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Form 10-Q REAC GROUP, INC. For: Mar 31

May 15, 2018 3:25 PM EDT



UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_______________

  

FORM 10-Q

 

_______________

(Mark One)


x

 QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2018

or

 

o

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


For the transition period from ______to______.



REAC GROUP, INC.

 (Exact name of registrant as specified in charter)

 

Florida

 

000-54845

 

59-3800845

(State or other jurisdiction of

incorporation or organization)

 

(Commission File Number)

 

(I.R.S Employer Identification No.)


 8878 Covenant Avenue, Suite 209

 Pittsburgh, Pa.  15237

 (Address of principal executive offices)

_______________


(724) 656-8886

 (Registrant’s telephone number, including area code)

_______________


Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o


Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes x No o


Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.


Large accelerated filer. o

Accelerated filer.o

Non-accelerated filer.o

(Do not check if a smaller reporting company)

Smaller reporting company.x


Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.) Yes o No x


As of May 14, 2018, there are 401,702,829 shares, par value $0.00001, of the issuers common stock issued and outstanding.

 



1





REAC GROUP, INC.


QUARTERLY REPORT ON FORM 10-Q

March 31, 2018


TABLE OF CONTENTS



 

PAGE

PART 1 - FINANCIAL INFORMATION

4

 

 

 

Item 1.

Financial Statements (Unaudited)

4

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

21

Item 3

Quantitative and Qualitative Disclosures About Market Risk

24

Item 4.

Controls and Procedures

24

 

 

 

PART II - OTHER INFORMATION

26

 

 

 

Item 1.

Legal Proceedings

26

Item 1A.

Risk Factors

26

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

26

Item 3.

Defaults Upon Senior Securities

26

Item 4.

Mine Safety Disclosures

26

Item 5.

Other Information

26

Item 6.

Exhibits

26

 

 

 

SIGNATURES

 

26

 




 



2




 

CAUTIONARY STATEMENT ON FORWARD-LOOKING INFORMATION


This Quarterly Report on Form 10-Q (this “Report”) contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).Forward-looking statements discuss matters that are not historical facts.  Because they discuss future events or conditions, forward-looking statements may include words such as “anticipate,” “believe,” “estimate,” “intend,” “could,” “should,” “would,” “may,” “seek,” “plan,” “might,” “will,” “expect,” “predict,” “project,” “forecast,” “potential,” “continue” negatives thereof or similar expressions. Forward-looking statements speak only as of the date they are made, are based on various underlying assumptions and current expectations about the future and are not guarantees.  Such statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, level of activity, performance or achievement to be materially different from the results of operations or plans expressed or implied by such forward-looking statements.


We cannot predict all of the risks and uncertainties.  Accordingly, such information should not be regarded as representations that the results or conditions described in such statements or that our objectives and plans will be achieved and we do not assume any responsibility for the accuracy or completeness of any of these forward-looking statements.  These forward-looking statements are found at various places throughout this Report and include information concerning possible or assumed future results of our operations, including statements about potential acquisition or merger targets; business strategies; future cash flows; financing plans; plans and objectives of management; any other statements regarding future acquisitions, future cash needs, future operations, business plans and future financial results, and any other statements that are not historical facts.


These forward-looking statements represent our intentions, plans, expectations, assumptions and beliefs about future events and are subject to risks, uncertainties and other factors.  Many of those factors are outside of our control and could cause actual results to differ materially from the results expressed or implied by those forward-looking statements.  In light of these risks, uncertainties and assumptions, the events described in the forward-looking statements might not occur or might occur to a different extent or at a different time than we have described.  You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this Report.  All subsequent written and oral forward-looking statements concerning other matters addressed in this Report and attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this Report.


Except to the extent required by law, we undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, a change in events, conditions, circumstances or assumptions underlying such statements, or otherwise.


CERTAIN TERMS USED IN THIS REPORT


When this report uses the words “we,” “us,” “our,” and the “Company,” they refer to REAC Group, Inc.  When this report uses “SEC”, it refers to the Securities and Exchange Commission.





3


 

March 31, 2018

(unaudited)

 

December 31, 2017

Assets

 

 

 

 

 

Current assets

 

 

 

 

 

Cash

$

12,625

 

$

51,396

Prepaid expenses

 

461

 

 

461

Total current assets

 

13,086

 

 

51,857

 

 

 

 

 

 

 

Total assets

$

13,086

 

$

51,857

 

 

 

 

 

 

 

Liabilities and Stockholders' Deficit

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

Accrued interest

 

13,329

 

 

14,559

 

Accrued salaries, payroll taxes and related expenses

 

744,427

 

 

853,011

 

Convertible notes payable, net of discounts of $6,974 and $14,648, respectively

 

324,206

 

 

350,073

 

Warrant liabilities payable

 

---

 

 

35,047

 

Due to principal shareholder, related party

 

---

 

 

47

Total current liabilities

 

1,081,962

 

 

1,252,737

 

 

 

 

 

 

Total liabilities

 

1,081,962

 

 

1,252,737

 

 

 

 

 

 

 

Commitments and Contingencies (Note 12)

 

---

 

 

---

 

 

 

 

 

 

 

Stockholders' Deficit

 

 

 

 

 

 

Preferred Stock A, $.0001 par value, 500,000 shares authorized; 500,000 and 50,935 issued and outstanding, respectively

 

50

 

 

5

 

Common Stock, $0.00001 par value, 9,999,000,000 shares authorized; 252,951,154 and 93,642,790 shares issued and outstanding, respectively

 

2,529

 

 

936

 

Additional paid-in capital

 

21,968,607

 

 

21,482,248

 

Accumulated deficit

 

(23,040,063)

 

 

(22,684,069)

Total stockholders' deficit

 

(1,068,876)

 

 

(1,200,880)

 

 

 

 

 

 

 

Total Liabilities and Stockholders' Deficit

$

13,086

 

$

51,857


The accompanying notes are an integral part of these unaudited financial statements.




5


Table of Contents

Financial Statements



REAC GROUP, Inc.

Statements of Operations

(unaudited)


 

For the Three Months Ended

 

March 31,

 

2018

2017

Revenues

$

---

$

---

 

Operating expenses:

 

Compensation and related costs

 

352,949

 

62,000

 

Professional

 

18,554

 

10,041

 

General and administrative

 

1,204

 

2,226

 

Total operating expenses

 

372,707

 

74,267

 

 

 

 

 

 

Loss from operations

 

(372,707)

 

(74,267)

 

 

 

 

 

 

Other income (expense):

 

 

 

 

 

Interest expense

 

(18,334)

 

(28,731)

 

Change in fair value of derivative liability

 

---

 

254,961

 

Gain on write off of warrant liability

 

35,047

 

---

 

Impairment of investment

 

---

 

(162,000)

 

Total other income (expense)

 

16,713

 

64,230

(Loss before provision for income taxes

 

(355,994)

 

(10,037)

 

 

 

 

 

 

 

Provision for income taxes

 

---

 

---

 

 

 

 

 

 

Net (Loss)

$

(355,994)

$

(10,037)

 

 

 

 

 

 

 

 

 

 

 

 

(Loss) per share, basic and dilutive

$

(0.00)

$

(0.00)

 

 

 

 

 

 

Weighted average shares outstanding, basic

 

194,900,602

 

48,048,139


The accompanying notes are an integral part of these unaudited financial statements.



6


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Financial Statements



REAC GROUP, Inc.

Statements of Cash Flows

(unaudited)

 

 

For the Three Months Ended

 

 

March 31,

 

 

2018

 

2017

Cash Flows from Operating Activities:

 

 

 

 

 

 

Net loss

$

(355,994)

 

$

(10,037)

 

Adjustment to reconcile net loss to net cash provided by operations:

 

 

 

 

 

 

Stock based compensation

 

330,000

 

 

32,000

 

In kind contribution of rent

 

300

 

 

300

 

Amortization of debt discounts and financing costs

 

19,564

 

 

17,792

 

Change in fair value of derivative liability

 

---

 

 

(254,961)

 

Gain on write off of warrant liability

 

(35,047)

 

 

 

 

Impairment of asset (investment)

 

---

 

 

162,000

 

Changes in assets and liabilities:

 

 

 

 

 

 

Prepaid expenses

 

---

 

 

(5,561)

 

Accounts payable

 

---

 

 

(41,466)

 

Accrued interest

 

(1,230)

 

 

10,939

 

Accrued salaries, payroll taxes and related expenses

 

3,683

 

 

30,000

 

Due to principal shareholder, related party

 

---

 

 

(6,816)

 

Net Cash Used in Operating Activities

 

(38,724)

 

 

(65,810)

 

 

 

 

 

 

 

Cash flows from Investing Activities:

 

 

 

 

Investment in affiliate

 

---

 

 

(19,500)

 

Net Cash Used in Investing Activities

 

---

 

 

(19,500)

 

 

 

 

 

 

Cash Flows from Financing Activities:

 

 

 

 

 

 

Proceeds from notes payable, principal shareholder

 

---

 

 

39,000

 

Repayments of notes payable, principal shareholder

 

(47)

 

 

(31,250)

 

Proceeds from loans payable

 

---

 

 

150,000

 

Proceeds from the sale of common stock

 

---

 

 

5,000

Net Cash (Used)/Provided by Financing Activities

 

(47)

 

162,750

 

 

 

 

 

 

 

Net (decrease)/increase in cash

 

(38,771)

 

 

77,440

Cash at beginning of period

 

51,396

 

 

105

Cash at end of period

$

12,625

 

$

77,545

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Supplemental cash flow information:

 

 

 

 

 

 

Interest paid

$

---

 

$

---

 

Taxes paid

$

---

 

$

---

 

 

 

 

 

 

 

Non-cash disclosures:

 

 

 

 

 

 

Common stock issued for investment

$

---

 

$

142,500

 

Common stock issued for principal on convertible notes

$

33,540

 

$

---

 

Common stock issued for interest on convertible notes

$

11,890

 

$

---

 

Preferred stock issued against accrued officer compensation

$

112,266

 

$

---


The accompanying notes are an integral part of these unaudited financial statements.



7


Table of Contents

Financial Statements



REAC Group, Inc.

Notes to the Financial Statements

(Unaudited)

For the three months ended March 31, 2018


1.

Background Information


REAC Group, Inc. ("The Company") was formed on March 10, 2005 under the name of Real Estate Contacts, Inc. as a Florida Corporation and is based in Pittsburgh, Pennsylvania. The Company changed its name to REAC Group, Inc. effective February 16, 2017. The Company engages in the ownership and operation of a real estate advertising portal website. The Company plans to provide a comprehensive online real estate search portal that consists of an advertising and marketing platform for real estate professionals.  The Company is in the final beta testing phase of development for our new national real estate website, (https://realestatecontacts.com/).


The Company’s website offers exclusive cities to real estate professionals so they can grow their businesses online and have the opportunity to show their listings and reach consumers interested in buying or selling property in their respective exclusive geographic areas.


RealEstateContacts.com is expected to serve as an internet portal that will feature a real estate search engine and a media network that directs consumers to receive more detailed information about agents, offices, current listings, homes for sale, commercial properties, mortgages, and foreclosures.  We intend to provide a service that enables real estate professionals to capture, cultivate, and convert leads which cater to prospective home buyers and sellers.


The Company is seeking to bring additional value to its shareholders through acquisition, joint venture, or partnerships with other real estate related businesses.


2.

Summary of Significant Accounting Policies


Basis of Presentation

The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 8-03 Regulation S-X.  Accordingly, the financial statements do not include all of the information and footnotes required by US GAAP for complete financial statements.  In the opinion of management, all adjustments considered necessary for a fair presentation have been included and such adjustments are of a normal recurring nature.  These unaudited financial statements should be read in conjunction with the financial statements for the year ended December 31, 2017 and notes thereto and other pertinent information contained in our General Form for Registration of Securities of Form 10 as filed with the Securities and Exchange Commission.


Use of Estimates

In preparing financial statements in conformity with generally accepted accounting principles, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses during the reported period. Actual results could differ from those estimates. Our most significant estimates are for stock based compensation, assumptions used in calculating derivative liabilities, deferred tax valuation allowances, and valuation of our investment in an affiliate. We evaluate our estimates on an ongoing basis. Actual results may differ from these estimates under different assumptions or conditions.


Financial Instruments

The Company’s balance sheets include the following financial instruments: cash, accrued expenses, notes payable and payables to a stockholder. The carrying amounts of current assets and current liabilities approximate their fair value because of the relatively short period of time between the origination of these instruments and their expected realization. The carrying values of the notes payable and amounts due to stockholder approximates fair value based on borrowing rates currently available to the Company for instruments with similar terms and remaining maturities.   


FASB Accounting Standards Codification (ASC) topic, “Fair Value Measurements and Disclosures”, defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy that distinguishes between (1) market participant assumptions developed based on market data obtained from independent sources (observable inputs) and (2) an entity’s own assumptions about market participant assumptions developed based on the best information available in the circumstances (unobservable inputs). The fair value hierarchy consists of



8


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Financial Statements


three broad levels, which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy are described below:


· Level 1 - Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities

· Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly, including quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability (e.g., interest rates); and inputs that are derived principally from or corroborated by observable market data by correlation or other means.

· Level 3 - Inputs that are both significant to the fair value measurement and unobservable.


Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management as of March 31, 2018.


Derivative Liabilities

The Company assessed the classification of its derivative financial instruments as of March 31, 2018 and December 31, 2017, which consist of convertible instruments and rights to shares of the Company’s common stock, and determined that such derivatives meet the criteria for liability classification under ASC 815.


ASC 815 generally provides three criteria that, if met, require companies to bifurcate conversion options from their host instruments and account for them as free standing derivative financial instruments. These three criteria include circumstances in which (a) the economic characteristics and risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics and risks of the host contract, (b) the hybrid instrument that embodies both the embedded derivative instrument and the host contract is not re-measured at fair value under otherwise applicable generally accepted accounting principles with changes in fair value reported in earnings as they occur and (c) a separate instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument subject to the requirements of ASC 815.


During the three months and the year ended March 31, 2018 and December 31, 2017, respectively, the Company had notes payable outstanding in which the conversion rate was variable and undeterminable. The Company uses judgment in determining the fair value of derivative liabilities at the date of issuance and at every balance sheet thereafter and in determining which valuation method is most appropriate for the instrument (e.g., Black-Scholes-Merton), the expected volatility, the implied risk-free interest rate, as well as the expected dividend rate, if any. During the year ended December 31, 2017, the Company determined that there was no active market for the Company’s common stock, and because of this lack of liquidity and market value, there was no derivative liability associated with these convertible notes.  The derivate liability that had previously been recognized was recorded as a gain through the change in fair value of derivative liability on the statement of operations as of December 31, 2017.As of March 31, 2018, the Company determined that there was no change to the market for the common stock and did not associate a derivative liability to its outstanding notes payable for the period.


Beneficial Conversion Features

ASC 470-20 applies to convertible securities with beneficial conversion features that must be settled in stock and to those that give the issuer a choice in settling the obligation in either stock or cash. ASC 470-20 requires that the beneficial conversion feature should be valued at the commitment date as the difference between the conversion price and the fair market value of the common stock into which the security is convertible, multiplied by the number of shares into which the security is convertible. This amount is recorded as a debt discount and amortized over the life of the debt. ASC 470-20 further limits this amount to the proceeds allocated to the convertible instrument.


Cash Flow Reporting

The Company follows ASC 230, Statement of Cash Flows, for cash flows reporting, classifies cash receipts and payments according to whether they stem from operating, investing, or financing activities and provides definitions of each category, and uses the indirect or reconciliation method (“indirect method”) as defined by ASC 230, Statement of Cash Flows, to report net cash flow from operating activities by adjusting net income to reconcile it to net cash flow from operating activities by removing the effects of (a) all deferrals of past operating cash receipts and payments and all accruals of expected future operating cash receipts and payments and (b) all items that are included in net income that do not affect operating cash receipts and payments.


Cash and Cash Equivalents

Cash is maintained with a major financial institution in the United States. Deposits with this bank may exceed the amount of insurance provided on such deposits. Generally, these deposits may be redeemed on demand and, therefore, bear minimal risk. The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents.  The Company had no cash equivalents at either March 31, 2018 or December 31, 2017.



9


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Financial Statements


Long-Lived Assets

In accordance with ASC 350, the Company regularly reviews the carrying value of intangible and other long-lived assets for the existence of facts or circumstances, both internally and externally, that suggest impairment. If impairment testing indicates a lack of recoverability, an impairment loss is recognized by the Company if the carrying amount of a long-lived asset exceeds its fair value. The Company recorded an impairment loss on its long-lived assets in the amount of $0 and $162,000 for the three months ended March 31, 2018 and 2017, respectively.


Stock Based Compensation

Under ASC 718, Compensation – Stock Compensation, companies are required to measure the compensation costs of share-based compensation arrangements based on the grant-date fair value and recognize the costs in the financial statements over the period during which employees are required to provide services. Share-based compensation arrangements include stock options, restricted share plans, performance-based awards, share appreciation rights and employee share purchase plans. As such, compensation cost is measured on the date of grant at their fair value. Such compensation amounts, if any, are amortized over the respective vesting periods of the option grant.


Equity instruments (“instruments”) issued to other than employees are recorded on the basis of the fair value of the instruments, as required by FASB ASC 718. FASB ASC No. 505, Equity Based Payments to Non-Employees (“ASC 505”) defines the measurement date and recognition period for such instruments. In general, the measurement date is (a) when a performance commitment, as defined, is reached or (b) when the earlier of (i) the non-employee performance is complete or (ii) the instruments are vested. The measured value related to the instruments is recognized over a period based on the facts and circumstances of each particular grant as defined in the ASC 505.


Earnings Per Share

Basic income per common share is computed based upon the weighted average common shares outstanding as defined by FASB ASC No. 260, Earnings Per Share.


Diluted income per share includes the dilutive effects of stock options, warrants, and stock equivalents. To the extent stock options, stock equivalents and warrants are anti-dilutive; they are excluded from the calculation of diluted income per share. As of March 31, 2018 there were approximately 430,637,151 share equivalents, as calculated, for potential conversion demand of our outstanding convertible notes.


3.

Going Concern


The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which contemplate continuation of the Company as a going concern.


The Company incurred net losses of $355,994 during the three months ended March 31, 2018 and had net cash used in operating activities of $38,724 for the same period. Additionally, the Company has an accumulated deficit of $23,040,063 and a working capital deficit of $1,068,876 at March 31, 2018.  These conditions raise substantial doubt about the Company’s ability to continue as a going concern for a period of at least twelve months after the date of issuance on these financial statements.  In view of these matters, the Company's ability to continue as a going concern is dependent upon the Company's ability to achieve a level of profitability and/or to obtain adequate financing through the issuance of debt or equity in order to finance its operations.


While the Company is attempting to commence operations and produce revenues, the Company’s cash position may not be significant enough to support the Company’s operations. While the Company believes in the viability of its strategy to increase revenues and in its ability to raise additional funds, there can be no assurances to that effect.  The key factors that are not within the Company's control and that may have a direct bearing on operating results include, but are not limited to, acceptance of the Company's business plan, the ability to raise capital in the future, the ability to expand its customer base, and the ability to hire key employees to build and maintain websites and to provide services and support to its customers and users.  There may be other risks and circumstances that management may be unable to predict.


The financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the possible inability of the Company to continue as a going concern.


4.

Recently Issued Accounting Pronouncements

 

We have reviewed all FASB issued Accounting Standards Update (“ASU”) accounting pronouncements and interpretations thereof that have effectiveness dates during the periods reported and in future periods. The Company has carefully considered the new pronouncements that alter previous generally accepted accounting principles and does not believe that any new or modified principles



10


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Financial Statements


will have a material impact on the corporation’s reported financial position or operations in the near term. The applicability of any standard is subject to the formal review of our financial management and certain standards are under consideration.


In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which supersedes ASC 840, Leases.  This ASU is based on the principle that entities should recognize assets and liabilities arising from leases.  The ASU does not significantly change the lessees’ recognition, measurement and presentation of expenses and cash flows from the previous accounting standard.  Leases are classified as finance or operating.  The ASU’s primary change is the requirement for entities to recognize a lease liability for payments and a right of use asset representing the right to use the leased asset during the term on operating lease arrangements.  Lessees are permitted to make an accounting policy election to not recognize the asset and liability for leases with a term of twelve months or less.  Lessors’ accounting under the ASC is largely unchanged from the previous accounting standard.  In addition, the ASU expands the disclosure requirements of lease arrangements.  Lessees and lessors will use a modified retrospective transition approach, which includes a number of practical expedients.  The effective date will be the first quarter of fiscal year 2020 with early adoption permitted. Management believes that this ASU will not have a significant effect on its financial statements.


In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606), which supersedes the revenue recognition requirements in ASC 605, Revenue Recognition. This guidance is based on the principle that revenue is recognized to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This guidance also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. This guidance can be adopted either retrospectively to each prior reporting period presented, or retrospectively with a cumulative-effect adjustment recognized as of the date of adoption. The original effective date of this guidance for public entities was for annual reporting periods beginning after December 15, 2016. In August 2015, the FASB issued ASU 2015-14, Revenue from Contracts with Customers (Topic 606), to defer the effective date of this guidance by one year, to the annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period. A reporting entity may choose to early adopt the guidance as of the original effective date.  We adopted the new standard effective January 1, 2018.  Upon generating revenue, the Company will provide disclosure requirements related to the adoption.


Management does not believe that any other recently issued, but not yet effective accounting pronouncements, if adopted, would have a material effect on the accompanying financial statements.


5.

Investment


On January 4, 2017, the Company executed an Asset Purchase Agreement with Patriot Bioenergy Corporation, a Kentucky corporation, for the purchase of all of the assets related to the business of operating a hemp processing and growth operation and selling hemp related products.  Pursuant to the Agreement, the Company issued 50,000 common shares which were valued at $142,500 based on the closing market price of the stock on the date of closing of the asset acquisition.  In addition, the Company paid expenses of Patriot totaling $19,500, resulting in a total investment of $162,000.


The Company has requested accounting records relating to the assets purchased, but Patriot has provided no such records.  Accordingly, the Company cannot allocate the purchase price among any specific assets purchased.  As a result, On April 21, 2017, the Company cancelled and terminated the Asset Purchase Agreement with Patriot Bioenergy Corporation that was originally executed on January 4, 2017.  REAC terminated the APA due to Patriot’s refusal to provide any financial information to the Company necessary to prepare the financial statements and pro forma financial information required of a reporting company.  As of March 31, 2017, the Company was unable to re-acquire the 50,000 shares issued for the purchase transaction, along with an aggregate of 15,000,000 shares issued in November 2016 to five individuals currently employed by Patriot (see Note 11, Stock Compensation).  As a result, the Company deemed the entire investment to be impaired and recorded an impairment loss of $162,000 as of March 31, 2017.


In May 2017, the Company received and cancelled an aggregate of six million shares of common stock related to Patriot employment agreements. The Company recorded the cancelled shares at their par value. In July, 2017, the Company received and cancelled the 50,000 shares issued for the purchase transaction and an additional 3,000,000 shares were returned by an individual employed by Patriot. The Company recorded the cancelled shares at their par value. (see Note 11)


6.

Related Party Transactions


The majority shareholder has advanced funds or deferred contractual salaries since inception, for the purpose of financing working capital and product development.   As of March 31, 2018 and December 31, 2017, the Company owed $0 and $47, respectively.  There are no repayment terms to these advances and deferrals and the Company has imputed interest at a nominal rate of 3%.




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The Company has minimal needs for facilities and operates from office space provided by the majority shareholder.  There are no lease terms.  For the three months ended March 31, 2018 and 2017, rent has been calculated based on the limited needs at a fair market value of the space provided.  Rent expense was $300 and $300 for the three months ended March 31, 2018 and 2017, respectively. The rental value has been recognized as an operating expense and treated as a contribution to capital.


The amounts and terms of the above transactions may not necessarily be indicative of the amounts and terms that would have been incurred had comparable transactions been entered into with independent third parties.


On March 1, 2018, the Company issued 449,065 shares of the Company’s Series A Preferred Shares to its sole director and chief executive officer for a value of $112,266, or $0.25 per share.  This value was applied against the balance of accrued compensation owed to him by the Company.


On January 23, 2018, the Company issued 100,000,000 shares of its common stock to sole officer and director, Robert DeAngelis, as his 2017 annual bonus per his employment agreement.  The annual bonus, if any, is determined and paid in accordance with policies set from time to time by the Board or Directors, in its sole discretion. The Board’s policy has been to base the stock price for such issuances upon the average of the closing price of the preceding 10 trading days as reported on OTCMarkets website, which was $0.0033; rendering the value of the preferred issued as $330,000.  Since the Company’s closing stock price on the date of grant was also $0.0033, the Company will not recognize any associated discounts or benefits associated with the shares issued.


On July 3, 2017, the Company’s Board of Directors authorized the issuance of 30,000,000 shares to the Company’s Chief Executive Officer as his 2016 performance bonus pursuant to his employment agreement that automatically renewed on March 4, 2017.  The shares were valued at the quoted market price on the date of grant, or $900,000.


On March 4, 2013, we entered into an employment agreement with Robert DeAngelis, our Chief Executive Officer. The employment agreement is for an initial three-year and automatically renews for an additional twelve months upon expiration of the initial term. The agreement can be cancelled upon written notice by either employee or employer (if certain employee acts of misconduct are committed). The total minimum aggregate annual amount due under the employment agreement is $120,000 plus bonuses.  For the three months ended March 31, 2018 and 2017, the Company recorded compensation expense in the amount of $30,000 and $30,000, respectively.


7.

Accrued Liabilities


Accounts Payable and Accrued expenses:

 

March 31, 2018

 

December 31, 2017

Accounts payable

$

--

 

$

--

Accrued interest

 

13,329

 

 

14,559

Accrued salaries, payroll taxes, penalties and interest (a)

 

744,427

 

 

853,011

(a) The Company has accrued compensation to its Chief Executive Officer totaling $30,000 and $30,000 during the three months ended March 31, 2018 and 2017, respectively.  However, the Company has not paid the related payroll taxes, consisting primarily of Social Security and Medicare taxes.  As a result, the Company has established an accrued liability for the unpaid salaries, along with related taxes and estimated interest and penalties of $744,427 and $853,011 at March 31, 2018 and December 31, 2017, respectively.


8.

Debt Obligations


The Company owed an aggregate of $337,535 in principal and accrued interest at March 31, 2018; of which, $324,206 represents convertible notes payable and $13,329 represents accrued interest.  At December 31, 2017, the Company owed an aggregate of $399,726 in principal and accrued interest; of which, $385,120 represents convertible notes payable, $47 represents notes payable to the principal shareholder, and $14,559 represents accrued interest.


Convertible Notes Payable

During the three and twelve months ended March 31, 2018 and December 31, 2017, respectively, the Company had notes payable outstanding in which the conversion rate was variable and undeterminable. The Company determined that there was no active market for the Company’s common stock, and because of this lack of liquidity and market value, there was no derivative liability associated with these convertible notes as of March 31, 2018 and December 31, 2017. The Company uses judgment in determining the fair value of derivative liabilities at the date of issuance and at every balance sheet thereafter and in determining which valuation method is most appropriate for the instrument (e.g., Black-Scholes-Merton), the expected volatility, the implied risk-free interest rate, as well as the expected dividend rate, if any.



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Schedule of Convertible Debt:

 

 

March 31, 2018

 

 

December 31, 2017

Convertible promissory notes, various lending institutions, maturing at variable dates ranging from 180 days to one year from origination date, 8-10% interest and in default interest of 12-22%, convertible at discount to trading price (25-50%) based on various measurements of prior trading, at face value of remaining original note principal balance, net of unamortized debt discounts, attributable to derivative liabilities, and deferred financing costs in the amount of $6,974 and $7,792, respectively.

$

331,180

 

$

364,721

Principal

 

331,180

 

 

364,721

Debt discount

 

(6,974)

 

 

(14,648)

Total Principal

$

324,206

 

$

350,073


Summary of Convertible Note Transactions:

 

 

March 31, 2018

 

 

December 31, 2017

Convertible notes, January 1

$

364,721

 

$

128,525

Additional notes, face value

 

---

 

 

405,949

Payments and adjustments

 

---

 

 

(107,750)

Conversions of debt

 

(33,541)

 

 

(62,003)

Unamortized debt discounts

 

(6,974)

 

 

(14,648)

Convertible notes, balance

$

324,206

 

$

350,073


On October 6, 2017, the Company entered into a Convertible Promissory Note with an accredited investor pursuant to which the Company received $150,000 in financing and an initial tranche of $20,000. Each tranche paid under the Note matures in 12 months and is convertible into shares of the Company’s common stock after a period of six months at a conversion price equal to 50% of the lowest trading price per share during the previous ten (10) trading days. The Company evaluated the terms of the convertible note in accordance with ASC Topic No. 815 - 40, Derivatives and Hedging - Contracts in Entity’s Own Stock and determined that the underlying is indexed to the Company’s common stock. The Company determined that the conversion feature met the definition of a liability and therefore bifurcated the conversion feature and accounted for it as a separate derivative liability. During the three months ended March 31, 2018, the Company determined that there was no active market for the Company’s common stock, and because of this lack of liquidity and market value, there was no derivative liability associated with these convertible notes. As of March 31, 2018, the Company owed $20,000 and accrued interest of $485. At December 31, 2017, the Company owed $20,000 and accrued interest of $238.  As of March 31, 2018, the Company 500,000,000 shares in reserve.


On October 2, 2017, the Company received $53,000 in financing through the execution of a Convertible Promissory Note associated with a Securities Purchase Agreement. The Note bears interest at a rate of 12% and matures 280 days from the purchase date.  The Note is convertible into shares of the Company’s common stock after a period of 180 days at a conversion price equal to 61% multiplied by the average of the lowest two trading prices during the previous fifteen (15) days.  After 180 days following the Issue Date, the Company will have no right of prepayment. The Company evaluated the terms of the convertible note in accordance with ASC Topic No. 815 - 40, Derivatives and Hedging - Contracts in Entity’s Own Stock and determined that the underlying is indexed to the Company’s common stock. The Company determined that the conversion feature met the definition of a liability and therefore bifurcated the conversion feature and accounted for it as a separate derivative liability. During the three months ended March 31, 2018, the Company determined that there was no active market for the Company’s common stock, and because of this lack of liquidity and market value, there was no derivative liability associated with these convertible notes. As of March 31, 2018, the Company owed $53,000 and accrued interest of $3,154. At December 31, 2017, the Company owed $53,000 and accrued interest of $1,587. As of March 31, 2018, the Company has 419,446,015 shares in reserve.


On July 8, 2017, the Company’s Board of Directors approved the assignment of a convertible note payable to a different third-party. The total amount assigned was $27,846 which includes principal of $20,775 and accrued interest of $7,087.  The terms of the original February 20, 2015 Convertible Promissory Note remain in effect and the note continues to accrue interest at a rate of 8% per annum until the note is paid in full. In connection with the assignment, the Company issued 3,350,000 common shares for a value of $3,350, which was applied against the balance of accrued interest on the note. As of March 31, 2018, the Company owed $2,329 and accrued interest of $28.  At December 31, 2017, the Company owed $13,025 and accrued interest of $194. As of March 31, 2018, the Company 486,000 shares in reserve.


On July 5, 2017, the Company entered into a Securities Purchase Agreement and related documents with an institutional accredited investor. On the Closing Date, the Company issued to Investor a Convertible Promissory Note in the principal amount of $175,000 in exchange for payment by Investor of $157,500. The principal sum of the Note reflects the amount invested, plus a $17,500 “Original



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Financial Statements


Issue Discount”. There is no material relationship between the Company or its affiliates and the Investor and the Company paid no commissions or other placement agent fees.


In connection with the Financing, and in addition to the Securities Purchase Agreement and the Secured Convertible Promissory Note, the Company issued a Warrant which grants the investor the right to purchase at any time on or after each tranche, and for a period of one year thereafter, a number of fully paid and non-assessable shares of the Company’s common stock equal to the amount of each tranche received under the Note divided by $0.05. (See Note 9)


Interest on the Note is accrued at a rate of 5% per annum and matures twelve months from the effective date of each payment.  The note holder has the right at any time to convert all or any part of unpaid principal and interest into common shares of the Company equal to 50% multiplied by the Market Price; that being the lowest (1) trading price for the common stock during the twenty-five trading days prior to the conversion date.  As of March 31, 2018, the Company owed $28,959 and accrued interest of $1,227. At December 31, 2017, the Company owed $47,565 and accrued interest of $1,173.


Pursuant to the terms of the SPA and the Note, the Company is required to reserve and keep available out of its authorized and unissued shares of common stock a number of shares of common stock at least equal to ten (10) times the number of shares issuable on conversion of the Note.  As of March 31, 2018, the Company has 750,000,000 shares in reserve.


On May 5, 2017, the Company entered into a Securities Purchase Agreement (“SPA”) with an institutional accredited investor pursuant to which the Company received $165,000 in financing through the execution of a Convertible Promissory Note.  In addition, the Company issued 1,153,000 shares of common stock for a value of $63,415 as consideration for entering into the financing agreement.


The Note matures in 10 months and is convertible into shares of the Company’s common stock at a conversion price equal to 50% of the lowest trading price per share during the previous twenty-five (25) trading days. The Company may prepay the Note within 90 days by payment to Investor of 135% of the outstanding principal, interest and other amounts then due under the Note or within 180 days by payment to Investor of 150% of the outstanding principal, interest and other amounts then due under the Note.  After 180 days, the Company will have no right of prepayment.


Pursuant to the terms of the SPA and the Note, the Company is required to reserve and keep available out of its authorized and unissued shares of common stock a number of shares of common stock at least equal to three and a half (3.5) times the number of shares issuable on full conversion of the Note. As of March 31, 2018, the Company has reserved 1,124,699,040 shares.


The Company determined that the conversion feature met the definition of a liability and therefore bifurcated the conversion feature and accounted for it as a separate derivative liability. During the three months ended March 31, 2018, the Company determined that there was no active market for the Company’s common stock, and because of this lack of liquidity and market value, there was no derivative liability associated with these convertible notes. The Company recognized a debt discount on the notes as a reduction (contra-liability) to the Convertible Notes Payable. The debt discounts are being amortized over the life of the notes.  As of March 31, 2018, the Company owed $162,242 in principle and accrued interest of $1,387. At December 31, 2017, the Company owed $164,539 and accrued interest of $2,802.


On March 13, 2017, the Company entered into an Agreement with an institutional Lender.  On that date, the Company issued to the Lender a Secured Convertible Promissory Note in the principal amount of $230,000; of which, the Company has received $150,000 as of March 31, 2018.  The principal sum of the Note reflects the amount borrowed, plus a $20,000 “Original Issue Discount” and a $10,000 reimbursement of Lender’s legal fees.


In connection with the Financing, and in addition to the Securities Purchase Agreement and the Secured Convertible Promissory Note, the Company issued a Warrant which grants the right to purchase at any time on or after March 13, 2017 and for a period of three years, a number of fully paid and non-assessable shares of the Company’s common stock equal to $57,500 divided by the Market Price as of the issue date. (See Note 9)


The Secured Convertible Promissory Note matures in 10 months and is convertible into shares of the Company’s common stock at a conversion price equal to $0.25 per share. In the event the minimum market capitalization falls below $6,000,000, then the conversion price is the lesser of the stated price of $0.25 or the market price (as calculated pursuant to the Agreement). The Company may prepay the Note at any time by payment of 125% of the principal, interest and other amounts then due under the Note.


Pursuant to the terms of the SPA and the Note, the Company is required to reserve and keep available out of its authorized and unissued shares of common stock a number of shares of common stock at least equal to three (3) times the number of shares issuable on conversion of the Note. As of March 31, 2018, the Company has 7,851,731 shares in reserve.




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The Company determined that the conversion feature met the definition of a liability and therefore bifurcated the conversion feature and accounted for it as a separate derivative liability. During the three months ended March 31, 2018, the Company determined that there was no active market for the Company’s common stock, and because of this lack of liquidity and market value, there was no derivative liability associated with these convertible notes.  The Company recognized a debt discount on the notes as a reduction (contra-liability) to the Convertible Notes Payable. The debt discounts are being amortized over the life of the notes. As of March 31, 2018, the Company owed $64,650 in principle and accrued interest of $815. At December 31, 2017, the Company owed $178,708 and accrued interest of $10,066.


On January 13, 2017, the Company’s Board of Directors approved the assignment of a convertible note payable to a different third-party. On May 8, 2017, the third party lender who accepted the assignment agreed to release the Company from all obligations under the note. As a result, the Company has recognized a gain on the extinguishment of debt in the amount of $51,821; which consisted of principal in the amount of $36,750 and $15,071 of interest.


On April 12, 2017, the Company was released from its obligation to pay the remaining balance of a convertible note payable and has recorded a gain on the extinguishment of debt in the amount of $76,777; which consisted of principal in the amount of $71,000 and $5,777 of interest.


9.

Warrant Liabilities


On July 5, 2017, the Company entered into a Securities Purchase Agreement and related documents with an institutional accredited investor. On the Closing Date, the Company issued to Investor a Convertible Promissory Note in the principal amount of $175,000 in exchange for payment by Investor of $157,500. (See Note 9) In connection with the Financing, and in addition to the Securities Purchase Agreement and the Secured Convertible Promissory Note, the Company issued a Warrant (“Warrant 1”) which grants the investor the right to purchase at any time on or after each tranche, and for a period of one year thereafter, a number of fully paid and non-assessable shares of the Company’s common stock equal to the amount of each tranche received under the Note divided by $0.05. The conversion option and the outstanding common stock warrants on that date are classified as derivative liabilities at their fair value on the date of issuance.  During the year ended December 31, 2017, the Company received a tranche of $35,000; resulting in the issuance of a warrant to purchase 700,000 shares of the Company’s common stock. The relative fair value of the warrant at issuance was $12,565, which was recorded as a debt discount and amortized over the life of the note. The Company estimates the fair value at each reporting period using the Binomial Method.  As of March 31, 2018, management determined that the Company’s common stock lacked liquidity and market value and therefore no derivative liability was recorded in association with these warrants.  As a result, the Company recorded a gain on the write-off of the fair value of the warrant in the amount of $32,268. The warrant derivative liability as of March 31, 2018 and December 31, 2017 was $0 and 32,268, respectively.


On March 13, 2017, the Company entered into an Agreement with an institutional Lender.  On that date, the Company issued to the Lender a Secured Convertible Promissory Note in the principal amount of $230,000; of which, the Company has received $150,000 as of December 31, 2017. (See Note 9) In connection with the Financing, and in addition to the Securities Purchase Agreement and the Secured Convertible Promissory Note, the Company issued a Warrant (“Warrant 2”) which grants the right to purchase at any time on or after March 13, 2017 and for a period of three years, a number of fully paid and non-assessable shares of the Company’s common stock equal to $57,500 divided by the Market Price as of the issue date. The Market Price is the conversion factor multiplied by the average of the three lowest closing bid prices during the twenty trading days immediately preceding the applicable conversion.  If the average of the three lowest closing bid prices is below $0.10, then the conversion factor is permanently reduced by 10%.  If at any time the Company is not DTC eligible, then the conversion factor is further reduced by an additional 5%.  At any time prior to the expiration date, the investor may elect a cashless exercise for any warrant shares equal to (i) the excess of the Current Market Value (Trade Price times the number of exercise shares) over the aggregate Exercise Price of the Exercise Shares, divided by (ii) the Adjusted Price (the lower of the Exercise Price of $0.25 or Market Price). The Trade Price is the higher of the closing trade price on the issue date or the VWAP of the stock for the trading day that is two trading days prior to exercise date. The conversion option and the outstanding common stock warrants on that date are classified as derivative liabilities at their fair value on the date of issuance. Under ASC-815 the conversion options embedded in notes payable require liability classification because the note does not contain an explicit limit to the number of shares that could be issued upon settlement.


The Market Price, as calculated pursuant to the Warrant Agreement, was $0.1097 per share with 524,157 being the resulting number of warrant shares at issuance.  The relative fair value of the warrant at issuance was $0, resulting in no debt discount. The Company estimates the fair value at each reporting period using the Binomial Method. As of March 31, 2018, management determined that the Company’s common stock lacked liquidity and market value and therefore no derivative liability was recorded in association with these warrants.  As a result, the Company recorded a gain on the write-off of the fair value of the warrant in the amount of $2,779. The warrant derivative liability as of March 31, 2018 and December 31, 2017 was $0 and $2,779, respectively.




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The following table indicates the fair value of the warrant recorded by the Company at issuance.

 

Amount

Factor

Warrant Shares

Stock Price on Date of Grant

Fair Value at Issuance

Fair Value as of December 31, 2017

Warrant 1

 $    35,000

$0.0500

700,000

$0.03

$12,565

$32,268

Warrant 2

$    57,500

$0.1097

524,157

$0.09

$      -0-

$  2,779

Total

 $    92,500

 

1,224,157

 

$12,565

$35,047


10.

Derivatives and Fair Value


The Company evaluated the terms of the convertible notes, in accordance with ASC Topic No. 815 - 40, Derivatives and Hedging - Contracts in Entity’s Own Stock and determined that the underlying is indexed to the Company’s common stock. The Company determined that the conversion features meet the definition of a liability and therefore bifurcated the conversion feature and accounted for it as a separate derivative liability. The Company evaluated the conversion feature for the embedded conversion option. Since these notes contain conversion price adjustment provisions (i.e. down round, or ratchet provisions), the Company determined that the embedded conversion options met the definition of a derivative. The effective conversion price was compared to the market price on the date of the note and was deemed to be less than the market value of underlying common stock at the inception of the note. The Company recognized a debt discount on the notes as a reduction (contra-liability) to the Convertible Notes Payable. The debt discounts are being amortized over the life of the notes.  The Company recognized financing costs for charges by the lender for original issue discounts and other applicable administrative costs, normally withheld from proceeds, which are being amortized as finance costs over the life of the loan.  The derivative values are calculated using the Binomial method.  


During the three and twelve months ended March 31, 2018 and December 31, 2017, the Company had convertible notes payable outstanding in which the conversion rate was variable and undeterminable; however, the Company determined that there was no active market for the Company’s common stock and because of this lack of liquidity and market value, there was no derivative liability associated with the convertible notes. The Company uses judgment in determining the fair value of derivative liabilities at the date of issuance and at every balance sheet thereafter and in determining which valuation method is most appropriate for the instrument (e.g., Black-Scholes-Merton, Binomial), the expected volatility, the implied risk-free interest rate, as well as the expected dividend rate, if any. The derivate liability that had previously been recognized was recorded as a gain through the change in fair value of derivative liability on the statement of operations as of December 31, 2017.


ASC 825-10 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 825-10 also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 825-10 describes three levels of inputs that may be used to measure fair value:  Level 1  – Quoted prices in active markets for identical assets or liabilities;  Level 2 – Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities; and  Level 3 – Unobservable inputs that are supported by little or no market activity and that are financial instruments whose values are determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant judgment or estimation. The Company’s Level 3 liabilities consist of the derivative liabilities associated with the convertible notes.  At March 31, 2018 and December 31, 2017, all of the Company’s derivative liabilities were categorized as Level 3 fair value liabilities. If the inputs used to measure the financial assets and liabilities fall within more than one level described above, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument.


Level 3 Valuation Techniques

Financial assets are considered Level 3 when their fair values are determined using pricing models, discounted cash flow methodologies or similar techniques and at least one significant model assumption or input is unobservable.  Level 3 financial liabilities consist of the derivative liabilities for which there is no current market for these securities such that the determination of fair value requires significant judgment or estimation.  At the date of the original transaction, we valued the convertible note that contains down round provisions using a Black-Scholes model, with the assistance of a valuation consultant, for which management understands the methodologies. This model incorporates transaction details such as the Company’s stock price, contractual terms, maturity, risk free rates, as well as assumptions about future financings, volatility, and holder behavior.  Using assumptions, consistent with the original valuation, the Company has subsequently used the Binomial model for calculating the fair value.

  

The table below provides a summary of the changes in fair value, including net transfers in and/or out of all financial assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during the three months ending March 31, 2018 and twelve months ended December 31, 2017.



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Financial Statements



Fair Value Measurements using inputs:


 

 

March 31, 2018

 

December 31, 2017

Balance, January 1,

$

--

 

$

699,090

(Gain)/Loss on change in fair value realized and included in net loss

 

--

 

 

533,074

Gain on write-off of derivative liability

 

--

 

 

(1,232,164)

Balance

$

--

 

$

--


11.

Equity   


Stock Subscriptions

On January 13, 2017, the Company issued 5,000 common shares for cash.  Consideration to the Company was $5,000, or $1.00 per share.


Stock Compensation

On March 1, 2018, the Company issued 449,065 shares of the Company’s Series A Preferred Shares to its sole director and chief executive officer for a value of $112,266, or $0.25 per share.  The value was recorded against his accrued compensation payable.


On January 23, 2018, the Company issued 100,000,000 shares of its common stock to sole officer and director, Robert DeAngelis, as his 2017 annual bonus per his employment agreement.  The annual bonus, if any, is determined and paid in accordance with policies set from time to time by the Board or Directors, in its sole discretion. The Board’s policy has been to base the stock price for such issuances upon the average of the closing price of the preceding 10 trading days as reported on OTCMarkets website, which was $0.0033; rendering the value of the preferred issued as $330,000.  Since the Company’s closing stock price on the date of grant was also $0.0033, the Company will not recognize any associated discounts or benefits associated with the shares issued.


On July 3, 2017, the Company’s Board of Directors authorized the issuance of 30,000,000 shares to the Company’s Chief Executive Officer as a performance bonus pursuant to his employment agreement.  The shares were valued at $0.03, the quoted market price on the date of issuance, or $900,000.


On June 7, 2017, the Company issued 2,000,000 shares pursuant to a Service Agreement entered into on that date for investor relation services.  The shares were valued at $0.05 per share, the closing market price on the date of issuance, or $100,000. On July 6, 2017, the Company terminated the investor relation agreement. The common shares issued in this transaction will remain issued and outstanding and the corresponding value of $100,000 was recorded to compensation expense.


On May 8, 2017, the Company issued 1,153,000 shares in consideration of financing received by the Company.  The shares were valued at $0.055, the quoted market price on the date of issuance, or $63,415.


On January 18, 2017, the Company issued 10,000 shares pursuant to a Consulting Agreement entered into on that date.  The consultant was engaged to perform research related to hemp processing in the State of Florida.  The shares were valued at $3.20 per share, the closing market price on the date of issuance, or $32,000. These services were completed prior to March 31, 2018 and as a result the entire amount was recorded as compensation expense.


Stock Issued for Debt and Interest

In January 2018, the Company issued 4,672,000 shares of common stock, for a value of $6,541 in satisfaction of $6,041 in principal and $500 of conversion fees on a convertible note payable.  The Company recorded the issuances at the contract value, at the date of exchange, off-setting the notes payable and accrued interest.


In January 2018, the Company issued 2,500,000 shares of common stock, for a value of $4,000 in satisfaction of $471 in principal, $3,029 in interest, and $500 of conversion fees on a convertible note payable.  The Company recorded the issuances at the contract value, at the date of exchange, off-setting the notes payable and accrued interest.


In February 2018, the Company issued 19,886,364 shares of common stock, for a value of $17,500 in satisfaction of $14,507 in principal and $2,993 in interest on a convertible note payable.  The Company recorded the issuances at the contract value, at the date of exchange, off-setting the notes payable and accrued interest.


In February 2018, the Company issued 11,250,000 shares of common stock, for a value of $11,250 in satisfaction of $10,696 in principal and $554 in interest on a convertible note payable.  The Company recorded the issuances at the contract value, at the date of exchange, off-setting the notes payable and accrued interest.



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In February 2018, the Company issued 10,000,000 shares of common stock, for a value of $4,000 in satisfaction of $1,826 in principal, $1,674 in interest, and $500 of conversion fees on a convertible note payable.  The Company recorded the issuances at the contract value, at the date of exchange, off-setting the notes payable and accrued interest.


In March 2018, the Company issued 11,000,000 shares of common stock, for a value of $2,640 in satisfaction of $2,140 in interest and $500 of conversion fees on a convertible note payable.  The Company recorded the issuances at the contract value, at the date of exchange, off-setting the notes payable and accrued interest.


In November 2017, the Company issued an aggregate of 5,000,000 shares of common stock, for a value of $5,000 in satisfaction of $4,859 in principal and $141 in interest on a convertible note payable.  The Company recorded the issuances at the contract value, at the date of exchange, off-setting the notes payable, accrued interest and the recorded derivative liability.


In November 2017, the Company issued an aggregate of 3,114,800 shares of common stock, for a value of $11,213 in satisfaction of $461 in principal and $10,753 in interest on a convertible note payable.  The Company recorded the issuances at the contract value, at the date of exchange, off-setting the notes payable, accrued interest and the recorded derivative liability.


In November 2017, the Company issued an aggregate of 3,880,000 shares of common stock, for a value of $3,880 in satisfaction of $2,891 in principal and $989 in interest on a convertible note payable.  The Company recorded the issuances at the contract value, at the date of exchange, off-setting the notes payable, accrued interest and the recorded derivative liability.


In October 2017, the Company issued an aggregate of 3,690,476 shares of common stock, for a value of $31,000 in satisfaction of $30,519 in principal and $481 in interest on a convertible note payable.  The Company recorded the issuances at the contract value, at the date of exchange, off-setting the notes payable, accrued interest and the recorded derivative liability.


In October 2017, the Company issued 3,880,000 shares of common stock, for a value of $3,880 in satisfaction of $3,880 in interest on a convertible note payable.  The Company recorded the issuances at the contract value, at the date of exchange, off-setting the notes payable, accrued interest and the recorded derivative liability.


In September 2017, the Company issued 3,571,429 shares of common stock, for a value of $30,000 in satisfaction of $23,273 in principal and $6,727 in interest on a convertible note payable.  The Company recorded the issuances at the contract value, at the date of exchange, off-setting the notes payable, accrued interest and the recorded derivative liability.


In July 2017, the Company issued an 3,350,000 shares of common stock, for a value of $3,350 in satisfaction of $3,350 accrued interest on a convertible note payable.  The Company recorded the issuances at the contract value, at the date of exchange, off-setting the accrued interest and the recorded derivative liability.


In May 2017, the Company authorized the issuance of 1,153,000 shares of common stock, for a value of $63,415, in satisfaction of $63,415 in finance costs associated with a convertible note payable.  The Company recorded the issuance at the fair value on the date of grant, which was $0.055 per share.


Stock Issued for Investment

On January 4, 2017, the Company executed an Asset Purchase Agreement with Patriot Bioenergy Corporation, a Kentucky corporation, for the purchase of all of the assets related to the business of operating a hemp processing and growth operation and selling hemp related products.  Pursuant to the Agreement, the Company issued 50,000 common shares which were valued at $142,500 based on the closing market price of the stock on the date of issuance.  In addition, the Company paid expenses of Patriot totaling $19,500, resulting in a total investment of $162,000 (see Note 5).


Preferred Stock

On March 1, 2018, the Company issued 449,065 shares of the Company’s Series A Preferred Shares to its sole director and chief executive officer for a value of $112,266, or $0.25 per share.  The value of these shares was applied against the accrued compensation owed to him by the Company.


Warrants

On the July 10, 2017, and in connection with a Securities Purchase Agreement and a Secured Convertible Promissory Note, the Company issued a Warrant which grants the investor the right to purchase at any time on or after July 10, 2017, and for a period of one year thereafter, a number of fully paid and non-assessable shares of the Company’s common stock equal to the amount of the tranche received under the Note divided by $0.05.  As of December 31, 2017, the Company received a tranche of $35,000; resulting in the issuance of a warrant to purchase 700,000 shares of the Company’s common stock. The relative fair value of the warrant at issuance was $12,565. The Company estimates the fair value at each reporting period using the Binomial Method.  As of March 31, 2018, management determined that the Company’s common stock lacked liquidity and market value and therefore no derivative



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liability was recorded in association with these warrants. The warrant derivative liability as of March 31, 2018 and December 31, 2017 was $0 and $32,268, respectively.


On the March 13, 2017, and in connection with a Securities Purchase Agreement and a Secured Convertible Promissory Note, the Company issued a Warrant which grants the investor the right to purchase at any time on or after March 13, 2017, and for a period of three years thereafter, a number of fully paid and non-assessable shares of the Company’s common stock equal to $57,500 divided by the Market Price as of March 13, 2017.  The Market Price, as calculated pursuant to the Warrant Agreement, was $0.1097 per share with 524,157 being the resulting number of warrant shares at issuance.  The relative fair value of the warrant at issuance was $47,174, resulting in a debt discount equal to $10,326 which will be amortized over the life of the Warrant. The Company estimates the fair value at each reporting period using the Binomial Method. As of March 31, 2018, management determined that the Company’s common stock lacked liquidity and market value and therefore no derivative liability was recorded in association with these warrants. The warrant derivative liability as of March 31, 2018 and December 31, 2017 was $0 and $2,779, respectively.


Other

During the year ended December 31, 2017, the Company received and canceled 9,000,000 common shares issued to employees of Patriot Bioenergy. The Company recorded the cancelled shares at their par value. (see Note 5)


On April 21, 2017, the Company cancelled and terminated the Asset Purchase Agreement with Patriot Bioenergy Corporation that was originally executed on January 4, 2017.  REAC terminated the APA due to Patriot’s refusal to provide any financial information to the Company as required by the Asset Purchase Agreement. On April 27, 2017, the 50,000 common shares were returned to the Company and cancelled at their par value (see Note 5).


On May 1, 2017, the Company terminated an agreement for web services that was consummated during the year ended December 31, 2016.  As a result, 5,000,000 common shares associated with the agreement were returned to the Company and cancelled.


During the three months ended March 31, 2018 and 2017, the Company recorded in-kind contributions for rent expense in the amount of $300and $300, respectively.


Amendment to the Articles of Incorporation

On February 20, 2018, the Board of Directors recommended and the majority shareholder (holding 83% of the voting shares) voted in favor of increasing the authorized capital of the Company from Three Billion (3,000,000,000) shares, to Ten Billion (10,000,000,000) shares.  No change was made to the number of preferred shares authorized.  Accordingly, as of February 20, 2018, the total authorized capital of the Company will be comprised of Nine Billion Nine Hundred Ninety-Nine Million (9,999,000,000) shares of common stock, par value $0.00001 per share, and One Million (1,000,000) shares of Preferred Stock, of which Five Hundred Thousand (500,000) shares are designated as Series A Preferred Stock, par value $0.0001 per share.


On February 5, 2018, the Board of Directors recommended and the majority shareholder (holding 74% of the voting shares) voted in favor of increasing the authorized capital of the Company from One Billion (1,000,000,000) shares, to Three Billion (3,000,000,000) shares.  No change was made to the number of preferred shares authorized.  Accordingly, as of February 5, 2018, the total authorized capital of the Company will be comprised of Two Billion Nine Hundred Ninety-Nine Million (2,999,000,000) shares of common stock, par value $0.00001 per share, and One Million (1,000,000) shares of Preferred Stock, of which Five Hundred Thousand (500,000) shares are designated as Series A Preferred Stock, par value $0.0001 per share.


On July 21, 2017, the Board of Directors recommended and the majority shareholder (holding 94% of the voting shares) voted in favor of increasing the authorized capital of the Company from Two Hundred Fifty Million (250,000,000) shares, to One Billion (1,000,000,000) shares.  The Company filed the Articles of Amendment with the Florida Department of State, to be effective August 1, 2017.


On January 26, 2017, upon written consent of the board of directors and the majority shareholder, who holds enough common and preferred shares to create a greater than 80% voting position, Article I of the Articles of Incorporation was amended to change the corporate name to REAC GROUP, Inc.  The effective date of the Amendment to the Articles of Incorporation is February 16, 2017.


As of March 31, 2018, the total number of shares this corporation is authorized to issue is 10,000,000,000 (ten billion), allocated as follows among these classes and series of stock:



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Designation

Par value

Shares Authorized

Common

$0.00001

9,999,000,000

Preferred Stock Class, Series A

$0.0001

500,000

Preferred Stock Class, allocated but undesignated

-

500,000


12.

Commitments and Contingencies


From time to time the Company may be a party to litigation matters involving claims against the Company.   Management believes that there are no known or potential matters that would have a material effect on the Company’s financial position or results of operations.


The Company’s operations are subject to significant risks and uncertainties including financial, operational and regulatory risks, including the potential risk of business failure.


There were no operating or capital lease commitments as of March 31, 2018 and December 31, 2017.


On June 6, 2017, the Company entered into a Service Agreement with a third party for Investor Relation Services.  Pursuant to the terms of the Agreement, the Company is to pay $5,000 monthly for a period of six months for a total of $30,000.  In addition, the Company agreed to issue common stock of the Company in two installments valued at $100,000 each. The first share installment is due on the date the Agreement was consummated (see Note 11); and the second share installment is due on day 90 of the Agreement. Shares issued in relation to this Agreement will be restricted for a period of twelve months, while the entire Agreement expires after a period of six months.  On July 6, 2017, the Company terminated the investor relation agreement and the common shares issued in this transaction will remain issued and outstanding.


13.

Subsequent Events


On April 30, 2018, the Company was notified of the purchase and assignment of a convertible promissory note originally consummated on July 5, 2017, with the first tranche face amount being $35,000. At the time of assignment, the Company owed $28,959 plus accrued interest of $1,347.


In April 2018, the Company issued 12,608,108 shares of common stock, for a value of $4,665 in satisfaction of $4,665 in principal on a convertible note payable.  The Company will record the issuances at the contract value, at the date of exchange, off-setting the note payable.


In April 2018, the Company issued 12,594,595 shares of common stock, for a value of $4,660 in satisfaction of $4,660 in principal on a convertible note payable.  The Company will record the issuance at the contract value, at the date of exchange, off-setting the note payable.


In April 2018, the Company issued 12,608,108 shares of common stock, for a value of $4,665 in satisfaction of $4,665 in principal on a convertible note payable.  The Company will record the issuance at the contract value, at the date of exchange, off-setting the note payable.


In April 2018, the Company issued 14,486,486 shares of common stock, for a value of $5,360 in satisfaction of $4,665 in principal on a convertible note payable.  The Company will record the issuance at the contract value, at the date of exchange, off-setting the note payable.


In May 2018, the Company issued 15,216,216 shares of common stock, for a value of $5,630 in satisfaction of $5,630 in principal on a convertible note payable.  The Company will record the issuance at the contract value, at the date of exchange, off-setting the note payable.


In May 2018, the Company issued 15,229,730 shares of common stock, for a value of $5,635 in satisfaction of $5,635 in principal on a convertible note payable.  The Company will record the issuance at the contract value, at the date of exchange, off-setting the notes payable.


In May 2018, the Company issued 15,000,000 shares of common stock, for a value of $3,600 in satisfaction of $3,100 in interest and $500 of conversion fees on a convertible note payable.  The Company will record the issuance at the contract value, at the date of exchange, off-setting the notes payable and accrued interest.




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In May 2018, the Company’s Board authorized the return and cancellation of the reserve of 500,000,000 common shares of stock that was put in reserve for a convertible promissory note in the amount of $150,000.  The balance of the note at the time the shares were returned back to the Company’s available shares to issue was $20,000.


In May 2018, the Company’s Board authorized the return and cancellation of the reserve of 486,000 common shares of stock that was put in reserve for a convertible promissory note in the amount of $20,775. The balance of the note at the time the shares were returned back to the Company’s available shares to issue was $2,329.


In May 2018, the Company issued 14,440,896 shares of common stock pursuant to the terms of a Common Stock Purchase Warrant issued in July 2017.


In May 2018, the Company issued 17,486,486 shares of common stock, for a value of $6,470 in satisfaction of $6,470 in principal on a convertible note payable.  The Company will record the issuance at the contract value, at the date of exchange, off-setting the note payable.


In May 2018, a third party convertible note holder agreed to cancel the note and all accrued interest owed to them by the Company.  At the date of retirement, the Company owed $20,000 in principal and $589 in accrued interest.


In May 2018, the Company issued 19,081,081 shares of common stock, for a value of $7,060 in satisfaction of $6,470 in principal on a convertible note payable.  The Company will record the issuance at the contract value, at the date of exchange, off-setting the note payable.



Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations


The following discussion provides information which management believes is relevant to an assessment and understanding of our results of operations and financial condition. The discussion should be read along with our financial statements and notes thereto contained elsewhere in this Report. The following discussion and analysis contains forward-looking statements, which involve risks and uncertainties. Our actual results may differ significantly from the results, expectations and plans discussed in these forward-looking statements.


The following plan of operation provides information which management believes is relevant to an assessment and understanding of our results of operations and financial condition. The discussion should be read along with our financial statements and notes thereto. This section includes a number of forward-looking statements that reflect our current views with respect to future events and financial performance. Forward-looking statements are often identified by words like believe, expect, estimate, anticipate, intend, project and similar expressions, or words which, by their nature, refer to future events. You should not place undue certainty on these forward-looking statements. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from our predictions.

 

Plan of Operations


Our plan of operation is to operate a real estate search engine portal website. We want to position our company as a national real estate search engine/social community network that matches buyers, sellers, brokers, and professionals anywhere in the world.


What Makes us Different


Real Estate professionals use the internet to generate leads.  The top sources of internet leads are company and agent websites. Each real estate professional on our website will be the EXCLUSIVE agent in the city that they service in and will have their own profile page that contains the agent’s information and bios with links to their listings.  Each agent will also have their own exclusive city page that will feature advertising banners from various other local businesses that work in the real estate field such as local mortgage brokers, title companies, real estate attorneys, contractors, among others in the real estate profession.


Products and Services


Our new real estate search website, https://realestatecontacts.com/, will allow real estate professionals and consumers to interact through the internet as a business medium and features the real estate professional’s current listings and profiles in their geographic service areas enabling potential home buyers to view real estate listings and homes that are for sale and featured on the real estate professional’s website. This format is called a “lead-generation” program for real estate professionals that are on the https://realestatecontacts.com/ portal website.




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We aim to offer real estate agents, brokers, and offices the opportunity to become the exclusive real estate contact in the city that they serve on https://realestatecontacts.com/ for a yearly fee.


We believe our services will empower consumers and drive more business for real estate professionals as well as small business owners.  Participating real estate brokers, offices and agents receive coverage in the cities, areas and territories that they service.


The Company plans to generate its revenue from selling advertising to real estate professionals on our real estate portal.


Our business strategy is  having the agent, broker, or office be exclusive in their city which will eliminate all of their competition for that city.  For this reason we believe our concept will have a high level of interest from any real estate professional.


Currently, while there are other real estate directories and portals on the internet, no one features real estate agents on exclusive basis. We believe this approach will be attractive to real estate professionals in each locale.


We plan to grow revenues from the advertising sales from real estate professionals on our current website in the next 12 months by undertaking the following steps:


·

Devote greater resources to marketing and selling our services such as developing and creating a more productive advertising sales division within our company by the hiring of advertising sales account executives.

·

Focus to expand our network of advertisers and real estate professionals by increasing our online presence to include various marketing channels such as the major search engines, Google, Yahoo and Bing.

·

Expand our company’s public relations by creating more brand awareness on the internet. An example would be to focus on other social media websites such as Facebook, Twitter, and LinkedIn.

·

Develop other marketing programs to efficiently increase our brand awareness such as email campaigns, newsletters, linking our website to other real estate business websites, real estate portals and directories.

·

We intend to continue, maintain and aggressively pursue to build our advertising campaign around all internet related marketing concepts, such as search engine optimization, banner advertising and social media networks to help manage and geographically target consumer traffic and lead volume.

·

We plan to increase our online Search Engine Marketing to create more unique users Focus on driving more internet traffic and unique visitors to our websites by using these search engine marketing techniques.


The number of real estate professionals (advertisers) on our website is an important driver of revenue growth because each advertiser will pay a yearly fee to participate in the advertising of their services on our website.


Limited Operating History


We have generated a limited financial history and have not previously demonstrated that we will be able to expand our business through increased investment in marketing activities. We cannot guarantee that the expansion efforts described in this Registration Statement will be successful. The business is subject to risks inherent in growing an enterprise, including limited capital resources and possible rejection of our business model and/or sales methods.


Future financing may not be available to us on acceptable terms. If debt financing is not available or not available on satisfactory terms, we may be unable to continue expanding our operations. Equity financing will result in a dilution to existing shareholders.


For the three months ended March 31, 2018 compared to the three months ended March 31, 2017


The Company earned no revenues for the three month periods ended March 31, 2018 and 2017, respectively.


Operating expenses were $372,707 and $74,267 for the three month periods ended March 31, 2018 and 2017 and   interest expense was $18,334 and $28,731, respectively.  The Company recorded a loss of $355,994 for the three months ended March 31, 2018 as compared to a loss of $10,037 for the three months ended March 31, 2017. The change is largely indicative of increased volatility in the fair value of the Company’s common stock and stock compensation issued to the Company’s executive officer.


Capital Resources and Liquidity


The Company is currently financing its operations primarily through loans, equity sales and advances from shareholders. We believe we can currently satisfy our cash requirements for the next six months with our expected capital to be raised in private placement and sales of our common stock. Additionally, we will begin to use our common stock as payment for certain obligations and to secure work to be performed.

 



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At March 31, 2018, the Company has cash in the amount of $12,625.  The Company anticipates earning revenue, which will mitigate partial cash flow deficiencies, however at the present time we do not have revenues to cover our cash requirements.  Management does not believe that is has adequate cash resources to meet the requirements to develop certain aspects of our business plan, however, should be sufficient to meet our current obligations, as the amount represents approximately nine months to one year of our run rate of operating expenses.  In consideration of the potential shortfall in adequate resources, management has disclosed its going concern. and believes that financial support from the majority shareholder to pay minimal and necessary incurred expense will allow the Company to benefit from advertising revenue streams, currently in-place, to produce the anticipated cash flow necessary to support operations.


As of March 31, 2018, we had negative working capital of $1,068,876 and during the three months ended March 31, 2018, we have used cash of $38,724 in our operating activities.


We do believe that we will have enough cash to support our daily operations, at reduced levels of development, beyond the next 12 months while we are attempting to expand operations and produce revenues.  Although we believe we have adequate funds to maintain our current operations for the near term, we do not believe that we have the required funding to expand our product offering (web video channel and other possible alternative service offerings). We estimate the Company needs an additional $200,000 to fully implement its business plans over the next twelve months.  In addition, we anticipate we will need an additional minimum of $120,000 to cover operational and administrative expenses for the next twelve months.  The majority shareholder has committed to cover any cash shortfalls of the Company, although there is no written agreement or guarantee.  If we are unable to satisfy our cash requirements we may be unable to proceed with our plan of operations.


Future financing for our operations may not be available to us on acceptable terms.  To raise equity will require the sale of stock and the debt financing will require institutional or private lenders.  We do not have any institutional or private lending sources identified.  If debt financing is not available or not available on satisfactory terms, we may be unable to continue expanding our operations.  Equity financing will result in a dilution to existing shareholders.


The foregoing represents our best estimate of our cash needs based on current planning and business conditions.  In the event we are not successful in reaching our initial revenue targets, additional funds may be required, and we may not be able to proceed with our business plan for the development and marketing of our core services.  Should this occur, we will suspend or cease operations.


We anticipate that depending on market conditions and our plan of operations, we may incur significant continuing operating losses in the foreseeable future.  Therefore, our auditors have raised substantial doubt about our ability to continue as a going concern.


Management Consideration of Alternative Business Strategies


In order to continue to protect and increase shareholder value management believes that it may, from time to time, consider alternative management strategies to create value for the company or additional revenues.  Strategies to be reviewed may include acquisitions; roll-ups; strategic alliances; joint ventures on large projects; issuing common stock as compensation in lieu of cash; and/or mergers.


Management will only consider these options where it believes the result would be to increase shareholder value while continuing the viability of the company.  At the current time, there have been no planned commitments to any independent considerations mentioned above.

 

Recent Accounting Pronouncements


The Financial Accounting Standards Board and other standard-setting bodies issued new or modifications to, or interpretations of, existing accounting standards during the year. The Company has carefully considered the new pronouncements that alter previous generally accepted accounting principles and does not believe that any new or modified principles will have a material impact on the corporation's reported financial position or operations in the near term. These recently issued pronouncements have been addressed in the notes to the financial statements included in this filing.


Critical Accounting Policies and Estimates


Use of Estimates

In preparing financial statements in conformity with generally accepted accounting principles, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses during the reported period. Actual results could differ from those estimates. Our significant estimates include valuation of stock based compensation, derivative liabilities, valuation of our investment in affiliate, and deferred tax valuation allowances. We evaluate our estimates on an ongoing basis. Actual results may differ from these estimates under different assumptions or conditions.




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Revenue Recognition

The Company recognizes revenue on arrangements in accordance with FASB ASC No. 605, Revenue Recognition. In all cases, revenue is recognized only when the price is fixed or determinable, persuasive evidence of an arrangement exists, the service is performed and collectability is reasonably assured.


Consideration for future advertising services are made by customers in advance of those services being provided. Advertising revenue is recognized ratably over the period that the services are subscribed, generally a one year period. The unearned portion of the advertising revenue is deferred until future periods in which the subscription is earned.


The Company has not issued guarantees or other warrantees on the advertising subscription success or results. The Company has not experienced any refund requests or committed to any adjustments for terminated subscriptions. The Company does not believe that there is any required liability.


In February 2016, the FASB codified in ASC Topic 606, Revenue From Contracts with Customers.  The transition provisions require a public business entity to adopt this standard beginning after December 31, 2017, including interim reporting periods within that reporting period. The Company does not believe that adoption of ASC 606 will have a significant impact on its financial statements at this time.


Share-based Compensation

In December 2004, the FASB issued FASB ASC No. 718, Compensation – Stock Compensation (“ASC 718”). Under ASC 718, companies are required to measure the compensation costs of share-based compensation arrangements based on the grant-date fair value and recognize the costs in the financial statements over the period during which employees are required to provide services. Share-based compensation arrangements include stock options, restricted share plans, performance-based awards, share appreciation rights and employee share purchase plans. As such, compensation cost is measured on the date of grant at their fair value. Such compensation amounts, if any, are amortized over the respective vesting periods of the option grant. The Company applies this statement prospectively.


Equity instruments (“instruments”) issued to other than employees are recorded on the basis of the fair value of the instruments, as required by FASB ASC 718. FASB ASC No. 505, Equity Based Payments to Non-Employees (“ASC 505”) defines the measurement date and recognition period for such instruments. In general, the measurement date is (a) when a performance commitment, as defined, is reached or (b) when the earlier of (i) the non-employee performance is complete or (ii) the instruments are vested. The measured value related to the instruments is recognized over a period based on the facts and circumstances of each particular grant as defined in the ASC 505.


Off-Balance Sheet Arrangements

 

The Company does not have any off-balance sheet arrangements.



Item 3.

Quantitative and Qualitative Disclosures About Market Risk


We are a Smaller Reporting Company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.



Item 4.

Controls and Procedures


Evaluation of Disclosure Controls and Procedures


(a) Evaluation of disclosure controls and procedures. Pursuant to Rule 13a-15(b) under the Securities Exchange Act of 1934 (“Exchange Act”), the Company carried out an evaluation, with the participation of the Company’s management, including the Company’s Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”) (the Company’s principal financial and accounting officer), of the effectiveness of the Company’s disclosure controls and procedures (as defined under Rule 13a-15(e) under the Exchange Act) as of the end of the period covered by this report. Based upon that evaluation, the Company’s CEO and CFO concluded that the Company’s disclosure controls and procedures are not effective to ensure that information required to be disclosed by the Company in the reports that the Company files or submits under the Exchange Act, is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to the Company’s management, including the Company’s CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure.




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Financial Statements


The Company is a small company with limited resources. There is insufficient staff for segregation of duties of accounting functions and for levels of review of our report filings. Due to these constraints, management considers that a material weakness in financial reporting currently exists. Through the use of outside consultants, management is taking actions to remediate this deficiency, including attaining new or additional Board members for oversight.


A material weakness is a control deficiency (within the meaning of the Public Company Accounting Oversight Board (PCAOB) auditing standard) or combination of control deficiencies that result in more than remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected.


(b) Changes in internal control over financial reporting. There have been no changes in our internal control over financial reporting that occurred during the last fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.



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PART II - OTHER INFORMATION


Item 1.

Legal Proceedings.


None.


Item 1A.

Risk Factors.


We are a Smaller Reporting Company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.


Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds.


None.


Item 3.

Defaults Upon Senior Securities.


None.


Item 4.

Mine Safety Disclosure.


None.


Item 5.

Other Information.


None.


Item 6.

Exhibits.


Exhibit Number

 

Description

31.1

 

Certification by the Principal Executive Officer and Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

Filed herewith

32.1

 

Certification by the Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C Section 1350 pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

Filed herewith

101*

 

Financial statements from the quarterly report on Form 10-Q of REAC GROUP, , Inc. for the quarter ended March 31, 2018, formatted in XBRL: (i) the Balance Sheet, (ii) the Statement of Income, (iii) the Statement of Cash Flows and (iv) the Notes to the Financial Statements.

Filed herewith


SIGNATURES


Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



 

REAC GROUP,  INC.

 

 

Dated: May 15, 2018

By:

/s/ROBERT DEANGELIS

 

 

Robert DeAngelis

 

 

President,

 

 

Principal Executive Officer, Principal Financial Officer

Principal Accounting Officer and Director




26


Exhibit 31


Certification of Principal Executive Officer and Principal Financial Officer

Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

and Securities and Exchange Commission Release 34-46427


I, Robert DeAngelis, certify that:


1. I have reviewed this report on Form 10-Q of REAC Group, Inc.;


2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;


3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;


4. I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we have:


a) designed such disclosure controls and procedures or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;


b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;


c) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and


d) disclosed in this report any change in registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of the annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and


5. I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):


a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and


b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.


Dated: May 15, 2018

By:

/s/ Robert DeAngelis

 

 

Robert DeAngelis

 

 

President

 

 

Principal Executive Officer, Principal Financial Officer, Principal Accounting Officer and Director




Exhibit 32.1


Certification of Principal Executive Officer and Principal Financial Officer

Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to

Section 906 of the Sarbanes-Oxley Act of 2002


In connection with the Annual Report of REAC Group, Inc. (the Company) on Form 10-Q for the period ended March 31, 2018 as filed with the Securities and Exchange Commission on the date hereof (the Report), I, Robert DeAngelis, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:


(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and


(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.


 

Dated: May 15, 2018

By:

/s/ Robert DeAngelis

 

 

Robert DeAngelis

 

 

President

 

 

Principal Executive Officer, Principal Financial Officer, Principal Accounting Officer and Director




1




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