EDGAR 10-K Filing

Company CIK: 1520528
Filing Year: 2021
Filename: 1520528_10-K_2021_0001640334-21-002502.json

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ITEM 1. BUSINESS
ITEM 1. BUSINESS
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 will provide a comprehensive online real estate search portal that consists of an advertising and marketing platform for real estate professionals.
The Company’s website will offer real estate professionals an advertising platform 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 will serve as an internet portal that will feature a real estate search engine that directs consumers to receive more detailed information about their local agents, brokers, and offices, with regards to showing current listings, homes for sale, commercial properties, mortgages, and foreclosures.
Our customer base is consumers interested in buying or selling their home and properties. We’ve made it an easy and convenient process for the consumer to start their search by featuring their local real estate companies or agents’ current listings. Consumers can view current properties and houses for sale in hundreds of U.S. cities as well as in their local market.
Real Estate professionals use the internet to generate leads. The top sources of internet leads are company and agent web sites. The internet is vital to a growing number of real estate professionals’ success. The strong surge in technology has created many new companies in the real estate industry. Many of them have become household names.
Our goal as a real estate portal is to send consumers to our real estate search site to view offices, brokers or agents’ current listings. We are building a national online lead network for our real estate professionals.
Our mission is for our company to become one of the leading marketing partners to the real estate industry.
The Company provides consumers the opportunity to view real estate listings and homes for sale from their local real estate in their local markets and in most markets and cities throughout the United States.
We enable real estate professionals to better promote themselves and their listings and connect with transaction-ready consumers through our online websites and marketing website products.
Business Operations
REAC Group, Inc., through their real estate website, will provide a service that enables real estate professionals to capture, cultivate, and convert leads which cater to prospective home buyers and sellers. (www.realestatecontacts.com).
The Company’s real estate website is conducted solely within the Internet. Our company matches buyers, sellers, and real estate brokers’ agents and offices anywhere in the world.
The Company intends to add to their business model by acquiring real estate such as multi-family and residential income producing properties. The company is interested with the possibilities to Acquire, Joint Venture or Partner with other real estate related businesses along with other new business opportunities with established business entities and revenues. We will continue to introduce our operational progress and other corporate actions that include our plan of growth.
Products and Services
The Company has designed a real estate website that will operate as a real estate search portal www.realestatecontacts.com that features the real estate professional’s profiles and other real estate service providers in their service areas. The company is in the Beta testing stage of development.
The Company’s marketing strategy is to feature the real estate professional’s profile on the RealEstateContacts.com portal website in the areas that they service and work in so potential home buyers can view current real estate listings and homes that are for sale. We will send homebuyers and sellers to our real estate website so they can view our real estate contacts profiles so our real estate professionals become focused on receiving good leads for their business. This format would be called a lead generation program for real estate professionals that are on the RealEstateContacts.com portal website.
The driving of internet traffic is the key to any online marketing company. Our advertising campaign will be built around all internet related marketing concepts, such as search engine optimization, pay per clicks advertising, banner advertising, email marketing, and linking up to other real estate portals and directories.
We currently offer real estate agents, brokers, and offices the opportunity to become the real estate contact in the city that they serve on www.RealEstateContacts.com for a yearly fee.
We will also offer other real estate service providers the opportunity to advertise their services in the cities they work in.
Our website will set the stage to drive more business for our 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 intends to generate its revenue from selling advertising to real estate professionals and real estate service providers that are featured on our real estate portal.
Consumers will and do continue to buy and sell homes in real estate markets throughout the United States. The majority are going online to do so and will continue to contact and seek the advice of real estate professionals.
Reports to Security Holders
We file reports and other information with the U.S. Securities and Exchange Commission (“SEC”). You may read and copy any document that we file at the SEC’s public reference facilities at 100 F. Street, N.E., Washington, D.C. 20549. Please call the SEC at 1-800-732-0330 for more information about its public reference facilities. Our SEC filings will be available to you free of charge at the SEC’s web site at www.sec.gov.
At the request of a shareholder, we will send a copy of an annual report to include audited financial statements. As a reporting company with the U.S. Securities and Exchange Commission (“SEC”), we file all necessary quarterly (Form 10-Q), annual (Form 10-K) and other reports as required.

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ITEM 1A. RISK FACTORS
ITEM 1A. RISK FACTORS
The shares of our common stock being offered for resale by the selling security holders are highly speculative in nature, involve a high degree of risk and should be purchased only by persons who can afford to lose the entire amount invested in the common stock. Before purchasing any of the shares of common stock, you should carefully consider the following factors relating to our business and prospects. If any of the following risks actually occurs, our business, financial condition or operating results could be materially adversely affected. In such case, you may lose all or part of your investment. You should carefully consider the risks described below and the other information in this process before investing in our common stock.
Risks Related to Our Business
An occurrence of an uncontrollable event such as the COVID-19 pandemic may negatively affect our operations.
In December 2019, a novel strain of coronavirus (COVID-19) emerged in Wuhan, Hubei Province, China. While initially the outbreak was largely concentrated in China and caused significant disruptions to its economy, it has now spread to several other countries, including the United States, and infections have been reported globally.
The COVID-19 outbreak is a widespread health crisis that could adversely affect the economies and financial markets of many countries, resulting in an economic downturn that could materially impact our efforts to effectuate ordinary business transactions into the unforeseeable future. A pandemic typically results in social distancing, travel bans and quarantine, and this may limit access to our facilities, customers, management, support staff and professional advisors. These factors, in turn, may not only impact our operations, financial condition and demand for our goods and services but our overall ability to react timely to mitigate the impact of this event. In addition, it may hamper our efforts to comply with our filing obligations with the Securities and Exchange Commission.
Our business has been disrupted, but the extent to which the coronavirus impacts our operations will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the duration of the outbreak, new information which may emerge concerning the severity of the coronavirus and the actions to contain the coronavirus or treat its impact. International stock markets have begun to reflect the uncertainty associated with the slow-down in the American, European, and Asian economies, and the significant decline in the Dow Industrial Average in February and March 2020, was largely attributed to the effects of COVID-19.
Our business is difficult to evaluate because we have a limited operating history.
REAC Group, Inc. was incorporated on March 10, 2005. For the years ended December 31, 2019, and 2018, net losses were $4,237,188 and $702,564, respectively. Although the Company has conducted its operations since March 2005, it nonetheless has a limited operating history. Additionally, the Company has been unsuccessful in generating any significant revenues since its inception. This limited operating history and lack of revenues may not serve as an adequate basis to judge the Company’s future prospects and results of operations. The Company’s business and prospects must be considered in light of the risks and uncertainties frequently encountered by companies in their early stages of operations, including such companies that operate in the new and rapidly changing online advertising and marketing environment. The Company cannot assure that it will ever be profitable or that it will not be subject to increasing accumulated losses in the foreseeable future. The Company anticipates that its operating expenses will increase in concert with its planned operations. Any significant failure to realize anticipated revenue growth could result in further losses. The Company will continue to encounter risks and difficulties frequently experienced by companies at a similar stage of development, including its potential failure to:
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Implement and/or adapt and modify the Company’s business model and strategy;
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Develop and increase brand awareness, protect the Company’s reputation, and develop customer loyalty;
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Efficiently manage the Company’s planned expansion of its operations and related expenses; and
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Anticipate and adapt to changing conditions in markets in which the Company operates, such as the impact of any changes mergers and acquisitions involving the Company’s competitors, technological developments, and other significant competitive and market dynamics.
If the Company is unsuccessful in addressing any or all of these risks, its business and financial condition may be materially and adversely affected.
We need additional capital to develop our business. Without additional capital we may not be able to implement our business plan.
The continued development of our services will require the commitment of substantial resources to implement our business plan. In addition, substantial expenditures will be required to enable us to manage properties in the future. Currently, we have no established bank-financing arrangements. Therefore, it is likely we would need to seek additional financing through a subsequent future private offering of our equity securities, or through strategic partnerships and other arrangements with corporate partners.
We cannot give you any assurance that any additional financing will be available to us, or if available, will be on terms favorable to us. The sale of additional equity securities will result in dilution to our stockholders. The occurrence of indebtedness would result in increased debt service obligations and could require us to agree to operating and financing covenants that would restrict our operations. If adequate additional financing is not available on acceptable terms, we may not be able to implement our business development plan or continue our business operations.
Our business is susceptible to fluctuation in the real estate market which may have an adverse effect on our ability to generate revenue.
Our business depends substantially on the conditions of the real estate market. Demand for real estate has grown rapidly in the past decade but such growth is often accompanied by volatility in market conditions and fluctuations in real estate prices. Fluctuations in the real estate market may negatively impact our ability to generate revenue through the advertising of real estate professionals on our website. If we are unable to generate revenue through advertising on our website we may have to cease operations.
We are subject to general real estate risks and our revenue may fluctuate.
Our primary revenue will be generated from yearly advertisements by real estate professionals, such as real estate offices, real estate brokerages, real estate agents, and the sales of real estate service providers. The revenue available from these advertisements will depend on the current real estate market. If the advertisements on our website do not generate sufficient income to meet operating expenses our cash flow and ability to operate will be adversely affected.
Our future success is dependent, in part, on the performance and continued service of Robert DeAngelis, CEO, President and Director. Without his continued service, we may be forced to interrupt or eventually cease our operations.
We are presently dependent to a great extent upon the experience, abilities and continued services of Robert DeAngelis. The loss of the service of Mr. DeAngelis could have a material adverse effect on our business, financial condition or results of operation.
We may incur significant costs to be a public company to ensure compliance with U.S. corporate governance and accounting requirements and we may not be able to absorb such costs.
We may incur significant costs associated with our public company reporting requirements, costs associated with newly applicable corporate governance requirements, including requirements under the Sarbanes-Oxley Act of 2002 and other rules implemented by the Securities and Exchange Commission. We expect all of these applicable rules and regulations to significantly increase our legal and financial compliance costs and to make some activities more time consuming and costly. We also expect that these applicable rules and regulations may make it more difficult and more expensive for us to obtain director and officer liability insurance and we may be required to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. As a result, it may be more difficult for us to attract and retain qualified individuals to serve on our board of directors or as executive officers. We are currently evaluating and monitoring developments with respect to these newly applicable rules, and we cannot predict or estimate the amount of additional costs we may incur or the timing of such costs. In addition, we may not be able to absorb these costs of being a public company which will negatively affect our business operations.
The lack of public company experience of our management team could adversely impact our ability to comply with the reporting requirements of U.S. Securities Laws.
Our management team lacks public company experience, which could impair our ability to comply with legal and regulatory requirements such as those imposed by Sarbanes-Oxley Act of 2002. Our senior management has never had responsibility for managing a publicly traded company. Such responsibilities include complying with federal securities laws and making required disclosures on a timely basis. Our senior management may not be able to implement programs and policies in an effective and timely manner that adequately respond to such increased legal, regulatory compliance and reporting requirements, including the establishing and maintaining of internal controls over financial reporting. Any such deficiencies, weaknesses or lack of compliance could have a materially adverse effect on our ability to comply with the reporting requirements of the Securities Exchange Act of 1934 which is necessary to maintain our public company status. If we were to fail to fulfill those obligations, our ability to continue as a U.S. public company would be in jeopardy in which event you could lose your entire investment in our company.
We may issue additional shares that could dilute your potential ownership interest and limit the ability of a third party to obtain voting control.
Some events over which investors in the Company have no control could result in the issuance of additional shares of our Common Stock or issuances of preferred stock which would dilute the ownership percentage of current shareholders. We may issue additional shares of Common Stock:
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to raise additional capital or finance acquisitions;
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upon the exercise or conversion of outstanding warrants or convertible notes;
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in lieu of cash payment of interest on our outstanding convertible subordinated notes; or
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to vendors in exchange for products or services
We have not filed for trademark protection with the United States Patent and Trademark office which may adversely impact our ability to generate revenue.
We have not filed for trademark protection with the United States Patent and Trademark Office regarding the use of the Company’s name, REAC Group, Inc. Should we fail to file for protection of the Company’s name, we may be unable to adequately protect the use of our name, which would negatively affect the Company’s brand name and its ability to generate revenues.
The Company’s officer and director has significant control over shareholder matters and the minority shareholders will have little or no control over the Company’s affairs.
The Company’s CEO and officer/director owns approximately 1,000,000 post-split shares of the Company’s outstanding Common Stock as of June 21, 2021, and has significant control over shareholder matters, such as election of the Company’s directors, amendments to its Articles of Incorporation, and approval of significant corporate transactions; as a result, the Company’ minority shareholders will have little or no control over its affairs.
The Company may become dependent upon advertising customers for a significant portion of its revenue. If these customers no longer require our service it will have an adverse effect on our business operations.
The Company may become dependent upon advertising customers for a significant portion of its revenues. Should the Company be successful in obtaining those customers, but those customers no longer require the Company’s services or terminate the use of its services, the Company’s revenues and operations will be negatively affected.
The real estate market is very competitive which may have a negative effect on our ability to generate revenue and continue our business operations.
The Real Estate Advertising/Marketing services market is becoming increasingly competitive and the barriers to entry regarding such services are low. Many of the Company’s existing and potential competitors have longer operating histories in the Real Estate Advertising Marketing and website business, greater name recognition, larger client base, greater Internet traffic, and greater financial, technical and marketing resources than the Company does. The Real Estate Advertising Marketing business and the sales of real estate websites is subject to intense competition; should the Company be unable to overcome such competitive forces, its operations will be negatively affected and it will be unable to expand its business.
If the Company fails to promote its brand cost effectively it may have a negative impact on our business operations.
If the Company fails to promote and maintain its brand successfully, or the Company incurs significant expenses pertaining to promotion of its brand without corresponding revenue increases, the Company’s business may be adversely affected.
Our business is subject to various risks associated with conducting business online.
The Company’s business is conducted solely within the Internet arena and is subject to various risks associated with conducting business online, including: (a) the Company’s target clients, real estate professionals, offices, brokers, agents, may operate their own Internet portal and websites for advertising and marketing purposes, and have no need for the Company’s advertising, marketing and services; and (b) consumer traffic to the Company’s website and its advertising/marketing revenues are based on consumer and real estate professional’s acceptance and/or continued acceptance of online marketing and advertising, which there is no assurance will continue to be an acceptable mode of marketing and advertising.
Risk Related To Our Capital Stock
We may never pay any dividends to shareholders.
We have never declared or paid any cash dividends or distributions on our capital stock. We currently intend to retain our future earnings, if any, to support operations and to finance expansion and therefore we do not anticipate paying any cash dividends on our common stock in the foreseeable future.
The declaration, payment and amount of any future dividends will be made at the discretion of the board of directors, and will depend upon, among other things, the results of our operations, cash flows and financial condition, operating and capital requirements, and other factors as the board of directors considers relevant. There is no assurance that future dividends will be paid, and, if dividends are paid, there is no assurance with respect to the amount of any such dividend.
You will experience dilution of your ownership interest because of the future issuance of additional shares of our common stock and our preferred stock.
In the future, we may issue our authorized but previously unissued equity securities, resulting in the dilution of the ownership interests of our present stockholders. We are currently authorized to issue an aggregate of 200,000,000 shares of capital stock consisting of 199,000,000 shares of common stock, par value $.00001 per share, and 1,000,000 shares of Preferred Stock, of which 500,000 shares have been designated as Series A Preferred Stock, par value $0.0001 per share (“Series A”), as per the amended and restated Articles of Incorporation, effective January 22, 2019.
We may also issue additional shares of our common stock or other securities that are convertible into or exercisable for common stock in connection with hiring or retaining employees or consultants, future acquisitions, future sales of our securities for capital raising purposes, or for other business purposes.
Our common stock is considered a penny stock, which may be subject to restrictions on marketability, so you may not be able to sell your shares.
If our common stock becomes tradable in the secondary market, we will be subject to the penny stock rules adopted by the Securities and Exchange Commission that require brokers to provide extensive disclosure to their customers prior to executing trades in penny stocks. These disclosure requirements may cause a reduction in the trading activity of our common stock, which in all likelihood would make it difficult for our shareholders to sell their securities.
Penny stocks generally are equity securities with a price of less than $5.00 (other than securities registered on certain national securities exchanges or quoted on the NASDAQ system). Penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document that provides information about penny stocks and the risks in the penny stock market. The broker-dealer also must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction, and monthly account statements showing the market value of each penny stock held in the customer’s account. The broker-dealer must also make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction. These requirements may have the effect of reducing the level of trading activity, if any, in the secondary market for a security that becomes subject to the penny stock rules. The additional burdens imposed upon broker-dealers by such requirements may discourage broker-dealers from effecting transactions in our securities, which could severely limit the market price and liquidity of our securities. These requirements may restrict the ability of broker-dealers to sell our common stock and may affect your ability to resell our common stock.
If we fail to maintain an effective system of internal control over financial reporting and disclosure controls and procedures, we may be unable to accurately report our financial results and comply with the reporting requirements under the Exchange Act.
We intend to prepare an internal plan of action for compliance with the requirements of Section 404. As a result, we cannot guarantee that we will not have any “significant deficiencies” or “material weaknesses” within our processes. Compliance with the requirements of Section 404 is expected to be expensive and time-consuming. If we fail to complete this evaluation in a timely manner, we could be subject to regulatory scrutiny and a loss of public confidence in our internal control over financial reporting. In addition, any failure to establish an effective system of disclosure controls and procedures could cause our current and potential stockholders and customers to lose confidence in our financial reporting and disclosure required under the Exchange Act, which could adversely affect our business.
Our Common Stock has a very limited trading market.
Our Common Stock is traded on the over-the-counter market (OTC) electronic quotation service, an inter-dealer quotation system that provides significantly less liquidity than the NASDAQ stock market or any other national securities exchange. In addition, trading in our Common Stock has historically been extremely limited. This limited trading adversely affects the liquidity of our Common Stock, not only in terms of the number of shares that can be bought and sold at a given price, but also through delays in the timing of transactions and reduction in security analysts’ and the media’s coverage of us. As a result, there could be a larger spread between the bid and ask prices of our Common Stock and you may not be able to sell shares of our Common Stock when or at prices you desire.
Our bylaws provide for our indemnification of our officers and directors.
Our directors and officers are indemnified as provided by the Florida corporate law and our Bylaws. We have agreed to indemnify each of our directors and certain officers against certain liabilities, including liabilities under the Securities Act of 1933. Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to our directors, officers and controlling persons pursuant to the provisions described above, or otherwise, we have been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than our payment of expenses incurred or paid by our director, officer or controlling person in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, we will, unless in the opinion of our counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.
We have been advised that in the opinion of the Securities and Exchange Commission indemnification for liabilities arising under the Securities Act is against public policy as expressed in the Securities Act, and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities is asserted by one of our directors, officers, or controlling persons in connection with the securities being registered, we will, unless in the opinion of our legal counsel the matter has been settled by controlling precedent, submit the question of whether such indemnification is against public policy to a court of appropriate jurisdiction. We will then be governed by the court’s decision.

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ITEM 1B. UNRESOLVED STAFF COMMENTS
ITEM 1B. UNRESOLVED STAFF COMMENTS
There is no reporting requirement under this item for a smaller reporting company.

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ITEM 2. PROPERTIES
ITEM 2. PROPERTIES
Our principal executive office is located at 3100 NW 74th Street, Miami, FL, 33122, and our telephone number is (305) 503-1200.

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ITEM 3. LEGAL PROCEEDINGS
ITEM 3. LEGAL PROCEEDINGS
From time to time, we may become involved in various lawsuits and legal proceedings, which arise, in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business. We are currently not aware of any such legal proceedings or claims that we believe will have a material adverse effect on our business, financial condition or operating results.

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ITEM 4. MINE SAFETY DISCLOSURE
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
PART II

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ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDERS MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Our common stock is quoted on the Over the Counter Bulletin Board (“OTC Pink”) under the symbol “REAC” for the reporting period. Although we are listed on the OTC Pink, there can be no assurance that an active trading market for our stock will develop. Price quotations on the exchange will reflect inter-dealer prices, without retail mark-up, mark-down or commission, and may not represent actual transactions.
Should a market develop for our shares, the trading price of the common stock is likely to be highly volatile and could be subject to wide fluctuations in response to factors such as actual or anticipated variations in quarterly operating results, announcements of technological innovations, new sales formats, or new services by us or our competitors, changes in financial estimates by securities analysts, conditions or trends in Internet or traditional retail markets, changes in the market valuations of other equipment and furniture leasing service providers or accounting related business services, announcements by us or our competitors of significant acquisitions, strategic partnerships, joint ventures, capital commitments, additions or departures of key personnel, sales of common stock and other events or factors, many of which are beyond our control. In addition, the stock market in general, and the market for instant messaging business services in particular, has experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of such companies. These broad market and industry factors may materially adversely affect the market price of the common stock, regardless of our operating performance.
Consequently, future announcements concerning us or our competitors, litigation, or public concerns as to the commercial value of one or more of our services may cause the market price of our common stock to fluctuate substantially for reasons which may be unrelated to operating results. These fluctuations, as well as general economic, political and market conditions, may have a material adverse effect on the market price of our common stock.
Cash dividends have not been paid since inception. In the near future, we intend to retain any earnings to finance the development and expansion of our business. We do not anticipate paying any cash dividends on our common stock in the foreseeable future. The declaration and payment of cash dividends by us are subject to the discretion of our board of directors. Any future determination to pay cash dividends will depend on our results of operations, financial condition, capital requirements, contractual restrictions and other factors deemed relevant at the time by the board of directors. We are not currently subject to any contractual arrangements that restrict our ability to pay cash dividends.
At the present time, we have outstanding warrants to purchase securities convertible into common stock (see Note 9).
Price Range of Common Stock
Our Common Stock is to be quoted on the over-the-counter market (OTC: Pink) electronic quotation service under the symbol “REAC.”
As of December 31, 2019
Retro-application of 1:10,000
reverse split made effective
March 1, 2019
Fiscal Year 2019
High*
Low*
High*
Low*
First quarter ended March 31, 2019
$ 0.0005
$ 0.0001
$ 5.00
$ 1.00
Second quarter ended June 30, 2019
$ 0.9500
$ 0.1000
$ 0.9500
$ 0.1000
Third quarter ended September 30, 2019
$ 0.5700
$ 0.1000
$ 0.5700
$ 0.1000
Fourth quarter ended December 31, 2019
$ 3.7700
$ 0.0201
$ 3.7700
$ 0.0201
As of December 31, 2018
Retro-application of 1:10,000
reverse split made effective
March 1, 2019
Fiscal Year 2018
High*
Low*
High*
Low*
First quarter ended March 31, 2018
$ 0.0064
$ 0.0007
$ 64.00
$ 7.00
Second quarter ended June 30, 2018
$ 0.0012
$ 0.0004
$ 12.00
$ 4.00
Third quarter ended September 30, 2018
$ 0.0006
$ 0.0003
$ 6.00
$ 3.00
Fourth quarter ended December 31, 2019
$ 0.0005
$ 0.0002
$ 5.00
$ 2.00
Approximate Number of Equity Security Holders
As of December 31, 2019, there were approximately 54 certificate holders of record of the Company’s common stock.
Dividends
We have not declared or paid cash dividends on our common stock.
Stock Option Grants
There are no outstanding options to purchase our securities.

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ITEM 6. SELECTED FINANCIAL DATA
ITEM 6. SELECTED FINANCIAL DATA
We qualify as a smaller reporting company, as defined by Rule 229.10(f)(1), and are not required to prove the information required by this Item.

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
Cautionary Notice Regarding Forward Looking Statements
This section of this Form 10-K 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.
Readers should not place undue reliance on these forward-looking statements, which are based on management’s current expectations and projections about future events, are not guarantees of future performance, are subject to risks, uncertainties and assumptions (including those described below), and apply only as of the date of this filing. Our actual results, performance or achievements could differ materially from the results expressed in, or implied by, these forward-looking statements. Factors which could cause or contribute to such differences include, but are not limited to, the risks to be discussed in our Annual Report on form 10-K and in the press releases and other communications to shareholders issued by us from time to time which attempt to advise interested parties of the risks and factors which may affect our business. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.
Our Operating Strategy
Our website allows real estate professionals and consumers to interact through the Internet as a business medium. Our operating strategy is to feature real estate agents’ websites on the www.realestatecontacts.com portal website in the areas that they service and work enabling potential home buyers to view real estate listings and homes that are for sale. This format would be called a lead generation program for real estate professionals that are on the RealEstateContacts.com portal website.
Our business strategy is an ease of use approach which allows the consumer to view listings of homes from our website and also of their local real estate office or agent.
Our focus is driving high volumes of traffic to our website and our advertisers profile pages putting the consumer with the most relevant and desired professional. Many unique visitors visit our website to view real estate listings and homes for sale. We accomplish this through highly focused and well-designed SEO strategies that allow our advertisers to receive greater amount of exposure without spending huge resources. Our methodology and resource expenditures are invaluable tools to our advertisers. We do the marketing and our advertisers get the leads.
Our real estate search portal website will also include local real estate service providers that want more traffic and exposure to their business website for potential new clients.
We believe the driving of internet traffic is the key to any online marketing company. We intend to build our advertising campaign around all internet related marketing concepts, such as search engine optimization, pay per clicks advertising, banner advertising, email marketing, and linking up to other real estate portals and directories.
Our goal is to connect real estate professionals with consumers who are interested in buying or selling a home. We believe that when a customer does research and knows which house he or she is interested in, the result is a more effective and time-efficient transaction for both buyer and seller.
Plan of Operations
Our plan of operation is to operate a search engine portal website for real estate.
Our real estate search website allows real estate professionals and consumers to interact through the internet as a business medium. The Company’s operating strategy is to feature real estate professional’s websites and profiles on the RealEstateContacts.com portal website in the areas that they service and work enabling potential home buyers to view real estate listings and homes that are for sale and featured on the real estate professionals’ website. This format is called a lead generation program for real estate professionals that are on the RealEstateContacts.com portal website.
Our business strategy is an ease of use approach which allows the consumer to view listings of homes from of their local real estate office, broker or agent. This service is provided from our real estate search website: www.realestatecontacts.com. In addition, our real estate search website will feature a select few per city. For this reason, we believe our concept will have a high level of interest from any real estate professional. We believe this approach will be attractive to real estate professionals in each locale.
The RealEstateContacts.com portal website will also feature local real estate service providers such as local or national mortgage lenders and mortgage brokers. By featuring local mortgage brokers our website allows the consumer to have access to any financial questions and can receive all the information they need quickly in their geographical area.
Our goal is to connect real estate professionals with consumers who are interested in buying or selling a home.
We anticipate generating revenues from advertising sales from real estate professionals on our current website.
We plan to grow revenues in the next 12 months by undertaking the following steps:
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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.
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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, pay per click advertising, banner advertising and social media networks to help manage and geographically target consumer traffic and lead volume.
·
Focus on driving more internet traffic and unique visitors to our websites by using these search engine marketing techniques.
·
We plan to increase our online Search Engine Marketing to create more unique users. Measuring unique users is important to us because our advertising revenues depend in part on our ability to enable our consumers to connect with real estate professionals. We define a unique user as a user who visits our website at least once during a calendar month, as measured by our analytical tools.
·
The number of real estate professionals (advertisers) on our website is an important driver of revenue growth.
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.
Results of Operations
For the years ended December 31, 2019 and 2018.
Revenues
For the years ended December 31, 2019 and 2018, we generated no revenues.
Operating Expenses
Operating expenses in the amount of $4,109,730 and $509,358 were incurred for the years ended December 31, 2019 and 2018, respectively. The increase was due to increased stock-based compensation and general and administrative expenses. We anticipate that our professional fees ($50,454 in 2019 vs $53,504 in 2018) will remain significant as we maintain compliance with our public reporting requirements.
Net Loss
The Company recognized net losses of $4,237,188 and $702,564 for the years ended December 31, 2019 and 2018, respectively. The increased loss is largely due to stock-based compensation issued to the Company’s CEO. At this time, normal costs of public filing will continue and it is not known when significant revenues will occur to off-set these expenses.
Liquidity and Capital Resources
The Company is currently financing its operations primarily through loans, equity sales and advances from shareholders. These advances are being made to supplement any cash generated by the operating revenue. We believe we can currently satisfy our cash requirements for the next twelve months with our current expected increase in revenue, and the 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. Management plans to continue to rely upon advances from shareholders until it has generated revenue through yearly advertising subscriptions.
The Company has negative working capital, in the amount of $1,742,797 as of December 31, 2019 and has net cash used by operations of $11,030. During the year ended December 31, 2019, the Company received $10,000 in proceeds from the issuance of common stock. During the year ended December 31, 2018, the Company received $65,000 from the issuance of convertible debt.
At December 31, 2019 the Company’s cash balance was $132. The Company anticipates generating revenue, which will partially mitigate cash flow deficiencies; however, without revenue at the present time, we are unable to cover our cash requirements without relying upon loans and advances. In consideration of the potential shortfall in adequate resources, management has disclosed its substantial doubt about its ability to continue as a going concern and our auditor has also expressed the same in their auditors’ report.
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 (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 operating losses in the foreseeable future. Therefore, there is 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.
Subsequent Events
On January 7, 2020, 100,000 shares of the Company’s common stock were issued to its President and Chief Executive Officer pursuant to the Plan of Share Exchange Agreement originally entered into on December 27, 2019 with Florida Beauty Express, Inc., Florida Beauty Flora, Inc., Floral Logistics of Miami, Inc., Floral Logistics of California, Inc., and Tempest Transportation Inc.
On January 13, 2020, we entered into an Amended Agreement and Plan of Share Exchange Agreement by and Amongst, REAC Group, Inc. and Florida Beauty Express, Inc., Florida Beauty Flora, Inc., Floral Logistics of Miami, Inc., Floral Logistics of California, Inc., Tempest Transportation Inc. (the “Companies”). The Agreement is for the exchange of 100% of the outstanding shares of the Companies in exchange for 15,015,002 shares of REAC Common Stock and 500,000 shares of REAC Series A Preferred Stock. The Agreement also states that the Mr. Robert DeAngelis will return to the REAC Treasury all of the shares that he currently controls, in return for $350,000, to be paid as follows: $100,000 shall be paid in cash within three (3) days of closing by wired funds to Robert DeAngelis. The remaining $150,000 will be payable in $75,000 installments for the first two quarters after closing (March 31, 2020 and June 30, 2020 respectively) and Mr. DeAngelis will also receive 100,000 shares of common stock, that will be valued at $1.00 per share, respectively. As part of the Agreement, Mr. Robert DeAngelis will also resign and appoint new officers and directors as to be chosen by the Companies.
On February 3, 2020, the Company entered into a Senior Convertible Promissory Note in the amount of $277,750 and the Company authorized the disbursement of the proceeds to Florida Beauty Flora, Inc. The Note bears interest at a rate of 12% and matures one year from the purchase date. The Note is convertible into shares of the Company’s common stock at a conversion price equal to 50% multiplied by the lowest trading price during the previous twenty-five (25) days. At any time during the period beginning on the Issue Date and ending on the last Trading Day immediately preceding the Maturity Date, the Borrower shall have the right, exercisable on not less than three (3) Trading Days prior written notice to the Holder of the Note and subject to the Holder’s written consent at the time of such prepayment, to prepay the outstanding Note (principal and accrued interest), in full by making a payment to the Holder of an amount in cash equal to 150%, multiplied by the sum of the then outstanding principal amount of this Note, plus accrued and unpaid interest on the unpaid principal amount of the Note, plus Default Interest, if any.
On February 25, 2020, the Company issued 1,000,000 shares of common stock to its President and Chief Executive Officer as a performance bonus for 2020. The shares were valued at the quoted market price on the date of issuance.
On April 13, 2020, we entered into a second Amended Agreement and Plan of Share Exchange Agreement that was originally entered into on December 26, 2019 by and Amongst, REAC Group, Inc. and Florida Beauty Express, Inc., Florida Beauty Flora, Inc., Floral Logistics of Miami, Inc., Floral Logistics of California, Inc., Tempest Transportation Inc. (the “Companies”) and Companies shareholders. The Agreement is for the exchange of 100% of the outstanding shares of the Companies in exchange for 15,015,002 shares of REAC Common Stock and 500,000 shares of REAC Series A Preferred Stock. The Conditions to the Agreement have been satisfied and fully closed, and the Companies are now wholly-owned subsidiaries of REAC. The Agreement also states that Mr. Robert DeAngelis will return to the REAC Treasury all of the shares that he currently controls, in return for $350,000, to be paid as follows: $100,000 shall be paid in cash within three (3) days of closing by wired funds to Robert DeAngelis. The remaining $150,000 will be payable in $75,000 installments for the first two quarters after closing (April 30, 2020 (of which $12,000 has been paid) and June 30, 2020 respectively) and Mr. DeAngelis will also receive 100,000 shares of common stock, that will be valued at $1.00 per share, respectively. As part of the Agreement, Mr. Robert DeAngelis will also resign and appoint new officers and directors as to be chosen by the Companies. The Company plans to bring Mr. DeAngelis back as a consultant and / or an advisor, but no agreements have been made to do so, at this time.
The 15,015,002 shares of Common Stock and 500,000 shares of Preferred Stock will be distributed as described below:
Common Stock
Shares to Issue
Shareholder
1,876,875
Efrat Afek
1,876,875
Ralph Milman
3,753,751
Ronan Koubi
3,003,000
The Q Trust
2,552,551
Ronald Minsky
1,951,950
The Apollo Family Trust
Series A Preferred Stock
Shares to Issue
Shareholder
62,500
Ralph Milman
62,500
Efrat Afek
125,000
Ronan Koubi
105,000
The Q Trust
80,000
Ronald Minsky
65,000
The Apollo Family Trust
The Agreement may be terminated, and the Acquisition contemplated herein may be abandoned at any time prior to the Effective Time, whether before or after stockholder approval thereof by either Acquiror or the Companies. The consummation of the transactions contemplated by this Agreement (the “Closing”) shall take place on such date as may be reasonably required to accommodate a satisfaction of the conditions precedent to Closing, but in no event later than April 13, 2020 without consent of the parties.
On April 16, 2020, the Company issued 400,000 shares of common stock to its President and Chief Executive Officer pursuant to the terms of his employment agreement. The shares were issued as a performance bonus for 2020 and were valued at the quoted market price on the date of issuance.
On April 23, 2020, the Company issued 2,000,000 shares of common stock to its President and Chief Executive Officer pursuant to the terms of his employment agreement. The shares were issued as a performance bonus for 2020 and were valued at the quoted market price on the date of issuance.
Effective June 22, 2020, Robert DeAngelis resigned from his position as President and Chief Executive Officer and as a member of the board of directors of REAC Group, Inc. Ronen Koubi will be appointed the new CEO. Ronen Koubi is the President and Director of Florida Beauty Flora, Inc.
Effective July 29, 2020, the Company entered into a securities purchase agreement with Auctus Fund, LLC, a Delaware limited liability company. The SPA provides for the purchase by Auctus of a convertible promissory note in the principal amount of $575,000; including 100% warrant coverage with full anti-dilution rights and buyback option. The Company authorized the disbursement of the proceeds of this Note to Florida Beauty Flora, Inc.. The Promissory Note matures on July 29, 2021 and bears interest at a rate of 12% per annum.
Effective October 12, 2020, one of the Company’s convertible promissory notes dated March 13, 2017, with the original principal amount of $230,000, was assigned to a new third party. All rights, title, and interest of the Note were assigned without recourse and without representations or warranties of any kind.
Common Shares issued for Cash
In May 2019, the Company issued 20,000 common shares to a private investor in exchange for $10,000, or $0.50 per share.
Common Shares issued as Compensation
On February 14, 2020, the Company issued 500,000 shares of common stock to its President and Chief Executive Officer as a performance bonus for the year ending December 31, 2019. The shares were valued at $1.65, the quoted market price on the date of issuance and the Company has recorded common stock payable as of December 31, 2019 for a value of $825,000.
In March 2019, the Company issued 15,000,000 shares of common stock to its President and Chief Executive Officer pursuant to the terms of his employment agreement. The shares were issued for purposes of maintaining voting control of the Company and were valued at $0.50, the quoted market price on the date of issuance, or $3,000,000.
Common Shares issued for Repayment of Notes
In December 2019, the Company approved the issuance of 726,100 shares of common stock in satisfaction of $4,608 in accrued interest and $500 in conversion fees on a convertible note payable. As of December 31, 2019, the shares were not yet issued by the Company’s transfer agent; therefore the Company has recorded common stock payable in the amount of $5,108. The Company will record the issuances at the contract value, at the date of exchange, off-setting accrued interest.
In August 2019, the Company issued 30,000 shares of common stock, for a value of $1,050 in satisfaction of $550 in principal and $500 in 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.
In January 2019, the Company issued 2,500 shares of common stock, for a value of $2,000 in satisfaction of $1,500 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 accrued interest.
In January 2019, the Company issued 2,400 shares of common stock, for a value of $1,920 in satisfaction of $1,420 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 accrued interest.
In August 2018, the Company issued 2,393 shares of common stock in connection with a Securities Purchase Agreement and a Secured Convertible Promissory Note that granted the investor a Warrant to purchase shares of the Company’s common stock. The shares were valued at $3,350, or $1.40 per share.
In June 2018, the Company issued 1,800 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 June 2018, the Company issued 2,195 shares of common stock in connection with a Securities Purchase Agreement and a Secured Convertible Promissory Note that granted the investor a Warrant to purchase shares of the Company’s common stock. The shares were valued at $3,073, or $1.40 per share.
During the year ended December 31, 2018, the Company issued 6,032 shares of common stock, in a cashless exercise, for an aggregate value of $9,456 pursuant to a Warrant Agreement associated with a convertible note payable.
In May 2018, the Company issued 1,522 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 May 2018, the Company issued 1,523 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 May 2018, the Company issued 1,749 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 May 2018, the Company issued 1,908 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 May 2018, the Company issued 2,003 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 May 2018, the Company issued 1,329 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 May 2018, the Company issued 550 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 May 2018, the Company issued 1,444 shares of common stock in connection with a Securities Purchase Agreement and a Secured Convertible Promissory Note that granted the investor a Warrant to purchase shares of the Company’s common stock. The shares were valued at $3,033, or $2.10 per share.
In May 2018, the Company issued 1,500 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 April 2018, the Company issued 1,261 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 April 2018, the Company issued 1,259 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 April 2018, the Company issued 1,261 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 April 2018, the Company issued 1,449 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 March 2018, the Company issued 1,100 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 February 2018, the Company issued 1,989 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 1,125 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.
In February 2018, the Company issued 1,000 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 January 2018, the Company issued 467 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 250 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.
Off-Balance Sheet Arrangements
Under the definition contained in Item 303(a)(4)(ii) of Regulation S-K, we do not have any off-balance sheet arrangements, financings, or other relationships with unconsolidated entities or other persons, also known as “special purpose entities” (SPEs).
Critical Accounting Policies
The Company’s significant accounting policies are presented in the Company’s notes to financial statements for the period ended December 31, 2019 and 2018, which are contained in this filing and the Company’s 2018 Annual Report on Form 10-K. The significant accounting policies that are most critical and aid in fully understanding and evaluating the reported financial results include the following:
·
The Company prepares its financial statements in conformity with generally accepted accounting principles in the United States of America. These principals require management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Management believes that these estimates are reasonable and have been discussed with the Board of Directors; however, actual results could differ from those estimates.
·
The Company currently does not issue credit on services provided, therefore there are no accounts receivable. No allowance for doubtful accounts is considered necessary to be established for amounts that may not be recoverable, since there has been no credit issued.
·
Long-lived assets such as property, equipment and identifiable intangibles are reviewed for impairment whenever facts and circumstances indicate that the carrying value may not be recoverable. When required impairment losses on assets to be held and used are recognized based on the fair value of the asset. The fair value is determined based on estimates of future cash flows, market value of similar assets, if available, or independent appraisals, if required. If the carrying amount of the long-lived asset is not recoverable from its undiscounted cash flows, an impairment loss is recognized for the difference between the carrying amount and fair value of the asset. When fair values are not available, the Company estimates fair value using the expected future cash flows discounted at a rate commensurate with the risk associated with the recovery of the assets. We did not recognize any impairment losses for any periods presented.
·
The Company issues restricted stock to consultants for various services. Cost for these transactions are measured at the fair value of the consideration received or the fair value of the equity instruments issued, whichever is measurable more reliably measurable. The value of the common stock is measured at the earlier of (i) the date at which a firm commitment for performance by the counterparty to earn the equity instruments is reached or (ii) the date at which the counterparty’s performance is complete.
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 footnotes to the financial statements included in this filing.

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
ITEM 7A. QUANTITATIVE AND QUALITIATIVE DISCLOSURES ABOUT MARKET RISK
We do not hold any derivative instrument assets and do not engage in any hedging activities.

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Financial Statements
REAC Group, Inc.
As of December 31, 2019
Contents
Financial Statements:
Reports of Independent Registered Public Accounting Firm
Balance Sheets
Statements of Operation
Statements of Changes in Stockholders’ Deficit
Statements of Cash Flows
Notes to Financial Statements
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and Board of Directors
REAC Group, Inc.
Opinion on the Financial Statements
We have audited the accompanying balance sheets of REAC Group, Inc. (the Company) as of December 31, 2019 and 2018 and the related statements of operations, changes in stockholders’ deficit and cash flows for each of the years in the two-year period ended December 31, 2019 and 2018, and the related notes (collectively referred to as the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2019 and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2019, in conformity with accounting principles generally accepted in the United States of America.
Explanatory Paragraph - Going Concern
The accompanying financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note 3 to the financial statements, the Company had a net loss and cash used in operations of $4,237,188 and $11,030, respectively, for the year ended of December 31, 2019 and a working capital deficit of approximately $1,742,797. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regards to these matters are also described in Note 3. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the auditing standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits include performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ Assurance Dimensions
Certified Public Accountants
We have served as the Company’s auditor since 2017.
Margate, Florida
September 30, 2021
REAC Group, Inc.
Balance Sheets
December 31,
December 31,
Assets
Current assets
Cash
$ 132
$ 1,162
Total assets
1,162
Liabilities and Stockholders’ Deficit
Current liabilities
Accounts payable
$ 35,300
$ 3,000
Accrued interest
154,460
54,119
Accrued salaries, payroll taxes, and penalties and interest
1,039,657
807,108
Due to principal shareholder
7,650
-
Convertible notes payable (net of debt discount of $0 and $4,915, respectively)
505,862
488,823
Total current liabilities
1,742,929
1,353,050
Total liabilities
1,742,929
1,353,050
Commitments and Contingencies (Note 11)
Stockholders’ Deficit
Preferred Stock Series A, $0.0001 par value, 500,000 shares designated; 500,000 and 500,000 shares issued and outstanding, respectively
Preferred Stock, Series B, $0.001 par value, 500,000 shares authorized; none issued and outstanding
-
-
Common Stock, $0.00001 par value, 199,000,000 shares authorized; 15,107,517 and 50,441 shares issued and outstanding, respectively
-
Common stock payable
830,108
---
Additional paid-in capital
25,050,715
22,034,695
Accumulated deficit
(27,623,821 )
(23,386,633 )
Total stockholders’ deficit
(1,742,797 )
(1,351,888 )
Total Liabilities and Stockholders’ Deficit
$ 132
$ 1,162
The accompanying notes are an integral part of these financial statements.
REAC Group, Inc.
Statements of Operations
For the Years Ended
December 31,
Revenues
$ -
$ -
Operating expenses:
Compensation
4,057,551
451,657
Professional
50,454
53,504
Rents
1,200
1,200
General and administrative
2,997
Total operating expenses
4,109,730
509,358
Net loss from operations
(4,109,730 )
(509,358 )
Other income/(expense)
Interest expense
(113,364 )
(75,956 )
Debt financing penalties
(14,094 )
(172,886 )
Gain on write-off of warrant liability
-
35,047
Gain on extinguishment of debt
-
20,589
Impairment of asset
-
-
Net gain/(loss) loss before provision for income taxes
(4,237,188 )
(702,564 )
Provision for income taxes
-
-
Net loss
$ (4,237,188 )
$ (702,564 )
Loss per share, basic and dilutive
$ (0.34 )
$ (17.84 )
Weighted average shares outstanding, basic and dilutive
12,410,460
39,387
The accompanying notes are an integral part of these financial statements.
REAC Group, Inc.
Statements of Changes in Stockholders’ Deficit
For the Years Ended December 31, 2018 and 2019
Preferred Shares
Par Value
Common Shares
Par Value
Additional Paid in Capital
Common Stock Payable
Accumulated Deficit
Total Deficiency
Balance as of December 31, 2017
50,935
$ 5
9,364
$ -
$ 21,483,185
$ -
$ (22,684,069 )
$ (1,200,879 )
In kind contribution of rent
-
-
-
-
1,200
-
-
1,200
Common shares issued as compensation for services and as settlement for accrued compensation
449,065
10,000
-
442,221
-
-
442,266
Shares issued in satisfaction of loan debt and interest
-
-
25,044
-
108,089
-
-
108,089
Shares issued on cashless exercise of warrants
-
-
6,033
-
-
-
-
-
Net loss for the year
-
-
-
-
-
-
(702,564 )
(702,564 )
Balance as of December 31, 2018
500,000
$ 50
50,441
$ -
$ 22,034,695
$ -
$ (23,386,633 )
$ (1,351,888 )
In kind contribution of rent
-
-
-
-
1,200
-
-
1,200
Fractional shares issued in stock split
-
-
2,176
-
-
-
-
-
Common shares issued for cash
-
-
20,000
-
10,000
-
-
10,000
Common shares issued as compensation for services and as settlement for accrued compensation
-
-
15,000,000
2,999,850
825,000
-
3,825,000
Shares issued in satisfaction of loan debt and interest
-
-
34,900
4,970
5,108
-
10,079
Net loss for the year
-
-
-
-
-
-
(4,237,188 )
(4,237,188 )
Balance as of December 31, 2019
500,000
$ 50
15,107,517
$ 151
$ 25,050,715
$ 830,108
$ (27,623,821 )
$ (1,742,797 )
REAC Group, Inc.
Statements of Cash Flows
For the Years Ended
December 31,
Cash Flows from Operating Activities:
Net loss
$ (4,237,188 )
$ (702,564 )
Adjustment to reconcile net loss to net cash provided by operations:
Stock based compensation
3,825,000
330,000
In kind contribution of rent
1,200
1,200
Gain on extinguishment of debt
-
(20,589 )
Gain on write-off of warrant liability
-
(35,047 )
Amortization of debt discounts and finance costs
4,915
9,733
Debt financing penalties
14,094
172,886
Changes in assets and liabilities:
Prepaid expenses
-
Accounts payable
32,300
3,000
Accrued interest
108,450
39,561
Accrued salaries, payroll taxes, penalties and interest
232,549
86,173
Due to principal shareholder
7,650
-
Net Cash Used by Operating Activities
(11,030 )
(115,186 )
Cash Flows from Investing Activities:
Net Cash Used by Investing Activities
-
-
Cash Flows from Financing Activities:
Proceeds from shareholder loans and advances
-
2,500
Repayments of shareholder loans and advances
-
(2,548 )
Proceeds from loans and notes
-
65,000
Repayments of loans and notes
-
-
Proceeds from the issuance of common stock
10,000
-
Net Cash Provided by Financing Activities
10,000
64,952
Net decrease in cash
(1,030 )
(50,234 )
Cash at beginning of period
1,162
51,396
Cash at end of period
$ 132
$ 1,162
Supplemental cash flow information:
Interest paid
$ -
$ 6,500
Taxes paid
$ -
$ -
Non-cash disclosures
Common stock issued for conversion of debt and interest
$ 9,078
$ 108,089
Common stock issued for warrants
$ -
$ 9,456
Preferred stock issued against accrued officer compensation
$ -
$ 112,266
Common shares issued as finance costs
$ 1,000
$ -
The accompanying notes are an integral part of these financial statements.
REAC Group, Inc.
Notes to the Financial Statements
For the years ended December 31, 2019 and 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’s national real estate search website is www.realestatecontacts.com.
The Company’s website offers 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 website that directs consumers to receive more detailed information about agents, offices, and 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. The Company intends to add to their business model by acquiring real estate such as multi-family and residential income producing properties. The company is interested with the possibilities to Acquire, Joint Venture or Partner with other real estate related businesses along with other new business opportunities with established business entities and revenues. We will continue to introduce our operational progress and other corporate actions that include our plan of growth.
2. Basis of Presentation and 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.
All share and per share information contained in this report gives retroactive effect to a 1 for 10,000 reverse stock split of outstanding common stock, effective March 1, 2019.
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, 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.
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 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 December 31, 2019.
Derivative Liabilities
The Company assessed the classification of its derivative financial instruments as of December 31, 2019 and 2018, 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 twelve months ended December 31, 2019 and 2018, 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, the expected volatility, the implied risk-free interest rate, as well as the expected dividend rate, if any. For the twelve months ended December 31, 2019, 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 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 December 31, 2019 or 2018 in excess of the federally insured limit.
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.
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.
In July 2019, the FASB released Accounting Standards Update (ASU) No. 2018-09, Codification Improvements. ASU 2018-09 that affect a wide variety of Topics in the FASB Accounting Standards Codification including the guidance in paragraph 718-740-35-2, Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting is unclear on whether an entity should recognize excess tax benefits (or tax deficiencies) for compensation expense that is taken on the entity’s tax return. The amendment to paragraph 718-740-35-2 in this update clarifies that an entity should recognize excess tax benefits (that is, the difference in tax benefits between the deduction for tax purposes and the compensation cost recognized for financial statement reporting) in the period in which the amount of the deduction is determined. This includes deductions that are taken on the entity’s return in a different period from when the event that gives rise to the tax deduction occurs and the uncertainty about whether (1) the entity will receive a tax deduction and (2) the amount of the tax deduction is resolved.
Income Taxes
The Company accounts for income taxes under Section 740-10-30 of the FASB Accounting Standards Codification. Deferred income tax assets and liabilities are determined based upon differences between the financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance to the extent management concludes it is more likely than not that the assets will not be realized. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the statements of operations in the period that includes the enactment date.
The Company adopted section 740-10-25 of the FASB Accounting Standards Codification (“Section 740-10-25”). Section 740-10-25 addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under Section 740-10-25, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than fifty percent (50%) likelihood of being realized upon ultimate settlement. Section 740-10-25 also provides guidance on de-recognition, classification, interest and penalties on income taxes, accounting in interim periods and requires increased disclosures.
The estimated future tax effects of temporary differences between the tax basis of assets and liabilities are reported in the accompanying balance sheets, as well as tax credit carry-backs and carry-forwards. The Company periodically reviews the recoverability of deferred tax assets recorded on its balance sheets and provides valuation allowances as management deems necessary.
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, convertible debt, 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 December 31, 2019 and 2018, there were approximately 109,307,182 and 619,754 share equivalents, respectively, for potential conversion demand of our outstanding convertible notes and warrants.
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 $4,237,188 for the twelve months ended December 31, 2019 and had net cash used in operating activities of $11,030 for the same period. Additionally, the Company has an accumulated deficit of $27,623,821 and a working capital deficit of $1,742,797 at December 31, 2019. 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 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 July 2018, FASB issued Accounting Standards Update 2018-11; Earnings Per Share (Topic 260); Distinguishing Liabilities from Equity (Topic 480): Derivatives and Hedging (Topic 815): (Part I) Accounting for Certain Financial Instruments with Down Round Features, (Part II) Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Non-public Entities and Certain Mandatorily Redeemable Non-controlling Interests with a Scope Exception. The guidance is intended to reduce the complexity associated with issuers’ accounting for certain financial instruments with characteristics of liabilities and equity. Specifically, a down round feature (as defined) would no longer cause a freestanding equity-linked financial instrument (or an embedded conversion option) to be accounted for as a derivative liability at fair value with changes in fair value recognized in current earnings. The amendments in this ASU are effective for interim and annual periods beginning after December 15, 2018. Early adoption is permitted. We adopted Topic 718 effective January 1, 2019 and the standard did not have a significant effect on the results of operations or cash flows.
In May 2018, FASB issued Accounting Standards Update 2018-09; Compensation-Stock Compensation (Topic 718): Scope of Modification Accounting. The amendments in this ASU amends the scope of modification accounting for share-based payment arrangements, provides guidance on the types of changes to the terms or conditions of share-based payment awards an entity is required to apply modification accounting under ASC 718. The amendments in this ASU are effective for interim and annual periods beginning after December 15, 2018. Early adoption is permitted. We adopted Topic 718 effective January 1, 2019 and the standard did not have a significant effect on the results of operations or cash flows.
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. We adopted Topic 842 effective January 1, 2019 and the standard did not have an effect on the results of operations or cash flows as the Company has no leases in place as of December 31, 2019.
5. Related Party Transactions
The majority shareholder has advanced funds since inception, for the purpose of financing working capital and product development. As of December 31, 2019, and 2018, the Company owed $7,650 and $0, respectively. There are no repayment terms to these advances and deferrals and the Company has imputed interest at a nominal rate of 3%.
The Company has minimal needs for facilities and operates from office space provided by the majority stockholder. There are no lease terms. For the twelve months ended December 31, 2019 and 2018, rent has been calculated based on the limited needs at a fair market value of the space provided. Rent expense was $1,200 and $1,200 for the twelve months ended December 31, 2019 and 2018, 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 February 14, 2020, the Company issued 500,000 shares of common stock to its President and Chief Executive Officer as a performance bonus for the year ending December 31, 2019. The shares were valued at $1.65, the quoted market price on the date of issuance and the Company has recorded common stock payable as of December 31, 2019 for a value of $825,000.
On March 31, 2019, the Company’s Board of Directors authorized the issuance of 15,000,000 shares to the Company’s Chief Executive Officer as a performance bonus pursuant to his employment agreement. The shares were valued at $0.20, the quoted market price on the date of issuance, or $3,000,000.
On March 4, 2019, the Company renewed its three-year employment agreement with Robert DeAngelis to serve as the President and Chief Executive Officer of the Company. The employment agreement automatically renews for an additional twelve months upon expiration of each 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 twelve months ended December 31, 2019 and 2018, the Company recorded compensation expense in the amount of $120,000 and $120,000, respectively.
6. Accounts Payable and Accrued expenses
December 31,
December 31,
Accounts payable
$ 35,300
$ 3,000
Accrued interest
154,460
54,119
Accrued salaries, payroll taxes, penalties and interest (a)
1,039,657
807,108
Due to principle shareholder, related party
7,650
-
(a) The Company has accrued additional compensation to its Chief Executive Officer totaling $120,000 and $120,000 during the twelve months ended December 31, 2019 and 2018, 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 $1,039,657 and $807,108 at December 31, 2019 and 2018, respectively.
7. Convertible Notes Payable
During the twelve months ended December 31, 2019 and 2018, respectively, the Company had convertible notes payable outstanding in which the conversion rate was variable and undeterminable. The Company determined that there wasn’t an active market for the Company’s common stock and because of this lack of liquidity and market value, there wasn’t a derivative liability associated with these convertible notes as of December 31, 2019 and 2018. 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, the expected volatility, the implied risk-free interest rate, as well as the expected dividend rate, if any.
As of December 31, 2019, three of the Company’s convertible promissory notes remain outstanding beyond their respective maturity dates; triggering an event of technical default under the agreements. Consequently, the Company is accruing interest on the notes at their respective default rates. As a result of being in default on certain Notes, the Holders could, at their sole discretion, call the respective Notes in their entirety, including all associated penalties provided for under the respective agreements. In this event, the Company may not have sufficient authorized shares to absolve itself of the defaulted Notes through the issuance of common shares of the Company. The Company is working with its current noteholders and its transfer agent in order that it may resolve this outstanding issue as soon as practicable.
As of December 31, 2019, the Company owed an aggregate of $660,321 in principal and accrued interest on its remaining outstanding convertible promissory notes; of which, $505,862 (before a discount of $-0-) represents convertible notes payable and $154,460 represents accrued interest. At December 31, 2018, the Company owed an aggregate of $542,942 (before a discount of $4,915) in principal and accrued interest; of which, $488,823 represents convertible notes payable, net of $4,915 debt discount, and $54,119 represents accrued interest.
December 31, 2019
December 31, 2018
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 12-24%, convertible at discount to trading price (25-50%) based on various measurements of prior trading, at face value of remaining original note principal balance plus default penalties, net of unamortized debt discounts, attributable deferred financing costs in the amount of $-0- and $4,915, respectively.
$ 505,862
$ 493,738
Principal
505,862
493,738
Debt discount
-
(4,915 )
Total Principal
$ 505,862
$ 488,823
Summary of Convertible Note Transactions:
December 31,
December 31,
Convertible notes, January 1
$ 493,738
$ 364,721
Additional notes, face value
-
65,000
Default Penalties
14,094
172,886
Payments and adjustments
-
-
Settlement of debt
-
(20,000 )
Conversions of debt
(1,970 )
(88,869 )
Unamortized debt discounts
-
(4,915 )
Convertible notes, balance
$ 505,862
$ 488,823
Note 6. 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 year ended December 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 wasn’t a derivative liability associated with this convertible note. On May 9, 2018, the note holder agreed to forgive the balance of the principal and accrued interest. As a result, during the year ended December 31, 2018, the Company has recognized a gain on the extinguishment of debt in the amount of $20,589 and canceled the reserve of 50,000 shares of common stock.
Note 5. 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 year ended December 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 wasn’t a derivative liability associated with this convertible note. In addition, the Company issued an aggregate of 15,813 common shares in satisfaction of $53,000 in principal and $3,727 in accrued interest. As of December 31, 2018, the note was considered paid in full and the Company canceled the reserve of 41,945 shares of common stock.
Note 4. 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 335 common shares for a value of $3,350, which was applied against the balance of accrued interest on the note. During the year ended December 31, 2018, the Company issued an aggregate of 1,125 common shares in satisfaction of $10,696 in principal and $554 in accrued interest for a total value of $11,250 and canceled the reserve of 49 shares of common stock. As of December 31, 2018, the note was considered paid in full.
Note 3. 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 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 Issue Discount” and accrues interest at 5% per annum. The 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, subject to anti-dilution and market adjustments set forth in the Agreement.
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 five years 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) On April 30, 2018, the Company’s Board of Directors approved the assignment of the Note to a different third-party. The total amount assigned was $30,306 which includes principal of $28,959 and accrued interest of $1,347. Subsequent to the assignment, the Company received additional tranches from the Assignee in the aggregate amount of $65,000 with no associated discounts. The Warrant associated with the Securities Purchase Agreement was not included in the Assignment of the Original Note.
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 concluded that there was no active market for the Company’s common stock, and because of this lack of liquidity and market value, there wasn’t a derivative liability associated with this convertible note.
The Note became due and payable on July 5, 2018 and the Company had defaulted on its obligations under the Note. Interest on the Note was then accrued at the default rate of 24% per annum and the Company classified the Note as a current liability. The Company is required to have authorized and reserved three and ten (10) times the number of shares that is actually issuable upon full exercise of the Note. The Note Holder could, at the Holder’s sole discretion, call the Note and impose the related default penalties. In this event, the Company would be obligated to pay 150% multiplied by the then outstanding entire balance and the Company would then also be in technical default of its Reserve requirement as it would have insufficient common shares authorized to cover the aggregate reserve requirement of all notes in default. During the year ended December 31, 2019, the Company issued no shares on the Note and recorded a penalty in the amount of $14,094 related to the Company’s stock split that became effective on March 1, 2019. As of December 31, 2019, the Company owed $108,053 in principal and $19,754 in accrued interest. As of December 31, 2019, the equivalent number of shares needed to satisfy the Note if converted is 9,782,374. During the year ended December 31, 2018, the Company issued an aggregate of 467 common shares in satisfaction of $6,041 in principal and fees under the Note of $500.
Note 2. 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 115 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, subject to anti-dilution and market adjustments set forth in the Agreement.
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. For the twelve months ended December 31, 2019 and 2018, the Company concluded that there was no active market for the Company’s common stock, and because of this lack of liquidity and market value, there wasn’t a derivative liability associated with this convertible note. The Company recognized a debt discount on the note as a reduction (contra-liability) to the Convertible Note Payable and is being amortized over the life of the note.
During the year ended December 31, 2018, the Company was required to increase the principal balance of the note by $5,000 pursuant to Section 1.3 of the Agreement which states that if the Borrower does not maintain or replenish the Reserved Amount within three (3) business days of the request of the Holder, the principal amount will increase by $5,000 for each such occurrence. In addition, under Section 1.4(g) of the Note, the Company was required to increase the principal amount of the Note by $15,000 due to the conversion price being less than $0.01. The penalties are tacked back to the Issue Date of the Note.
The Note became due and payable on February 5, 2018 and the Company remains in default of its obligations under the Note. Interest on the Note is being accrued at the default rate of 12% per annum and the Company classified the Note as a current liability. The Company is required to have authorized and reserved three and one half (3.5) times the number of shares that is actually issuable upon full exercise of the Note. On February 5, 2018, the Company was obligated to pay a Default Sum calculated as 150% multiplied by the then outstanding entire balance and recorded a penalty in the amount of $92,886 for failing to pay at maturity. As of December 31, 2019, the equivalent number of common shares the Company would be required to issue to satisfy the Note is 45,770,348.
In December 2019, the Company approved the issuance of 726,100 shares of common stock in satisfaction of $4,608 in accrued interest and $500 in conversion fees. As of December 31, 2019, the shares were not yet issued by the Company’s transfer agent, and therefore the Company has recorded common stock payable in the amount of $5,108. The Company will record the issuance at the contract value, at the date of exchange, off-setting accrued interest. During the twelve months ended December 31, 2019, the Company issued 34,900 common shares for a value of $4,970, satisfying $1,970 in principal, $1,500 in accrued interest, and $1,500 in finance costs. As of December 31, 2019, the Company owed $160,273 in principle, $112,886 in default penalties, and accrued interest of $94,835. During the year ended December 31, 2018, the Company issued 3,300 common shares for a value of $6,480, satisfying $5,480 in principal and $1,000 in finance costs. As of December 31, 2018, the Company owed $275,129 in principle and accrued interest of $35,292.
Note 1. 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, 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. On July 6, 2018, the Company’s Board of Directors approved the assignment of this Convertible Promissory Note to a different third-party. The terms of the original March 13, 2017 Convertible Promissory Note remain in effect and the note continues to accrue interest at a rate of 10% per annum until the note is paid in full.
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) Effective on July 20, 2018, the Warrant to Purchase Shares previously issued under the March 13, 2017 Convertible Promissory Note was terminated by the Warrant holder to facilitate the Company’s fundraising efforts.
The Secured Convertible Promissory Note 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). During the three months ended September 2017, the minimum market capitalization fell below $6,000,000 and the Company was required to adjust the conversion price to the market price defined in the agreement. 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.
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. For the twelve months ended December 31, 2019 and 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 wasn’t a derivative liability associated with this convertible note. The Company recognized a debt discount on the notes as a reduction (contra-liability) to the Convertible Notes Payable and the discounts are being amortized over the life of the notes.
The Note became due and payable on January 13, 2018 and the Company is in default of its obligations under the Note. Interest on the Note is being accrued at the default rate of 22% per annum beginning on July 6, 2018 and the Company classified the Note as a current liability. On November 2, 2018, the Note Holder demanded payment of all amounts due under the Note plus applicable collection costs, including attorney’s fees at the Mandatory Default Amount. The Mandatory Default Amount means the greater of (a) the Outstanding Balance divided by the Installment Conversion Price on the date the Mandatory Default Amount is demanded, multiplied by the VWAP on the date the Mandatory Default Amount is demanded, or (b) the Outstanding Balance following the application of the Default Effect. Pursuant to the demand letter on that date, the Company owed $125,053, which includes the mandatory default amount and interest will continue to accrue at the rate of $78.80 per day. The principal increase is considered applied as of the date of the demand for payment and is not tacked back to the Issue Date of the Note.
As of December 31, 2019, the Company owed $124,650 in principle and accrued interest of $39,189 and the equivalent number of shares needed to satisfy the Note if converted is 13,585,314. At December 31, 2018, the Company owed $124,650 in principle and accrued interest of $11,766.
8. Warrant Liabilities
The Company estimates the fair value of each option award on the date of grant using the Binomial option valuation model that uses the assumptions noted in the table below. Because Binomial option valuation models incorporate ranges of assumptions for inputs, those ranges are disclosed. Expected volatilities are based on the historical volatility of the Company’s stock. The Company uses historical data to estimate option exercise and employee termination within the valuation model; separate groups of employees that have similar historical exercise behavior are considered separately for valuation purposes. The expected term of options granted is derived from the output of the option valuation model and represents the period of time that options granted are expected to be outstanding; the range given below results from certain groups of employees exhibiting different behavior. During the twelve months ended December 31, 2019 and the year ended December 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 following table sets forth common share purchase warrants outstanding as of December 31, 2019:
December 31,
December 31,
Warrants, January 1
Additions
-
-
Conversions
-
(4 )
Forfeitures
-
(52 )
Warrants, balance
Weighted
Average
Exercise
Intrinsic
Warrants
Price
Value
Outstanding, January 1, 2019
$ 7.74
$ 7.66
Warrants granted and issued
---
$ ---
$ ---
Warrants forfeited
-
$ -
$ ---
Outstanding, December 31, 2019
$ 7.74
$ 7.66
Common stock issuable upon exercise of warrants
40,169,146
$ .50
$ .130
Warrants Outstanding
Warrants Exercisable
Weighted
Number
Average
Weighted
Number
Weighted
Outstanding
Remaining
Average
Exercisable
Average
Exercise
at December 31,
Contractual
Exercise
at December 31,
Exercise
Price
Life (Years)
Price
Price
$ .00804
0.55
$ .50
$ .50
The warrants convert at a rate of $.00804 per warrant, based on anti-dilution adjustments to the exercise price.
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 8) 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 five years 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, as adjusted from time to time pursuant to the terms and conditions of the Warrant. 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 70 shares of the Company’s common stock at $5,000 per share, resulting in an exercise value at issuance of $350,000. 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. During the year ended December 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 and in quarter ending March 31, 2018, the Company recorded a gain on the write-off of the fair value of the warrant in the amount of $35,047.
The Warrant may be exercised in whole or in part at $5,000 per share, subject to anti-dilution adjustments set forth in the Agreement. If the Market Price is greater than the Exercise Price, the Warrant Holder may elect to receive Warrant shares pursuant to a cashless exercise. The Market Price means the highest traded price of the Company’s common stock during the twenty (20) trading days prior to the date of the respective Exercise Notice. A dilutive issuance occurs when the Company issues common stock at an effective price per share that is less than the then-current Exercise Price. In this event, the Exercise Price is adjusted to match the lowest price per share at which such Common Stock was issued or may be acquired in the dilutive issuance.
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 equal to five (5) times the number of shares issuable on conversion of the Warrant. As of December 31, 2019, the Company is in technical default of its Reserve requirement for the detached Warrant.
During the twelve months ended December 31, 2019, no warrants were exercised. The warrant derivative liability as of December 31, 2019 and December 31, 2018 was $0 and $0, respectively. As of December 31, 2019, the remaining equivalent number of shares the Company would be required to issue under a cashless exercise of the Warrant is estimated to be 40,169,146 shares, which is based upon an exercise price of $0.00804.
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 $1,097 per share with 52 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. Effective July 20, 2018, the warrant to purchase shares previously issued under the Convertible Promissory Note was terminated by the Warrant holder to facilitate the Company’s fundraising efforts.
9. 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.
As of December 31, 2019 and December 31, 2018, 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, the expected volatility, the implied risk-free interest rate, as well as the expected dividend rate, if any.
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 December 31, 2019 and December 31, 2018, 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.
10. Equity
Common Shares issued for Cash
In May 2019, the Company issued 20,000 common shares to a private investor in exchange for $10,000, or $0.50 per share.
Common Shares issued as Compensation
On February 14, 2020, the Company issued 500,000 shares of common stock to its President and Chief Executive Officer as a performance bonus for the year ending December 31, 2019. The shares were valued at $1.65, the quoted market price on the date of issuance and the Company has recorded common stock payable as of December 31, 2019 for a value of $825,000.
On April 10, 2019, the Company entered into a Joint Venture Agreement with a third party for purposes of building a digital platform for real estate transactions. The parties have agreed that any projects undertaken jointly from which any funds are raised through the joint venture shall be split 50% to the Company and 50% to the third party. For and in consideration of the services to be provided, the Company has issued 1,250,000 shares of common stock. The shares were valued at $0.55, the quoted market price on the date of issuance, or $687,500. On June 5, 2019, the Company and Consultant mutually agreed to terminate the Agreement and the shares issued by the Company to the Consultant were returned and cancelled.
On April 10, 2019, the Company entered into a Consulting Agreement with a third party for purposes of establishing a real estate management division and or real estate holdings which will be operated as a division of the Company. The Company has agreed to dedicate a minimum of thirty-three percent (33%) of all funds received by the Company to the new division. The term of the Agreement is for a period of twelve months and is automatically extended for successive three-month terms. For and in consideration of the services to be provided, the Company has issued 1,250,000 shares of common stock. The shares were valued at $0.55, the quoted market price on the date of issuance, or $687,500. On June 5, 2019, the Company and Consultant mutually agreed to terminate the Agreement and the shares issued by the Company to the Consultant were returned and cancelled.
In March 2019, the Company issued 15,000,000 shares of common stock to its President and Chief Executive Officer pursuant to the terms of his employment agreement. The shares were issued for purposes of maintaining voting control of the Company and were valued at $0.50, the quoted market price on the date of issuance, or $3,000,000.
On January 23, 2018, the Company issued 10,000 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 OTC Markets website, which was $33.00; rendering the value of the preferred issued as $330,000. Since the Company’s closing stock price on the date of grant was also $33.00, the Company will not recognize any associated discounts or benefits associated with the shares issued.
Common Shares issued for Repayment of Notes
In December 2019, the Company approved the issuance of 726,100 shares of common stock in satisfaction of $4,608 in accrued interest and $500 in conversion fees on a convertible note payable. As of December 31, 2019, the shares were not yet issued by the Company’s transfer agent; therefore the Company has recorded common stock payable in the amount of $5,108. The Company will record the issuances at the contract value, at the date of exchange, off-setting accrued interest.
In August 2019, the Company issued 30,000 shares of common stock, for a value of $1,050 in satisfaction of $550 in principal and $500 in 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.
In January 2019, the Company issued 2,500 shares of common stock, for a value of $2,000 in satisfaction of $1,500 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 accrued interest.
In January 2019, the Company issued 2,400 shares of common stock, for a value of $1,920 in satisfaction of $1,420 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 accrued interest.
During the year ended December 31, 2018, the Company issued 25,044 shares of common stock, for a value of $80,251 in satisfaction of $33,541 principal, $38,210 accrued interest, and $8,500 in conversion fees on its convertible notes payable. The Company recorded the issuances at the contract value, at the date of exchange, off-setting the notes payable and accrued interest.
Preferred Stock
On March 1, 2018, the Company issued 449,065 shares of the Company’s non-convertible Series A Preferred Shares, with a par value of $0.0001 and with an initial liquidation preference of $200 per share pursuant to its amended and restated Articles on July 26, 2016, at a price of $200 per share, to its sole director and chief executive officer in exchange for $112,266 of accrued compensation. The Company valued the transaction at $8,981 and recognized the difference in fair value to additional paid in capital.
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 five years 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 $500. The conversion price is $5000, as adjusted from time to time pursuant to the terms and conditions of the Warrant. As of December 31, 2017, the Company received a tranche of $35,000; resulting in the issuance of a warrant to purchase 70 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. For the twelve months ended December 31, 2019, 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 December 31, 2019 and 2018 was $0 and $0, respectively. During year ended December 31, 2018, the Warrant Holder, in a cashless exercise, was issued 6,033 shares of common stock for an aggregate value of $9,456 pursuant to anti-dilution terms of the Warrant that adjusted the conversion price.
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 $1,097 per share with 52 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. Made effective on July 20, 2018, the warrant to purchase shares previously issued under the Convertible Promissory Note was terminated by the Warrant holder to facilitate the Company’s fundraising efforts.
Other
During the twelve months ended December 31, 2019 and 2018, the Company recorded in-kind contributions for rent expense in the amount of $1,200 and $1,200, respectively.
Amendment to the Articles of Incorporation
Pursuant to a written consent in lieu of a meeting, dated January 21, 2019, the Board approved to amend our Articles of Incorporation to (i) effect a 1-for-10,000 reverse stock split of our issued and outstanding shares of Common Stock, par value $0.00001 per share, and (ii) decrease the amount of authorized shares of Common Stock from 9.999 billion (9,999,000,000) prior to the Reverse Stock Split to 200 million (200,000,000). The Company has retro-actively applied the reverse stock split made effective on March 1, 2019 to share and per share amounts on these financial statements.
As of December 31, 2019, the total number of shares this corporation is authorized to issue is 200,000,000 (two-hundred million), allocated as follows among these classes and series of stock:
Designation
Par value
Shares Authorized
Common
$ 0.00001
199,000,000
Preferred Stock Class, Series A
$ 0.0001
500,000
Preferred Stock Class, Series B
$ 0.0001
500,000
11. 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 December 31, 2019 and December 31, 2018.
12. Income Tax
The Company accounts for income taxes under the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) No. 740, Income Taxes (“ASC 740”). Under ASC 740, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.
The federal income tax rate for corporations is 21% at years ending December 31, 2019 and 2018 and the blended tax rate for the Company is 24.3%, respectively.
December 31,
Income tax provision (benefit) at statutory rate of 21%
$ (890,000 )
$ (148,000 )
State taxes at 3.3%, net of federal benefit
(140,000 )
(23,000 )
Non-deductible items
929,000
80,000
Subtotal
(101,000 )
(91,000 )
Change in valuation allowance
101,000
91,000
Income Tax Expense
$ -
$ -
Net deferred tax assets and liabilities were comprised of the following:
Net Operating Losses
$ 1,908,000
$ 1,807,000
Valuation allowance
(1,908,000 )
(1,807,000 )
Deferred tax asset, net
$ -
$ -
As of December 31, 2019, the Company has estimated tax net operating loss carry-forwards of approximately $7.8 million, which can be utilized or expire beginning in 2037. The change in the blended rate reduced the net operating loss carry-forward deferred tax asset by $101,000. Utilization of these losses may be limited in accordance with IRC Section 382 in the event of certain ownership shifts.
As of December 31, 2019, the Company has estimated tax net operating loss carry-forwards of approximately $7.8 million, which can be utilized or expire beginning in 2037. The change in the blended rate reduced the net operating loss carry-forward deferred tax asset by $101,000. Utilization of these losses may be limited in accordance with IRC Section 382 in the event of certain ownership shifts.
13. Subsequent Events
The Company has evaluated all events that occur after the balance sheet date through the date when the financial statements were issued to determine if they must be reported.
On January 7, 2020, 100,000 shares of the Company’s common stock were issued to its President and Chief Executive Officer pursuant to the Plan of Share Exchange Agreement originally entered into on December 27, 2019 with Florida Beauty Express, Inc., Florida Beauty Flora, Inc., Floral Logistics of Miami, Inc., Floral Logistics of California, Inc., and Tempest Transportation Inc.
On January 13, 2020, we entered into an Amended Agreement and Plan of Share Exchange Agreement (the “Agreement”) by and Amongst, REAC Group, Inc. (“REAC”) and Florida Beauty Express, Inc., Florida Beauty Flora, Inc., Floral Logistics of Miami, Inc., Floral Logistics of California, Inc., Tempest Transportation Inc. (the “Companies”). The Agreement is for the exchange of 100% of the outstanding shares of the Companies in exchange for 15,015,002 shares of REAC Common Stock and 500,000 shares of REAC Series A Preferred Stock. The Agreement also states that the Mr. Robert DeAngelis will return to the REAC Treasury all of the shares that he currently controls, in return for $350,000, to be paid as follows: $100,000 shall be paid in cash within three (3) days of closing by wired funds to Robert DeAngelis, (the “Closing Cash”), and the remaining $150,000 will be payable in $75,000 installments for the first two quarters after closing (March 31, 2020 and June 30, 2020 respectively) and Mr. DeAngelis will also receive 100,000 shares of common stock, that will be valued at $1.00 per share, respectively. As part of the Agreement, Mr. Robert DeAngelis will also resign and appoint new officers and directors as to be chosen by the Companies.
On February 3, 2020, the Company entered into a Senior Convertible Promissory Note in the amount of $277,750 and the Company authorized the disbursement of the proceeds to Florida Beauty Flora, Inc. The Note bears interest at a rate of 12% and matures one year from the purchase date. The Note is convertible into shares of the Company’s common stock at a conversion price equal to 50% multiplied by the lowest trading price during the previous twenty-five (25) days. At any time during the period beginning on the Issue Date and ending on the last Trading Day immediately preceding the Maturity Date, the Borrower shall have the right, exercisable on not less than three (3) Trading Days prior written notice to the Holder of the Note and subject to the Holder’s written consent at the time of such prepayment, to prepay the outstanding Note (principal and accrued interest), in full by making a payment to the Holder of an amount in cash equal to 150%, multiplied by the sum of the then outstanding principal amount of this Note, plus accrued and unpaid interest on the unpaid principal amount of the Note, plus Default Interest, if any.
On February 14, 2020, the Company issued 500,000 shares of common stock to its President and Chief Executive Officer as a performance bonus for the year ending December 31, 2019. The shares were valued at the quoted market price on the date of issuance.
On February 25, 2020, the Company issued 1,000,000 shares of common stock to its President and Chief Executive Officer as a performance bonus for 2020. The shares were valued at the quoted market price on the date of issuance.
On April 13, 2020, we entered into a second Amended Agreement and Plan of Share Exchange Agreement that was originally entered into on December 26, 2019 (the “Agreement”) by and Amongst, REAC Group, Inc. (“REAC”) and Florida Beauty Express, Inc., Florida Beauty Flora, Inc., Floral Logistics of Miami, Inc., Floral Logistics of California, Inc., Tempest Transportation Inc. (the “Companies”) and Companies shareholders. The Agreement is for the exchange of 100% of the outstanding shares of the Companies in exchange for 15,015,002 shares of REAC Common Stock and 500,000 shares of REAC Series A Preferred Stock. The Conditions to the Agreement have been satisfied and fully closed, and the Companies are now wholly-owned subsidiaries of REAC. The Agreement also states that Mr. Robert DeAngelis will return to the REAC Treasury all of the shares that he currently controls, in return for $350,000, to be paid as follows: $100,000 shall be paid in cash within three (3) days of closing by wired funds to Robert DeAngelis, (the “Closing Cash”), the Closing Cash has been paid, and the remaining $150,000 will be payable in $75,000 installments for the first two quarters after closing (April 30, 2020 (of which $12,000 has been paid) and June 30, 2020 respectively) and Mr. DeAngelis will also receive 100,000 shares of common stock, that will be valued at $1.00 per share, respectively. As part of the Agreement, Mr. Robert DeAngelis will also resign and appoint new officers and directors as to be chosen by the Companies. The Company plans to bring Mr. DeAngelis back as a consultant and / or an advisor, but no agreements have been made to do so, at this time.
The 15,015,002 shares of Common Stock and 500,000 shares of Preferred Stock will be distributed as described below:
Common Stock
Shares to Issue
Shareholder
1,876,875
Efrat Afek
1,876,875
Ralph Milman
3,753,751
Ronan Koubi
3,003,000
The Q Trust
2,552,551
Ronald Minsky
1,951,950
The Apollo Family Trust
Series A Preferred Stock
Shares to Issue
Shareholder
62,500
Ralph Milman
62,500
Efrat Afek
125,000
Ronan Koubi
105,000
The Q Trust
80,000
Ronald Minsky
65,000
The Apollo Family Trust
The Agreement may be terminated, and the Acquisition contemplated herein may be abandoned at any time prior to the Effective Time, whether before or after stockholder approval thereof by either Acquiror or the Companies.
On April 16, 2020, the Company issued 400,000 shares of common stock to its President and Chief Executive Officer pursuant to the terms of his employment agreement. The shares were issued as a performance bonus foe 2020 and were valued at the quoted market price on the date of issuance.
On April 23, 2020, the Company issued 2,000,000 shares of common stock to its President and Chief Executive Officer pursuant to the terms of his employment agreement. The shares were issued as a performance bonus doe 2020 and were valued at the quoted market price on the date of issuance.
Effective June 22, 2020, Robert DeAngelis resigned from his position as President and Chief Executive Officer and as a member of the board of directors of REAC Group, Inc. Ronen Koubi will be appointed the new CEO. Ronen Koubi is the President and Director of Florida Beauty Flora, Inc.
Effective July 22, 2020, the Company entered into a Mutual Compromise and Settlement Agreement with one of its existing Noteholders to combine the settlement terms of two separate Convertible Note instruments owed by the Company. The first Note originally entered into on July 5, 2017, with a balance owed of approximately $172,000, was settled for a total of $150,000. At closing, the Note was paid off by the party in the Mutual Compromise and Settlement Agreement and the Company agreed to work together to reach a settlement on the second Convertible Note instrument, originally entered into on March 13, 2017, with a balance of approximately $230,000.
Effective July 29, 2020, the Company entered into a securities purchase agreement with Auctus Fund, LLC, a Delaware limited liability company. The SPA provides for the purchase by Auctus of a convertible promissory note in the principal amount of $575,000; including 100% warrant coverage with full anti-dilution rights and buyback option. The Company authorized the disbursement of the proceeds of this Note to Florida Beauty Flora, Inc.. The Promissory Note matures on July 29, 2021 and bears interest at a rate of 12% per annum.
Effective October 12, 2020, one of the Company’s convertible promissory notes dated March 13, 2017, with the original principal amount of $230,000, was assigned to a new third party. All rights, title, and interest of the Note were assigned without recourse and without representations or warranties of any kind.
On April 15, 2021, the Company cancelled 9,000,000 shares of common stock that were issued to the Company’s previous Chief Executive Officer and reissued 9,000,000 shares collectively, to Afek, Milman, Koubi, and Quartieri.

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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.

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ITEM 9A. CONTROLS AND PROCEDURES
ITEM 9A. CONTROLS AND PROCEDURES
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 acting Chief Financial Officer (“CFO”), 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.
Management’s Report on Internal Control Over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) of the Company. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America.
The Company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of America, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Management, under the supervision of the Company’s Chief Executive Officer and acting Chief Financial Officer, conducted an evaluation of the effectiveness of internal control over financial reporting based on the framework in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, management concluded that the Company’s internal control over financial reporting was not effective as of December 31, 2019 under the criteria set forth in the in Internal Control-Integrated Framework.
A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis. Management has determined that material weaknesses exist due to a lack of segregation of duties, resulting from the Company’s limited resources.
This annual report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to rules of the SEC that permit us to provide only management’s report in this Annual Report on Form 10-K.
Changes in Internal Control over Financial Reporting
There have been changes in our internal control over financial reporting that occurred subsequent to this Form 10K ending December 31, 2019. These changes are expected to have a material effect, or are reasonably likely to materially affect, our internal control over financial reporting.
On April 13, 2020, we entered into a second Amended Agreement and Plan of Share Exchange Agreement with Florida Beauty Express, Inc., Florida Beauty Flora, Inc., Floral Logistics of Miami, Inc., Floral Logistics of California, Inc., Tempest Transportation Inc. (the “Companies”) and Companies shareholders. As a result, the Company has expanded its management and board of directors and believes certain controls such as segregation of duties and levels of review related to our report filings will add reasonable assurances that any current deficiency risks will be mitigated.

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ITEM 9B. OTHER INFORMATION
ITEM 9B . OTHER INFORMATION
None.
PART III

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ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Directors and Executive Officers
Name
Position
Period
Age
Robert DeAngelis
8878 Covenant Ave., Suite 209
Pittsburgh, Pa. 15237
President, Chief Executive Officer, Chief Accounting Officer, Treasurer and Director
March 2005 June 2020
Ronen Koubi
3100 NW 74th Street
Miami, FL 33122
President, Chief Executive Officer, Chief Accounting Officer, Treasurer and Director
June 2020 - Present
Set forth below is a brief description of the background and business experience of our executive officers and directors for the past five years.
Management Team
Robert DeAngelis, President, Chief Executive Officer
Robert DeAngelis is the Founder, President and Chief Executive Officer of REAC Group, Inc., and has been since the company’s inception in 2005. Mr. DeAngelis brings to the company over 20 years of successful business development and management experience along with a strong diverse background of sales, financial and internet experience. Mr. DeAngelis is responsible for running the overall day to day management operations of the companies’ administrative functions, corporate filings, strategic evolution direction of the business, the overall vision as well as the sales and marketing for the company.
From 1997-2005 Mr. DeAngelis developed a company named The Privilege Club, Inc. This company was a print and internet advertising company for upper scale retailers and business owners. Prior to developing The Privilege Club, between 1987 through 1997 he developed a print and newspaper advertising company named Shopping Center Promotions and Marketing, Inc. In this capacity, Mr. DeAngelis planned successful marketing and advertising strategies working with shopping center owners and management owners in the South Florida area. From 1979 through 1985, Mr. DeAngelis managed several branch real estate offices in Ft. Lauderdale, Florida consisting of Century 21, ERA and Realty World Franchises.
In 1974, Mr. DeAngelis received his Associate’s Degree in Applied Business and his Bachelor of Science in Business Administration in 1977 from Youngstown University, Youngstown, Ohio.
Ronen Koubi, President, Chief Executive Officer
Ronen Koubi is the President and Chief Executive Officer of REAC Group, Inc., and has been since the company’s merger of the Florida Beauty Flora trucking/transportation group in April, 2020. Mr. Koubi brings to the company over 38 years of successful trucking, logistics and transportation business with management experience along with a strong diverse background of transportation sales and marketing, finance and internet experience.
Mr. Koubi is responsible for running the overall day to day management operations of the combined companies’, administrative functions, corporate filings, strategic evolution direction of the business, and the overall corporate vision.
In 1985, after retiring from the Israeli Navy as a sonar engineer for nuclear capable submarines, Mr. Koubi established First Paragon, Inc., a Greenhouse based flora grower located in Homestead, FL. Mr. Koubi grew the Company to $30MM in revenues as a Director of Marketing, when it was eventually spun off.
In 1995, Mr. Koubi acquired Florida Beauty Flora and transitioned it into a trucking Company specializing in transportation of fresh cut flowers and other perishable goods. At that time the Company had a small fleet of four trucks and four trailers. Mr. Koubi became the President of the company shortly thereafter. In 1998, Floral Logistics was incorporated and merged with the group to provide air transportation including inventory management and warehousing. Under Mr. Koubi’s leadership, Floral Logistics of Miami grew to be a $20MM revenue Company and became a leader in the transportation industry. In 2007, under Mr. Koubi’s direction, a California branch was opened, allowing the Florida Beauty group to become a national trucking and logistics operation covering both coasts. In 2012, Mr. Koubi moved the group of companies to their current location in a 275,000 square foot refrigerated building near the Miami International Airport. As CEO, Mr. Koubi continues to grow the Companies through organic growth and mergers and acquisitions to include 250 trucks and 300 trailers and in excess of $90,000,000 in gross revenues.
Term of Office
Our directors are appointed for a one-year term to hold office until the next annual general meeting of our shareholders or until removed from office in accordance with our bylaws. Our officers are appointed by our board of directors and hold office until removed by the board.
Code of Ethics
We have adopted a code of ethics since the final quarter of 2011 that applies to our principal executive officer, principal financial officer, and principal accounting officer as well as our employees. Our standards are in writing and are to be posted on our website at a future time. The following is a summation of the key points of the Code of Ethics we adopted:
·
Honest and ethical conduct, including ethical handling of actual or apparent conflicts of interest between personal and professional relationships;
·
Full, fair, accurate, timely, and understandable disclosure reports and documents that a small business issuer files with, or submits to, the Commission and in other public communications made by our Company;
·
Full compliance with applicable government laws, rules and regulations;
·
The prompt internal reporting of violations of the code to an appropriate person or persons identified in the code; and
·
Accountability for adherence to the code
Corporate Governance
We are a small reporting company, not subject to the reporting requirements of Section 13(a) or 15(d) of the Exchange Act respecting any director. We have conducted special Board of Director meetings almost every month since inception. Each of our directors has attended all meetings either in person or via telephone conference. We have no standing committees regarding audit, compensation or other nominating committees. In addition to the contact information in private placement memorandum, each shareholder will be given specific information on how he/she can direct communications to the officers and directors of the corporation at our annual shareholders meetings. All communications from shareholders are relayed to the members of the Board of Directors.
Section 16(a) Beneficial Ownership Reporting Compliance
Under Section 16(a) of the Exchange Act, our directors and certain of our officers, and persons holding more than 10 percent of our common stock are required to file forms reporting their beneficial ownership of our common stock and subsequent changes in that ownership with the United States Securities and Exchange Commission. Such persons are also required to furnish Coastline Corporate Services, Inc. with copies of all forms so filed.
Based solely upon a review of copies of such forms filed on Forms 3, 4, and 5, and amendments thereto furnished to us, we believe that as of the date of this report, our executive officers, directors and greater than 10 percent beneficial owners complied on a timely basis with all Section 16(a) filing requirements.

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ITEM 11. EXECUTIVE COMPENSATION
ITEM 11. EXECUTIVE COMPENSATION
The table below summarizes all compensation awarded to, earned by, or paid to our executive officers by any person for all services rendered in all capacities to us for the fiscal years ended December 31, 2019 and 2018.
The following summary compensation table sets forth all compensation awarded to, earned by, or paid to the named executive officers paid by us during the years ended December 31, 2019 and 2018 in all capacities for the accounts of our executives, including the Chief Executive Officer (CEO) and Chief Financial Officer (CFO):
Name and principal position(1)
Year
Salary ($)
Bonus
($)
Stock Awards
($)
Option Awards
($)
Non-Equity Incentive Plan Comp ($)
Non-Qualified Deferred Comp Earnings
($)
All Other Comp ($)
Total
($)
Robert DeAngelis,
$ 120,000
$ 3,825,000
$ 3,945,000
President, CEO and CFO
$ 120,000
$ 442,266
$ 562,266
$ 120,000
$ 900,000
$ 1,020,000
(1) There is an employment contract with the Executive at this time. There is no employment contract with the Directors at this time; nor are there any agreements for compensation in the future. A salary and stock options and/or warrants program may be developed in the future.
Executive Compensation
As of December 31, 2019, we have one full time employee and plan to employ more qualified employees in the near future. On March 4, 2019 we renewed and amended the original three-year employment agreement dated March 10, 2016, which had expired. We entered into a new three-year employment agreement with Robert DeAngelis to serve as the President and Chief Executive Officer of the Company. Mr. DeAngelis will be paid a minimum of $10,000 per month plus performance bonuses. The agreement also stipulated that the Company is to issue stock for the purpose of maintaining voting control of the Company.
On February 14, 2020, the Company issued 500,000 shares of common stock to its President and Chief Executive Officer as a performance bonus for the year ending December 31, 2019. The shares were valued at $1.65, the quoted market price on the date of issuance and the Company has recorded common stock payable as of December 31, 2019 for a value of $825,000.
In March 2019, the Company issued 15,000,000 shares of common stock to its President and Chief Executive Officer pursuant to the terms of his employment agreement. The shares were issued for purposes of maintaining voting control of the Company and were valued at $0.50, the quoted market price on the date of issuance, or $3,000,000.
On March 1, 2018, the Company issued 45 shares of the Company’s non-convertible Series A Preferred Shares, with a par value of $0.0001 and with an initial liquidation preference of $200 per share pursuant to its amended and restated Articles on July 26, 2016, at a price of $200 per share, to its sole director and chief executive officer in exchange for $112,266 of accrued compensation. The Company valued the transaction at $8,981 and recognized the difference in fair value to additional paid in capital.
On January 23, 2018, the Company issued 10,000 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 $33; rendering the value of the preferred issued as $330,000. Since the Company’s closing stock price on the date of grant was also $33, the Company will not recognize any associated discounts or benefits associated with the shares issued.
Additional Compensation of Directors
We have no stock option, retirement, pension, or profit-sharing programs for the benefit of directors, officers or other employees.
Board of Directors and Committees
Our board of directors appoints our executive officers to serve at the discretion of the board. Our directors receive no compensation from us for serving on the board. Until we achieve significant operational revenues, we do not intend to reimburse our officers or directors for travel and other expenses incurred in connection with attending the board meetings or for conducting business activities.
Employment Agreements
Effective March 10, 2010, and subsequently renewed on March 4, 2013, 2016, and 2019, we entered into an employment agreement with Robert DeAngelis, our Chief Executive Officer. The employment agreement is for a period of three years and 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 existing employment agreement is $120,000 plus bonuses. For the years ending December 31, 2019 and 2018, the Company awarded stock valued at $3,825,000 and $442,266, respectively.
Director Compensation
We have provided no compensation to our directors for services provided as directors.
Stock Option Grants
We have not granted any stock options to our executive officers since our incorporation.

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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The following table sets forth information concerning the beneficial ownership of shares of our common stock with respect to stockholders who were known by us to be beneficial owners of more than 5% of our common stock as of December 31, 2019, and our officers and directors, individually and as a group. Unless otherwise indicated, the beneficial owner has sole voting and investment power with respect to such shares of common stock.
Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission (“SEC”) and generally includes voting or investment power with respect to securities. In accordance with the SEC rules, shares of our common stock which may be acquired upon exercise of stock options or warrants which are currently exercisable or which become exercisable within 60 days of the date of the table are deemed beneficially owned by the optionees, if applicable.
The following table provides the names and addresses of each person known to us to own more than 5% of our outstanding common stock as of December 31, 2019, and by the officers and directors, individually and as a group. All shares are owned directly.
Name
Position
Common Stock
Owned
Percentage
Owned*
Robert DeAngelis
8878 Covenant Ave., Suite 209
Pittsburgh, Pa. 15237
President, Chief Executive Officer,
Chief Accounting Officer, Treasurer
and Director
15,015,002
27.4 %

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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS, AND DIRECTOR INDEPENDENCE
As of December 31, 2019, Mr. DeAngelis beneficially owned 15,015,002 shares of common stock.

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ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
The following table shows the fees that were billed for the audit and other services for the two-year period. Assurance Dimensions provided services for the years ended December 31, 2019 and December 31, 2018.
Audit Fees
$ 29,000
$ 24,000
Audit-Related Fees
-
-
Tax Fees
-
-
All Other Fees
-
-
Total
$ 29,000
$ 24,000
Audit Fees - This category includes the audit of our annual financial statements, review of financial statements included in our Quarterly Reports on Form 10-Q and services that are normally provided by the independent registered public accounting firm in connection with engagements for those fiscal years. This category also includes advice on audit and accounting matters that arose during, or as a result of, the audit or the review of interim financial statements.
Audit-Related Fees - This category consists of assurance and related services by the independent registered public accounting firm that are reasonably related to the performance of the audit or review of our financial statements and are not reported above under “Audit Fees.” The services for the fees disclosed under this category include consultation regarding our correspondence with the Securities and Exchange Commission and other accounting consulting.
Tax Fees - This category consists of professional services rendered by our independent registered public accounting firm for tax compliance and tax advice. The services for the fees disclosed under this category include tax return preparation and technical tax advice.
All Other Fees - This category consists of fees for other miscellaneous items.
Our Board of Directors has adopted a procedure for pre-approval of all fees charged by our independent registered public accounting firm. Under the procedure, the Board approves the engagement letter with respect to audit, tax and review services. Other fees are subject to pre-approval by the Board, or, in the period between meetings, by a designated member of Board. Any such approval by the designated member is disclosed to the entire Board at the next meeting. The audit and review fees paid to the auditors with respect to 2018 were pre-approved by the entire Board of Directors. There were no consultation or tax fees paid to our auditors.
Pursuant to the requirements of Section 13 or 15(d) 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.
Effective May 6, 2003, the Securities and Exchange Commission adopted rules that require that before our auditor is engaged by us to render any auditing or permitted non-audit related service, the engagement be:
·
approved by our audit committee; or
·
entered into pursuant to pre-approval policies and procedures established by the audit committee, provided the policies and procedures are detailed as to the particular service, the audit committee is informed of each service, and such policies and procedures do not include delegation of the audit committee’s responsibilities to management.
We do not have an audit committee. Our entire board of directors pre-approves all services provided by our independent auditors.
The pre-approval process has just been implemented in response to the new rules. Therefore, our board of directors does not have records of what percentage of the above fees was pre-approved. However, all of the above services and fees were reviewed and approved by the entire board of directors either before or after the respective services were rendered.
PART IV

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ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
ITEM 15 . EXHIBITS, FINANCIAL STATEMENT SCHEDULES
Exhibit
Number
Exhibit Title
3.1
Articles Amendment to Articles of Incorporation
Filed on June 15, 2011, as Exhibit 3.2 to the registrant’s Registration Statement on Form S-1 (File No. 333-174905) and incorporated herein by reference.
3.1s
Amended and Restated Articles of Incorporation
Filed on January 22, 2019 as Exhibit 3.1 to the registrant’s Report on Form 8-K (File No. 000-54845) and incorporated herein by reference
3.2
By-Laws
Filed on June 15, 2011, as Exhibit 3.2 to the registrant’s Registration Statement on Form S-1 (File No. 333-174905) and incorporated herein by reference.
10.1
Robert DeAngelis Employment Agreement
Filed on July 27, 2011, as Exhibit 10.1 to the registrant’s amended Registration Statement on Form S-1/A (File No. 333-174905) and incorporated herein by reference.
31.1
Certification of Chief Executive Officer and Chief Financial Officer filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Filed herewith
32.1*
Certification of Chief Executive Officer and Chief Financial Officer furnished pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
Filed herewith
101**
Financial statements from the annual report on Form 10-K of REAC Group, Inc. for the year ended December 31, 2019, formatted in XBRL: (i) the Balance Sheet, (ii) the Statement of Income, (iii) the Statement of Stockholders’ Equity, (iv) the Statement of Cash Flows and (v) the Notes to the Financial Statements.
Filed herewith
*Pursuant to Item 601(32)(ii) of Regulation S-K, Exhibit 32.1 is not deemed “filed” for purposes of Section 18 of the Securities and Exchange Act of 1934, as amended, or otherwise subject to liability under that section.
**Pursuant to Rule 406T of Regulation S-T, the interactive XBRL files contained in Exhibit 101 hereto are deemed “not filed” for purposes of Section 18 of the Securities and Exchange Act of 1934, as amended, and otherwise are not subject to liability under that section.