ACTL Artec Global Media Inc (CE)

 

 

UNITED STATES 

SECURITIES AND EXCHANGE COMMISSION 

Washington, D.C. 20549

 

FORM 10-Q

 

x QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For quarterly period ended July 31, 2014

 

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

 

For the transition period from ___________ to ___________

 

Commission file number 333-186732

 

ARTEC CONSULTING CORP.

(Exact name of registrant as specified in its charter)

 

Nevada		99-0381772
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
5536 S. Ft. Apache #102
Las Vegas, NV		89148
(Address of principal executive offices)		(Zip Code)

 

(760) 814-9567

(Registrant’s telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Act: None

 

Securities registered pursuant to Section 12(g) of the Act:

 

Common Stock, $0.001 Par Value 

(Title of Class)

 

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

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ¨ No x

 

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

 

Large accelerated filer	¨	Accelerated filer	¨
Non-accelerated filer	¨	Smaller reporting company	x
(Do not check if a smaller reporting company)

  

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

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 8,665,255 shares of common stock, par value $0.001, were outstanding on September 8, 2014.

 

 

 

ARTEC CONSULTING CORP. 

FORM 10-Q

 

For the Quarterly Period Ended July 31, 2014

 

Table of Contents

 

PART I FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)		3
	Balance Sheets			3
	Statements of Operations			4
	Statements of Stockholders’ Equity (Deficit)			5
	Statements of Cash Flows			6
	Notes to Financial Statements			7
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations			9
Item 4.	Controls and Procedures			17
PART II OTHER INFORMATION
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds			18
Item 6.	Exhibits			18
Signatures				19
Certifications

 

2

 

PART I — FINANCIAL INFORMATION

 

Item 1. Financial Statements (Unaudited)

 

Artec Consulting Corp.

Balance Sheets

 

				July 31,				January 31,
				2014				2014
					(Unaudited)
Assets
Current Assets
	Cash			$	78,547			$	5,285
	Accounts receivable (Note B)				27,347				-
	Prepaid expenses				-				17,822
		Total current assets			105,894				23,107
		Total assets		$	105,894			$	23,107
Liabilities and Stockholders' Equity
Current Liabilities
	Accounts payable & accrued expenses			$	33,558			$	1,100
		Total Current Liabilities			33,558				1,100
Commitments and contingencies
Stockholders' Equity (Note C)
	Common stock, $0.001 par value 75,000,000 shares authorized; issued and outstanding 8,665,255 and 8,245,000 at July 31, 2014 and January 31, 2014, respectively				8,665				8,245
	Additional-paid-in-capital				492,490				72,655
	Accumulated deficit				(428,819	)			(58,893	)
		Total stockholders' equity			72,336				22,007
		Total liabilities and stockholders' equity		$	105,894			$	23,107

 

(The accompanying notes are an integral part of these financial statements)

 

3

 

Artec Consulting Corp.

Statements of Operations (Unaudited)

Three and Six Months Ended July 31, 2014 and 2013

 

			Three Months Ended								Six Months Ended
			July 31,								July 31,
			2014				2013				2014				2013
Revenue			$	64,670			$	-			$	83,338			$	-
Cost of sales				48,638				-				64,221				-
	Gross profit			16,032				-				19,117				-
Operating expenses
	Selling, general and administrative			233,849				8,963				389,043				12,374
Loss from operations				(217,817	)			(8,963	)			(369,926	)			(12,374	)
Net loss			$	(217,817	)		$	(8,963	)		$	(369,926	)		$	(12,374	)
Net (loss) per common share basic and diluted			$	(0.03	)		$	(0.00	)		$	(0.04	)		$	(0.00	)
Weighted average common shares outstanding - basic				8,290,205				8,031,739				8,290,205				7,551,575

 

(The accompanying notes are an integral part of these financial statements)

 

4

 

Artec Consulting Corp.

Statement of Stockholders' Equity

For the Six Months Ended July 31, 2014 and the Year Ended January 31, 2014

 

											Additional				Accumulated				Total
			Common Stock								paid-in				Earnings				Stockholders'
			Shares				Amount				Capital				(Deficit)				Equity
Balance, January 31, 2013				7,000,000				7,000				-				(3,041	)			3,959
	Proceeds from sale of common stock			1,245,000				1,245				72,655				-				73,900
	Net loss			-				-				-				(55,852	)			(55,852	)
Balance, January 31, 2014				8,245,000			$	8,245			$	72,655			$	(58,893	)		$	22,007
	Common stock issued for services			100,000				100				99,900								100,000
	Proceeds from sale of common stock			320,255				320				319,935				-				320,255
	Net loss			-				-				-				(369,926	)			(369,926	)
Balance, July 31, 2014 (Unaudited)				8,665,255			$	8,665			$	492,490			$	(428,819	)		$	72,336

 

(The accompanying notes are an integral part of these financial statements)

 

5

 

Artec Consulting Corp.

Statements of Cash Flows (Unaudited)

Six Months Ended July 31, 2014 and 2013

 

					Six Months Ended
				July 31,
				2014				2013
Cash flows from operating activities
	Net loss			$	(369,926	)		$	(12,374	)
	Adjustments to reconcile net loss
	to net cash provided (used) by operating activities:
		Common stock issued for services			100,000				-
	Changes in operating assets and liabilities:
		Decrease (increase) in accounts receivable			(27,347	)			-
		Decrease (increase) in prepaid expenses			17,822				(6,822	)
		Increase (decrease) in accounts payable and accrued expenses			32,458				1,198
	Net cash used in operating activities				(246,993	)			(17,998	)
Cash flows from financing activities
	Proceeds from sale of common stock				320,255				23,900
	Net cash provided by financing activities				320,255				23,900
Increase in cash					73,262				5,902
Cash and cash equivalents at beginning of period					5,285				4,073
Cash and cash equivalents at end of period				$	78,547			$	9,975
Supplemental disclosures of cash flow information
Cash paid during the year for:
	Taxes paid			$	-			$	-
	Interest paid			$	-			$	-
Non-cash financing activities:
	Value of common stock issued for services			$	100,000			$	-

 

(The accompanying notes are an integral part of these financial statements)

 

6

  

ARTEC CONSULTING CORP. 

NOTES TO FINANCIAL STATEMENTS

 

NOTE A - Basis of Presentation, Organization, Going Concern and Concentrations of Credit Risk

 

Basis of Presentation

 

The unaudited financial statements of Artec Consulting Corp. as of July 31, 2014, and for the three and six months ended July 31, 2014 and 2013, have been prepared in accordance with accounting principles generally accepted in the United States for interim financial reporting. Accordingly, they do not include all of the disclosures required by accounting principles generally accepted in the United States for complete financial statements and should be read in conjunction with the audited consolidated financial statements and notes thereto for the year ended January 31, 2014, as filed with the Securities and Exchange Commission as part of the Company's Form 10-K. In the opinion of management, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation of the interim financial information have been included. The Company did not record an income tax provision during the periods presented due to net taxable losses. The results of operations for any interim period are not necessarily indicative of the results of operations for the entire year.

 

Organization

 

Artec Consulting Corp. (the “Company,” “we,” “us,” “our”) was incorporated under the laws of the State of Nevada on August 6, 2012 (“Inception”). Originally intending to commence operations in the business of distributing crystal white glass floor tile. The Company was in the development stage until January 2013 when the Company changed its focus to providing online marketing and reporting solutions to companies and began generating revenue. Thus, beginning in the quarter ending April 30, 2014, the Company left the development stage.

 

Going Concern

 

The Company has not generated net income since inception. The Company has an accumulated deficit of $428,819 as of July 31, 2014, and does not have positive cash flows from operating activities. The accompanying financial statements have been prepared in conformity with generally accepted accounting principles in the United States of America, which contemplates continuation of the Company as a going concern, which is dependent upon the Company’s ability to establish itself as a profitable business.

 

In its report with respect to the Company’s financial statements for the year ended January 31, 2014, the Company’s independent auditors expressed substantial doubt about the Company’s ability to continue as a going concern. Because the Company has not yet generated net income from its operations, its ability to continue as a going concern is wholly dependent upon its ability to obtain additional financing and increase revenue.

 

As of July 31, 2014, the Company had cash and cash equivalents of $78,547. Based upon its current and near term anticipated level of operations and expenditures, the Company's cash on hand is insufficient to enable it to continue operations for the next twelve months. As a result, the Company is seeking additional financing but has no commitments to obtain any such financing, and there can be no assurance that financing will be available in amounts or on terms acceptable to the Company, if at all. If adequate funds are not available on reasonable terms, or at all, it would result in a material adverse effect on the Company’s business, operating results, financial condition and prospects.

 

Concentrations of credit risk

 

At July 31, 2014, three customers accounted for 84% (45%, 25% and 14%) of accounts receivable. At January 31, 2014, he Company had no outstanding accounts receivable.

 

During the three months ended July 31, 2014, two customers accounted for 81% (41% and 40%) of sales. During the six months ended July 31, 2014, four customers accounted for 89% (32%, 31%, 15% and 11%) of sales.

 

NOTE B - Accounts Receivable

 

Revenue is generated from affiliate marketing whereby the Company markets other companies products through our online portal http://artecmedia.com and other 3rd party portals. We have primarily used our own in-house email transmission software and a few affiliates to drive sales to multiple companies. The two revenue options the Company has promoted are pay-per-lead and pay-per-sale. Revenue from the pay-per-lead option ranges from $4 to $6 per verified lead and the pay-per-sale option revenue ranges from $80-$120. Customer payment terms range from net 7 to net 30 days.

 

7

 

Additionally, the Company generates revenue through the sale of data used by companies in the targeted marketing of their products and services via direct mail. Payment for our data is either upfront or via a revenue sharing arrangement whereby the Company is paid monthly based on the customers acquired through the direct mail process.

 

NOTE C - Stockholder's Equity

 

During the six months ended July 31, 2014, the Company issued 320,255 shares of common stock for $1.00 per share for total proceeds of $320,255. The Company also issued 100,000 shares of restricted common stock in exchange for services valued at $1.00 per share. The Company valued the restricted shares based on current price of our common stock realized from private party sales as this more closely reflects the fair value of the issuance rather than the market price of our thinly traded common stock.

 

During the year ended January 31, 2014, the Company 1) issued 1,195,000 shares of common stock at $0.02 per share for total proceeds of $23,900 and 2) issued 50,000 shares of common stock for $1.00 per share, in accordance with its January 2014 Private Placement Memorandum, for total proceeds of $50,000

 

NOTE D - Related Party Transactions

 

A related party is generally defined as (i) any person that holds 10% or more of the Company’s securities and their immediate families, (ii) the Company’s management, (iii) someone that directly or indirectly controls, is controlled by or is under common control with the Company, or (iv) anyone who can significantly influence the financial and operating decisions of the Company. A transaction is considered to be a related party transaction when there is a transfer of resources or obligations between related parties.

 

CW Web Designs, wholly owned by Caleb Wickman, President, provides data management and client-marketing program development services to the Company. During the three and six months ended July 31, 2014, the Company paid CW Web Designs $3,500 and $13,500, respectively. In addition, Mr. Wickman received $28,000 and $54,095 as compensation during the three and six months ended July, 31, 2014, respectively.

 

Since Inception (August 6, 2012) through October 31, 2013, Elizaveta Padaletc, former Director and President, had loaned the Company $8,614 to pay for operating expenses. The loan is non-interest bearing, due upon demand and unsecured. In December, 2013, the Company and Ms. Padaletc executed a Loan Cancellation and General Release agreement whereby, in exchange for $1.00, Ms. Padaletc released the Company from its prior obligation to repay $8,614. The Company recognized the release on our Statement of Operations as Gain on debt forgiveness.

 

All related party transactions are recorded at the exchange amount established and agreed to between related parties and are in the normal course of business.

 

NOTE E - Subsequent Events

 

On August 1, 2014, the Company received $50,000 in exchange for 50,000 shares of restricted common stock.

 

8

 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

Forward-Looking Statements

 

This Report on Form 10-Q contains forward-looking statements which involve assumptions and describe our future plans, strategies, and expectations, and are generally identifiable by use of words such as “may,” “will,” “should,” “expect,” “anticipate,” “estimate,” “believe,” “intend,” or “project,” or the negative of these words or other variations on these words or comparable terminology. These statements are expressed in good faith and based upon a reasonable basis when made, but there can be no assurance that these expectations will be achieved or accomplished.

 

Such forward-looking statements include statements regarding, among other things, (a) the potential markets for our products, our potential profitability, and cash flows (b) our growth strategies (c) our future financing plans and (d) our anticipated needs for working capital. This information may involve known and unknown risks, uncertainties, and other factors that may cause our actual results, performance, or achievements to be materially different from the future results, performance, or achievements expressed or implied by any forward-looking statements. These statements may be found at various places throughout this report including, but not limited to the discussions under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and "Business." Actual events or results may differ materially from those discussed in forward-looking statements as a result of various factors, including, without limitation, the matters described in this Form 10-K generally. In light of these risks and uncertainties, there can be no assurance that the forward-looking statements contained in this filing will in fact occur. In addition to the information expressly required to be included in this filing, we will provide such further material information, if any, as may be necessary to make the required statements, in light of the circumstances under which they are made, not misleading.

 

Although forward-looking statements in this report reflect the good faith judgment of our management, forward-looking statements are inherently subject to known and unknown risks, business, economic and other risks and factors that may cause actual results to be materially different from those discussed in these forward-looking statements. Many of those factors are outside of our control and could cause actual results to differ materially from the results expressed or implied by those forward-looking statements. Accordingly, you are urged not to place undue reliance on these forward-looking statements, which speak only as of the date of this report.

 

We assume no obligation to update any forward-looking statements in order to reflect any event or circumstance that may arise after the date of this report, other than as may be required by applicable law or regulation.

 

Overview

 

We offer a comprehensive suite of online marketing and reporting solutions, including lead gen (prospect email, performance display, mobile marketing), performance media (PPC, SEO, social media, retargeting) and affiliate marketing, as well as other related web services and consultation. We generate revenue by delivering measurable marketing results to clients.

 

Online leads are usually generated as clicks from websites or email. Our goal is to engage Internet visitors with targeted media and to connect our marketing clients with their potential clients on line.

 

We use world-class technology solutions to create advertising campaigns for clients to target potential customers, optimize those campaigns in real time and track tangible results. Through a single advertising budget, we enable our clients to reach customers —whether using traditional computing devices or mobile devices—across the Internet, including through all of the major search engines and leading general interest and vertically focused online publishers.

 

Our retargeting and display marketing solutions target consumers that have recently search for a client’s business keywords as well as those who have recently visited their website. We continue to expand our platform to include additional advertising products designed specifically for the needs of our clients. Our website solutions are designed to help client turn more of their website visitors into leads, manage those leads more effectively and convert more of them into customers.

 

We focus on serving clients in large, information-intensive industry verticals where relevant, targeted media and offerings help visitors make informed choices, find the products that match their needs, and thus become qualified customer prospects for our clients.

 

9

 

Products/Services

 

We combine advanced, publisher-agnostic technology and an experienced, digitally sophisticated direct sales force to provide clients with a single, easy to use and cost-effective solution to acquire, maintain and retain customers using digital and traditional media.

 

Artec owns or accesses targeted databases and utilizes proprietary technology to create local, regional and national marketing campaigns on demand providing clients with the ability to acquire new customers. We run advertisements or other forms of marketing messages and programs through multiple channels (i.e. Email, Direct Mail, Social Media, SMS, radio and telecommunication) to create responders for client offerings. We optimize client matches and media yield such that we achieve desired results for clients and a sound financial outcome for Artec.

 

We deliver cost-effective marketing results to our clients, predictable and scalable, most typically in the form of a qualified lead, click or call. These leads, clicks or calls can then convert into a customer or sale for the client at a rate that results in an acceptable marketing cost to them. We get paid by clients primarily when we deliver qualified results as defined in our agreements. Typically, leads are routed through a call center or other offline acquisition process. Online leads are usually generated as clicks from websites. Our marketing services include but are not limited to:

 

·	Affiliate and performance marketing,
·	Search advertising,
·	Display advertising,
·	Telecommunications
·	Retargeting,
·	Email marketing,
·	Lead generation,
·	Creative design, and
·	Consulting services.

  

For advertisers our platform allows us to connect clients to multiple online publishers. For publishers our platform provides access to a significant advertiser base to gain access to a broader range of advertising inventory. The combination of these end-to-end online marketing capabilities enables us to offer clients the simplicity of a single advertising budget that meets their marketing objectives.

 

Our search product is focused on assuring that our clients’ advertisements appear prominently among the search results when local consumers enter certain keywords on leading local search sites such as Google, Yahoo! and Bing and social networks such as Facebook and LinkedIn.

 

Our display product is primarily focused on maximizing the exposure for clients that want to broadcast a message to a specific target online audience.

 

Our remarketing and search retargeting products allow us to target consumers who have previously visited a specific client’s website, either through a search marketing campaign or a display marketing campaign, or who have previously searched for a client’s keywords. When the potential customer visits any other site within our remarketing network, we can remarket to the target customer on behalf of that client.

 

Our lead conversion helps clients manage their leads and convert more of them into customers.

 

10

  

Our capabilities:

 

·	Software-based solution that provides back-end automation and optimization technologies to manage advertising spend across a broad array of online publishers and media outlets;
·	For advertisers interested in search engine marketing, automation of build-up of keyword search criteria for the leading search engines;
·	Seting and optimization of bids for keywords based on client products and services;
·	Placement of display advertisements on websites selected in accorance with custom profiles;
·	Integration with leading social media sites;
·	Proprietary algorithms multiple times a day to evaluate each publisher and keyword, dynamic shifting of spend to continuously optimize and improve campagin performance;
·	Proprietary reverse proxy technology that automatically tracks campaign-generated activity; and
·	Access to multiple publishers and advertisers.

 

Consulting

 

We work with clients on a consultative basis to help them achieve their markeing objectives, educating and guiding them through the opportunities arising from and the mechanics of online advertising. Our consulting services provide clients access to technology and media that they could not access by themselve, and proven in ways they understand.

 

Scale and Experience

 

Our scale and experience in purchasing online advertising from publishers allows us to make more efficient and effective purchasing decisions on behalf of our clients. In addition, our platform enables us to connect our clients to a wide array of online publishers. Our platform not only allows us to expand the reach of our publisher network, but also allows us quickly to test and identify better performing advertising options for our clients.

 

Client Relationships

 

As new online advertising opportunities emerge, such as mobile, video and social media, we believe that having a direct client relationship will enable us to offer additional products and services to our clients.

 

Technology

 

Running thousands of online advertising campaigns simultaneously across multiple publishers poses significant technical challenges. While technologies exist to help larger companies manage and optimize their online marketing spend, we believe that such solutions are too expensive and too complex to scale down to many of our clients’ monthly advertising budget. We have built our services, systems and networks for maximum scalability and flexibility to manage these types of campaigns, and we have invested heavily in automation technologies that reduce the level of human intervention required to support these campaigns. This automation is critical to our ability to scale our business and deliver moderately budgeted campaigns in a cost-effective manner.

 

Strategy

 

We generate revenue by providing marketing and advertising solutions for our clients through direct sales and our online marketing platform. We sell our marketing products based on a consultative approach to discover customer needs and build pricing and packages which provide a positive return on their investment. While we do not commit to a specific set of results, we work with our clients to meet their marketing objectives. Clients primarily pay us for leads that they can convert into customers. Typically, leads are routed through a call center or other offline customer acquisition process. Online leads are usually generated as clicks from websites or email. In brief, Artec helps clients communicate their message to potential new customers by delivering compelling offers through the use of proprietary products, media channels and distribution platforms.

 

11

 

We believe that we are in the early stages of a large and long-term business opportunity presented by the shift from traditional media formats to digital media formats. Our strategy for pursuing this opportunity includes the following key components:

 

·	Expand Media Offerings. We have developed a platform that enables us more easily to connect our client advertisers to a broader array of online publishers and, in the future, to reach customers through new formats such as mobile and video. Our plan has been, and continues to be, to fulfill, track and optimize a client’s entire digital media plan, regardless of media property or format.
·	Develop Digital Marketing Software Solutions. Our current products target our clients’ needs to acquire customers through online media buying. We believe that there will be continued movement towards digital platforms in the other segments of our clients’ marketing activities, such as marketing automation, lead conversion and customer relationship management. To address these and other needs, we plan to continue investing in the internal development or potential acquisition of products and services in these adjacent segments.

  

Affiliate and Performance Marketing Key Trends and Drivers

 

·	One of the most effective ways to enter new markets (pay-for-performance model represents low risk and low overhead while also providing access to local marketing experts without having to bring on full-time staff),
·	Growth of mobile,
·	With the rise in multi-channel retailing, expect a tighter integration of marketing channels. Performance marketing, for example, will be more closely aligned with retargeting and display,
·	Big data solutions that include affiliate program data will enable more targeted, timely ads and offers to be delivered at the right audience at the right time on the right device.
·	Aligned with the way that consumers shop and behave,
·	It’s a proven acquisition channel for new customers and provides a low risk opportunity to try new ideas, and
·	Deal-driven consumers turn to affiliate sites first and frequently, because they believe offers from affiliate sites are better than those presented on a retailer’s

 

We differentiate ourselves by utilizing our marketing platform to attract large multi-location organizations. These organizations have seen dramatic cuts to their marketing departments over the last few years forcing them to work more with less. We help centralize and streamline marketing initiatives for these large decentralized organizations allowing them, in many cases for the first time in years, to stop playing defense and become offensive in the management and implementation of their marketing efforts. In essence, we allow independent field offices, franchise owners, sales agents to have access to easy to utilize fortune 500 type marketing services at their disposal 24/7. We have proven our services lower client acquisition costs, increase the overall spend of client initiatives, creating more loyal and profitable clients.

 

Our Market

 

The ability to market to and acquire customers is a critical driver of success for businesses, often representing a very significant portion of their cost base. Business to consumer e-commerce was approximately a $1.0 trillion industry globally in 2012, growing at 16.7% per year from 2012 to 2017, according to International Data Corporation, or IDC. Penetration of smartphones and tablets has also driven rapid growth of mobile commerce, which represented $64.5 billion globally in 2012, and is expected to grow at 35.5% CAGR between 2012 and 2017 according to IDC. The internet and mobile devices are becoming increasingly important mediums for businesses to generate customer engagement and leads that ultimately result in sales, both online and offline. However, these mediums are also complex and fragmented, making it difficult and costly to engage and convert customers. Illustrating the difficulty of converting customers, 88% of online shoppers surveyed in February 2013 by comScore indicated they had from time to time placed items in a shopping cart and left a site without making a purchase. It is therefore important for businesses to develop and execute online and mobile marketing campaigns efficiently and effectively harnessing consumer intent, big data, technology, measurability, and the ability to target, at scale. According to ZenithOptimedia, marketers spent $88.6 billion on internet advertising in 2012, with this spend expected to grow at a compound annual growth rate of over 14.3% through 2015.

 

12

  

Competitive Landscape

 

The market for online advertising solutions is intensely competitive and rapidly changing, and with the introduction of new technologies and market entrants, we expect competition to intensify in the future. Many of our current and potential competitors enjoy substantial competitive advantages, such as greater name recognition, longer operating histories and larger marketing budgets, as well as substantially greater financial, technical and other resources. In addition, many of our current and potential competitors have established marketing relationships and access to larger customer bases.

 

Our competitors include:

 

·	Internet Marketing Providers. We compete with large Internet marketing providers such as Google, Yahoo! and Microsoft. These providers typically offer their products and services through disparate, online-only, self-service platforms. We compete with these companies on the basis of our product offerings and our publisher-agnostic services to our clients. Although we compete against the self-service offerings of these large providers, we also have business relationships with them. We also believe that we provide a valuable service to these companies by connecting them to a large number of clients, which are generally disinclined to purchase online advertising via self-service platforms
·	Traditional, Offline Media Companies. We compete with traditional yellow page and newspaper companies with large, direct sales forces. While these traditional media companies have made investments to address the migration of advertising expenditures away from their existing print products, we believe that they face the prospect of cannibalizing their existing higher margin products that they own and the challenge of re-training and restructuring their sales forces, most of whom have only sold print products and many of whom still receive the majority of their income from selling those products. We compete with these companies on the basis of the strength and breadth of our technology platform and product offering and our focus exclusively on Internet advertising.

  

Intellectual Property

 

We have developed a few different very important software/applications, which we consider to be proprietary including a custom gateway that runes real-time analytics and tracking on all campaigns powered by our resources. This software helps us manage and mitigate exposure to fraud, while enabling us to purchase media more intelligently, with better control over our advertiser’s budget in order to maximize campaign efficiency and effectiveness. In addition, we have developed Email Service Provider (“ESP”) and Message Transfer Agent (“MTA”) software, which allows clients to log in and manage their own mailings directly. We have also developed dialer/phone systems to maximize efficiency with respect to telecommunication client management.

 

Governmental Approval and Regulation

 

We are subject to various federal and state law and regulation relating to our business. The regulation currently focuses on data collection, privacy, social networking, user generated content, information security and online behavioral marketing. Because of the increasing popularity of the Internet and the growth of online services, there are regular initiatives at both the federal and state level to expand the scope of regulation as problems and perceived problems arise and develop. Although much of the regulation is well founded, it does have an impact on how we conduct our business and may have an impact on our financial results if we are limited in our business activities or there are additional costs associated with compliance. We do not believe there to be any specific environmental regulation that will have a material impact on our business operations or financial results.

 

In the United States, the Federal Trade Commission, or the FTC, enforces rules and regulations enacted pursuant to the Children’s Online Privacy Protection Act of 1998, or COPPA, imposing restrictions on the ability of online services to collect information from minors under the age of 13. During 2009, the FTC actively enforced COPPA through civil penalties and consent orders. As a part of our efforts to comply with these requirements, we do not knowingly collect online personally identifiable information from any person under 13 years of age and have implemented age screening mechanisms on certain of our websites in an effort to prohibit persons under the age of 13 from registering. The restrictions are likely to dissuade some percentage of our potential customers from using such websites, which may adversely affect our business. If it turns out that one or more of our websites is not COPPA compliant, we may face enforcement actions by the FTC, complaints to the FTC by individuals, or face a civil penalty, any of which could adversely affect our reputation and business. Laws on the state level protecting the identity of personal information of children online have been enacted or are under consideration. For example, Michigan and Utah have established registries where parents and others may register instant messenger IDs, mobile text messaging and fax numbers in addition to e-mail addresses to prevent certain types of messages from reaching children in those states. Such laws could have an adverse impact on how we will be able to conduct our business in the future and may limit access to an important segment of the target markets our clients seek.

  

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A number of government authorities, both in the United States and abroad, and private parties are increasing their focus on privacy issues and the use of personal information. Well-publicized breaches of data privacy and consumer personal information have caused state legislatures to enact data privacy legislation. Forty-five states, including New York, California and Pennsylvania, have enacted data privacy legislation, including data breach notification laws, and laws penalizing the misuse of personal information in violation of published privacy policies. Certain states have also enacted legislation requiring certain encryption technologies for the storage and transmission of personally identifiable information, including credit card information, and more states are considering enactment of information security regulations and may require the adoption of written information security policies that are consistent with state laws if businesses have personal information of residents of their states. Data privacy and information security legislation is also being considered at the federal level, which if enacted, could adversely affect our business. In addition to the specific data privacy and data breach statutes, the FTC and attorneys general in several states have investigated the use of personal information by some Internet companies under existing consumer protection laws. In particular, an attorney general or the FTC may examine privacy policies to ensure that a company fully complies with representations in the policies regarding the manner in which the information provided by consumers and other visitors to a website is used and disclosed by the company and the failure to do so could give rise to a complaint under state or federal unfair competition or consumer protection laws. We review our privacy policies and operations on a regular basis, and currently, we believe we are in material compliance with applicable U.S. federal and state laws. Our business could be adversely affected if new regulations or decisions regarding the storage, transmission, use and/or disclosure of personal information are implemented in such ways that impose new or additional technology requirements on us, limit our ability to collect, transmit, store and use the information, or if government authorities or private parties challenge our privacy practices that result in restrictions on us, or we experience a significant data or information breach which would require public disclosure under existing notification laws and for which we may be liable for damages or penalties.

 

The United States Congress enacted the Controlling the Assault of Non-Solicited Pornography and Marketing Act of 2003, or CAN-SPAM, regulating “commercial electronic mail messages” (i.e., e-mail), the primary purpose of which is to promote a product or service. The FTC has promulgated various regulations applying CAN-SPAM and has enforcement authority for violations of CAN-SPAM. Any entity that sends commercial e-mail messages, such as Alloy and our various subsidiaries for itself and clients, and those who re-transmit such messages, must adhere to the CAN-SPAM requirements. Violations of its provisions may result in civil money penalties and criminal liability. Although the FTC has publicly announced that it does not at the present time intend to do so, CAN-SPAM further authorizes the FTC to establish a national “Do Not E-Mail” registry akin to the “Do Not Call Registry” relating to telemarketing. The Federal Communications Commission has also promulgated CAN-SPAM regulations prohibiting the sending of unsolicited commercial electronic e-mails to wireless e-mail addresses and has released a “Do Not E-Mail” registry applicable to wireless domain addresses, some of which may be in our databases. Compliance with these provisions may limit our ability to send certain types of e-mails on our own behalf and on behalf of several of our advertising clients, which may adversely affect our business. While we intend to operate our businesses in a manner that complies with the CAN-SPAM provisions, we may not be successful in so operating. If it turns out we have violated the provisions of CAN-SPAM we may face enforcement actions by the FTC or FCC or face civil penalties, either of which could adversely affect our business.

 

In addition to the federal CAN-SPAM regulations, many states have comparable legislation. There have been a number of cases brought as class actions based on the federal and state statutes. At the state level the courts have tended to decide in favor of the plaintiffs and awarded substantial damages. An award of damages, at either the federal or state level could have a detrimental impact on our financial results.

  

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Social networking websites are under increased scrutiny. Legislation has been introduced on the state and federal level that could regulate social networking websites. Some of the proposed rules call for more stringent age-verification techniques, attempt to mandate data retention or data destruction by Internet providers, and impose civil and/or criminal penalties on owners or operators of social networking websites. For example, the United States Congress may consider once again the Deleting Online Predators Act which, if enacted in the form introduced in 2007, would require certain schools and libraries to protect minors from online predators in the absence of parental supervision when using commercial networking websites and chat rooms. Such law could potentially limit user access to our websites. Similar bills to ban or restrict access to social networking sites are also being introduced and considered on the state level. Dozens of state attorneys general in late 2008 and early 2009 have served subpoenas on certain social networking sites relating to known predators and if any such actions become more widespread, similar actions could potentially have an adverse effect on our reputation or our business.

 

The FTC has been considering a number of issues relating to online behavioral advertising and has most recently issued a report containing a new set of “guidelines” for industry self-regulation. The FTC’s report may result in future regulation of the collection and use of online consumer data, which could potentially place restrictions on our ability to utilize our database and other marketing data on our own behalf and on behalf of our advertising clients, which may adversely affect our business.

 

Legislation concerning the above described online activities has either been enacted or is in various stages of development and implementation in other countries around the world and could affect our ability to make our websites available in those countries as future legislation is made effective. It is possible that state and foreign governments might also attempt to regulate our transmissions of content on our website or prosecute us for violations of their laws.

 

Governments of states or foreign countries might attempt to regulate our transmissions or levy sales or other taxes relating to our activities even though we do not have a physical presence and/or operate in those jurisdictions. As our products and advertisements are available over the Internet anywhere in the world, and we conduct marketing programs in numerous states, multiple jurisdictions may claim that we are required to qualify to do business as a foreign corporation in each of those jurisdictions and pay various taxes in those jurisdictions.

 

Results of Operations

 

As of July 31, 2014, we had total assets of $105,894 and total liabilities of $33,558. Since our Inception to July 31, 2014, we have accumulated a deficit of $428,819 of which $100,000 relates to stock based compensation. We anticipate that we will continue to incur losses for the foreseeable future. Our financial statements have been prepared assuming that we will continue as a going concern. We expect we will require additional capital to meet our long term operating requirements. We expect to raise additional capital through, among other things, the sale of equity or debt securities.

 

Three and Six Months Ended July 31, 2014 Compared with the Three and Six Months Ended July 31, 2013

 

Revenue and Gross Profit

 

Revenue is generated from affiliate marketing whereby the Company markets other companies products through our online portal http://artecmedia.com and other 3rd party portals. Additionally, the Company generates revenue through the sale of data used by companies in the targeted marketing of their products and services via direct mail. During the three and six months ended July 31, 2014, the Company generated $64,670 and $83,338, respectively, of revenue compared to no revenue in the prior year. The increase is due to the Company beginning operations as a vertically integrated marketing firm.

 

Cost of sales consists of data purchased for resale and was $48,638 and $64,221 during the three and six months ended July 31, 2014, respectively, resulting in gross profit of $16,032 and $19,117, respectively.

 

Operating Expenses

 

Operating expenses increased $224,886 to $233,849 during the three months ended July 31, 2014 compared to $8,963 during the three months ended July 31, 2013. Operating expenses increased $376,669 to $389,043 during the six months ended July 31, 2014 compared to $12,374 during the six months ended July 31, 2013. The increase in expense is due to the initiation the Company's strategic plan to become a vertically integrated marketing firm, including costs to establish an internet presence and the purchase of resalable data. Additionally, the Company recorded $100,000 of compensation expense during the three and nine months ended July 31, 2014 related to the issuance of 100,000 shares of restricted common stock in exchange for services.

 

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Liquidity and Capital Resources

 

Our principal source of liquidity is cash in the bank. As of July 31, 2014 our current assets were $105,894 and were comprised of $78,547 in cash and $27,347 in accounts receivable. We are only now beginning to have any significant revenue. Due to the “start-up” nature of our business, we expect to continue to incur losses as we develop and introduce our products and services. These conditions raise doubt about our ability to continue as a going concern. Management recognizes that in order for us to meet our capital requirements, and continue to operate, additional financing will be necessary. We expect to raise additional funds through private or public equity investment in order to expand the range and scope of business operations. We will seek access to private or public equity but there is no assurance that such additional funds will be available for us to finance our operations on acceptable terms, if at all. If we are unable to raise additional capital or generate positive cash flow, it is unlikely that we will be able to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

Cash Flows from Operating Activities

 

For the six months ended July 31, 2014, net cash flows used in operating activities was $246,993, compared to $17,998 for the six months ended July 31, 2013. The increase is due to the initiation the Company's strategic plan to become a vertically integrated marketing firm.

 

Cash Flows from Financing Activities

 

We have financed our operations primarily from the issuance of equity instruments. For the six months ended July 31, 2014, we generated net cash flows from financing activities of $320,255 from the issuance of common stock compared to $23,900 for the six months ended July 31, 2013.

 

Plan of Operation and Funding

 

Our cash reserves are not sufficient to meet our obligations for the next twelve month period. As a result, we are seeking additional funding from the sale of shares of our common stock. We may also seek to obtain short-term loans from our directors or unrelated parties, although no such arrangements have been made. Our ability to continue operations will be dependent upon the successful completion of additional financing and, ultimately, the achievement of profitable operations. There can be no assurances that we will be successful, which would in turn significantly affect our ability to be successful in our business plan. If not, we will likely be required to reduce operations. We will continue to evaluate our projected expenditures relative to our available cash and to seek additional means of financing in order to satisfy our working capital and other cash requirements.

 

Off-Balance Sheet Arrangements

 

We have no off-balance sheet arrangements.

 

Critical Accounting Estimates

 

The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States requires us to make judgments, assumptions and estimates that have a significant impact on the results that we report in our financial statements. Some of our accounting policies require us to make difficult and subjective judgments, often as a result of the need to make estimates regarding matters that are inherently uncertain. Certain of these significant accounting policies require us to make critical accounting estimates, as defined below.

   

A critical accounting estimate is defined as one that is both material to the presentation of our financial statements and requires management to make difficult, subjective or complex judgments that could have a material effect on our financial condition and results of operations. Specifically, critical accounting estimates have the following attributes:

 

	·	we are required to make assumptions about matters that are highly uncertain at the time of the estimate; and
	·	different estimates we could reasonably have used, or changes in the estimate that are reasonably likely to occur, would have a material effect on our financial condition or results of operations.

   

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Estimates and assumptions about future events and their effects cannot be determined with certainty. We base our estimates on historical experience and on various other assumptions believed to be applicable and reasonable under the circumstances. These estimates may change as new events occur, as additional information is obtained and as our operating environment changes. These changes have historically been minor and have been included in the financial statements as soon as they became known. Based on a critical assessment of our accounting policies and the underlying judgments and uncertainties affecting the application of those policies, management believes that our financial statements are fairly stated in accordance with accounting principles generally accepted in the United States, and present a meaningful presentation of our financial condition and results of operations.

 

Our most critical accounting estimates include:

 

·

the recognition and measurement of current and deferred income taxes, which impact our provision for taxes.

  

Below, we discuss this policy further, as well as the estimates and judgments involved.

 

Income Taxes

 

Provisions for income taxes are based on taxes payable or refundable for the current period and deferred taxes on temporary differences between the amount of taxable income and pretax financial income and between the tax bases of assets and liabilities and their reported amounts in the financial statements. Deferred tax assets and liabilities are included in the financial statements at currently enacted income tax rates applicable to the period in which the deferred tax assets and liabilities are expected to be realized or settled.

 

When accounting for Uncertainty in Income Taxes, first, the tax position is evaluated to determine the likelihood that it will be sustained upon external examination. If the tax position is deemed “more-likely-than-not” to be sustained, the tax position is then assessed to determine the amount of benefit to recognize in the financial statements. The amount of the benefit that may be recognized is the largest amount that has a greater than 50 percent likelihood of being realized upon ultimate settlement. As changes in tax laws or rates are enacted, deferred tax assets and liabilities are adjusted through the provision for income taxes. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. The Company’s utilization of U.S. Federal net operating losses will be limited in accordance to Section 381 rules. As changes in tax laws or rates are enacted, deferred tax assets and liabilities are adjusted through the provision for income taxes. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized.

 

Recently Issued Accounting Pronouncements

 

We review new accounting standards as issued. Although some of these accounting standards issued or effective after the end of our previous fiscal year may be applicable to us, we have not identified any standards that we believe merit further discussion. We believe that none of the new standards will have a significant impact on our financial statements.

   

Item 4. Controls and Procedures

 

Disclosure Controls and Procedures

 

Under the supervision and with the participation of our management, including our President and Treasurer, we conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”), as of the end of the period covered by this quarterly report. Based on this evaluation, our President and Treasurer concluded that as of July 31, 2014, that our disclosure controls and procedures were effective such that the information required to be disclosed in our United States Securities and Exchange Commission (the “SEC”) reports is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and is accumulated and communicated to our management, including our President and Treasurer, as appropriate to allow timely decisions regarding required disclosure.

 

Internal Control over Financial Reporting

 

There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 

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PART II – OTHER INFORMATION

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

 

During the three months ended July 31, 2014, the Company issued 194,707 shares of common stock for $1.00 per share for total proceeds of $194,707.

 

The Note and common stock issuances were issued in reliance upon exemptions from registration pursuant to, among others, Section 4(2) under the Securities Act of 1933, as amended (the “Securities Act”) and Regulation S promulgated under the Securities Act.

 

Item 6. Exhibits

 

Exhibit No.		Description of Exhibit
31.1 *		Certification of Principal Executive Officer and Principal Financial Officer Pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, As Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*
32.1 *		Certification of Principal Executive Officer and Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*
101.INS **		XBRL Instance Document
101.SCH **		XBRL Taxonomy Extension Schema Document
101.CAL **		XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF **		XBRL Taxonomy Extension Definition Linkbase Document
101.LAB **		XBRL Taxonomy Extension Label Linkbase Document
101.PRE **		XBRL Taxonomy Extension Presentation Linkbase Document

____________________

*	Filed herewith
**	Furnished herewith. XBRL (eXtensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.

 

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SIGNATURE

 

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

 

 

	Artec Consulting Corp.
	(Registrant)
September 11, 2014	By:	/s/ Caleb Wickman
		Caleb Wickman
		Chairman, President and Treasurer
		(Principal Executive Officer, Principal Financial Officer, and Principal Accounting Officer)

  

 

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---

 

EXHIBIT 31.1

 

CERTIFICATION PURSUANT TO RULE 13A-14(A) OF THE SECURITIES EXCHANGE ACT OF 1934 

AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

 

I, Caleb Wickman, certify that:

 

1.	I have reviewed this quarterly report on Form 10-Q of Artec Consulting Corp. (the “Registrant”);
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	As the registrant’s certifying officer I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

	(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to me by others within those entities, particularly during the period in which this report is being prepared;
	(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under my supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
	(c)	Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report my conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
	(d)	Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

 

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

 

	(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
	(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

 

September 11, 2014	By:	/s/ Caleb Wickman
		Caleb Wickman
		Chairman, President and Treasurer

 

EXHIBIT 32.1

 

CERTIFICATION OF CHIEF EXECUTIVE OFFICERPURSUANT TO 18 U.S.C. SECTION 1350 

AS ADOPTED PURSUANT TO 

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

In connection with the accompanying Quarterly Report on Form 10-Q of Artec Consulting Corp. for the fiscal quarter ending July 31, 2014, I, Caleb Wickman, Chief Executive Officer and Chief Financial Officer of Artec Consulting Corp., hereby certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to the best of my knowledge and belief, that:

 

	1.	Such Quarterly Report on Form 10-Q for the fiscal quarter ending July 31, 2014, fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
	2.	The information contained in such Quarterly Report on Form 10-Q for the fiscal quarter ending July 31, 2014, fairly presents, in all material respects, the financial condition and results of operations of Artec Consulting Corp.

 

 

September 11, 2014	By:	/s/ Caleb Wickman
		Caleb Wickman
		Chairman, President and Treasurer