The accompanying notes are an integral part of these consolidated financial statements.
The accompanying notes are an integral part of these consolidated financial statements.
Notes to Consolidated Financial Statements
For the Year Ended December 31, 2015 and 2014
NOTE 1. NATURE OF BUSINESS
ORGANIZATION
Atacama Resources International, Inc., f/k/a Arrakis Mining Research, Inc. (hereinafter the Company) is a company incorporated in the State of Florida in June 2013. We were originally formed as a consultant to the mining industry. The mining industry is subject to constant change due to market trends, thereby making it extremely competitive. The mining industry is complex, because several segments are regulated by both federal and state governments. ARIIs approach assists general business operations with the growth and development, international expansion and marketing aspects of their business, allowing our potential customers to focus on the business aspects of operations. By using the services provided by ARII, our clients are free to focus on compliance with regulations within their industry, and to complete their primary business goals.
During the year, Atacama Resources International Inc. purchase 100% of Good2Drive LLC, a smartphone application company that establishes a baseline to test drivers alertness. The acquisition includes the rights to two filed patent applications. The financial operations of Good2Drive LLC have been consolidated in the December 31, 2015 audited financial statements of Atacama Resources International Inc.
NOTE 2. GOING CONCERN
The Companys consolidated financial statements are prepared using accounting principles generally accepted in the United States of America applicable to a going concern which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has not yet established an ongoing source of revenues sufficient to cover its operating cost and allow it to continue as a going concern. The ability of the Company to continue as a going concern is dependent on the Company obtaining adequate capital to fund operating losses until it becomes profitable. If the Company is unable to obtain adequate capital, it could be forced to cease operations.
In order to continue as a going concern, the Company will need, among other things, additional capital resources. Managements plan to obtain such resources for the Company include, obtaining capital from management and significant stockholders sufficient to meet its minimal operating expenses. However, management cannot provide any assurance that the Company will be successful in accomplishing any of its plans.
22
There is no assurance that the Company will be able to obtain sufficient additional funds when needed or that such funds, if available, will be obtainable on terms satisfactory to the Company. In addition, profitability will ultimately depend upon the level of revenues received from business operations. However, there is no assurance that the Company will attain profitability. The accompanying financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern
NOTE 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
FINANICAL STATEMENTS
The accompanying audited financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America.
In the opinion of management, all adjustments consisting of normal recurring entries necessary for a fair statement of the periods presented for: (a) the financial position; (b) the result of operations; and (c) cash flows, have been made in order to make the consolidated financial statements presented not misleading. The results of operations for such interim periods are not necessarily indicative of operations for a full year.
BASIS OF PRESENTATION AND USE OF ESTIMATES
The Company prepares its consolidated financial statements in conformity with accounting principles generally accepted in the United States of America ("GAAP"), which 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 consolidated financial statements, and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with an original maturity of three months or less at the date of acquisition to be cash equivalents. Cash and cash equivalents totaled $8,477 at December 31, 2015 and $1,693 at December 31, 2014.
CASH FLOWS 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
23
that do not affect operating cash receipts and payments. The Company reports the reporting currency equivalent of foreign currency cash flows, using the current exchange rate at the time of the cash flows and the effect of exchange rate changes on cash held in foreign currencies is reported as a separate item in the reconciliation of beginning and ending balances of cash and cash equivalents and separately provides information about investing and financing activities not resulting in cash receipts or payments in the period.
EXPLORATION AND DEVELOPMENT COSTS
Costs of acquiring mining properties and any exploration and development costs are expensed as incurred unless proven and probable reserves exist and the property is a commercially mineable property in accordance with FASB ASC 930, Extractive Activities Mining. Mine development costs incurred either to develop new gold and silver deposits, expand the capacity of operating mines, or to develop mine areas substantially in advance of current production are capitalized. Costs incurred to maintain current production or to maintain assets on a standby basis are charged to operations. Costs of abandoned projects are charged to operations upon abandonment. The Company evaluates at least quarterly, the carrying value of capitalized mining costs and related property, plant and equipment costs, if any, to determine if these costs are in excess of their net realizable value and if a permanent impairment needs to be recorded. The periodic evaluation of carrying value of capitalized costs and any related property, plant and equipment costs are based upon expected future cash flows and/or estimated salvage value.
The Company capitalizes costs for mining properties by individual property and defers such costs for later amortization only if the prospects for economic productions are reasonably certain.
Capitalized costs are expensed in the period when the termination has been made that economic production does not appear reasonably certain.
During the year ended December 31, 2015 and 2014, the Company recorded exploration costs of $194,690 and $2,000, respectively.
RELATED PARTIES
The Company follows ASC 850, Related Party Disclosures, for the identification of related parties and disclosure of related party transactions. Related party transactions are summarized in Note 7.
FINANCIAL INSTRUMENTS
The Companys balance sheet includes certain financial instruments. 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.
24
ASC 820, 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 entitys 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, 2015 and December 31, 2014. The respective carrying value of certain on-balance-sheet financial instruments approximated their fair values due to the short-term nature of these instruments.
REVENUE RECOGNITION
The Company follows ASC 605, Revenue Recognition. The Company recognizes revenue when it is realized or realizable and earned. The Company considers revenue realized or realizable and earned when all of the following criteria are met: (i) persuasive evidence of an arrangement exists, (ii) the product has been shipped or the services have been rendered to the customer, (iii) the sales price is fixed or determinable, and (iv) collectability is reasonably assured.
The Company derives revenue from consulting arrangements with clients. Revenue is generated by hourly fee structure or fixed contract costs, based on expected time to complete, additionally, costs incurred may be billed, as defined by the contractual arrangements.
25
DEFERRED INCOME TAXES AND VALUATION ALLOWANCE
The Company accounts for income taxes under ASC 740, Income Taxes. Under the asset and liability method of ASC 740, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statements 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 effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period the enactment occurs. A valuation allowance is provided for certain deferred tax assets if it is more likely than not that the Company will not realize tax assets through future operations. No deferred tax assets or liabilities were recognized as of December 31, 2015 or December 31, 2014.
NET INCOME (LOSS) PER COMMON SHARE
Net income (loss) per share is calculated in accordance with ASC 260, Earnings Per Share. The weighted-average number of common shares outstanding during each period is used to compute basic earning or loss per share. Diluted earnings or loss per share is computed using the weighted average number of shares and diluted potential common shares outstanding. Dilutive potential common shares are additional common shares assumed to be exercised.
Basic net income (loss) per common share is based on the weighted average number of shares of common stock outstanding at December 31, 2015 and December 31, 2014. As of December 31, 2015, the Company had no dilutive potential common shares.
SHARE-BASED EXPENSE
ASC 718, Compensation Stock Compensation, prescribes accounting and reporting standards for all share-based payment transactions in which employee services are acquired. Transactions include incurring liabilities, or issuing or offering to issue shares, options, and other equity instruments such as employee stock ownership plans and stock appreciation rights. Share-based payments to employees, including grants of employee stock options, are recognized as compensation expense in the consolidated financial statements based on their fair values. That expense is recognized over the period during which an employee is required to provide services in exchange for the award, known as the requisite service period (usually the vesting period).
The Company accounts for stock-based compensation issued to non-employees and consultants in accordance with the provisions of ASC 505-50, Equity Based Payments to Non-Employees. Measurement of share-based payment transactions with non-employees is based on the fair value of whichever is more reliably measurable: (a) the goods or services received; or (b) the equity instruments issued. The fair value of the share-based payment transaction is determined at the earlier of performance commitment date or performance completion date.
26
Share-based expense was $6,550 for the year ended December 31, 2015 and $32,500 for the ended December 31, 2014.
RECENT ACCOUNTING PRONOUNCEMENTS
Except for rules and interpretive releases of the SEC under authority of federal securities laws and a limited number of grandfathered standards, the FASB Accounting Standards Codification (ASC) is the sole source of authoritative GAAP literature recognized by the FASB and applicable to the Company. Management has reviewed the aforementioned rules and releases and believes any effect will not have a material impact on the Company's present or future financial statements.
We have reviewed the FASB issued Accounting Standard Update (ASU 2014-10) and have applied the standard as of the dates during the periods reported.
We have reviewed the FASB issued Accounting Standard Update (ASU 2014-9). The Company does not believe that the new or modified principal will not have a material effect on these financial statements.
We have reviewed the 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 corporations 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.
NOTE 4. INCOME TAXES
At December 31, 2015, the Company had a net operating loss carryforward for Federal income tax purposes of approximately $621,522 that may be offset against future taxable income through 2032 No tax benefit has been reported with respect to these net operating loss carry-forwards in the accompanying financial statements because the Company believes that the realization of the Companys net deferred tax assets calculated at the effective rates note below, was not considered more likely than not and accordingly, the potential tax benefits of the net loss carry-forwards are fully offset by the valuation allowance.
Deferred tax assets consist primarily of the tax effect of NOL carry-forwards. The Company has provided a full valuation allowance on the deferred tax assets because of the uncertainty regarding its realizability.
27
The Companys tax expense differs from the expected tax expense for Federal income tax purposes (computed by applying the United States Federal tax rate of 34% and State tax rate of 3.6% to income before taxes), as follows:
|
| |
|
For the Year Ended December 31, 2015
|
For the Year Ended December 31, 2014
|
Tax expense (benefit) at the statutory rate
|
$(96,901)
|
$(62,435)
|
State income taxes, net of federal income tax benefit
|
(10,260)
|
(6,610)
|
Change in valuation allowance
|
107,161
|
69,045
|
Total
|
$ 0
|
$ 0
|
The tax effects of the temporary differences between reportable financial statement income and taxable income are recognized as deferred tax assets and liabilities.
In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment.
For the period ending December 31, 2015 and for the year ended December 31, 2014, the Company has net operating losses from operations. The carry forwards expire through the year 2032. The Companys net operating loss carry forward may be subject to annual limitations, which could reduce or defer the utilization of the losses as a result of an ownership change as defined in Section 382 of the Internal Revenue Code. A valuation allowance has been applied due to the uncertainty of realization.
The Companys net deferred tax asset as of December 31, 2015 and December 31, 2014 is as follows:
|
| |
|
December 31, 2015
|
December 31, 2014
|
Deferred tax assets
|
$233,800
|
$127,000
|
Valuation allowance
|
(233,800)
|
(127,000)
|
Net deferred tax assets
|
$ 0
|
$ 0
|
The Company is currently open to audit under the statute of limitations by the Internal Revenue Service for the period from inception ended December 31, 2013 through the year ended December 31, 2015. The Company recognizes interest and penalties related to income taxes in income tax expense. The Company had incurred no penalties and interest through the year ended December 31, 2015.
28
NOTE 5. SHAREHOLDERS EQUITY
The Company, through approval of its Board of Directors, authorized common shares of 500,000,000 with a par value of $0.0001.
COMMON STOCK
On March 24, 2014, the Company issued 325,000 shares, at $0.10 per share, to Soellingen Advisory Group, Inc., a non-related party, in exchange for consulting services totaling $32,500.
In August 2014, the Board of Directors cancelled 12 million shares that were issued in anticipation of services to be performed. The following shares were cancelled due to non-performance. The shares were originally issued at par $0.0001.
1. Foster Smith 6,000,000
2. Bruce Hartley 2,000,000
3. Gerald Ernst 2,000,000
4. Kavita Khandelwal 2,000,000
On August 29, 2014, the Company issued at $0.0001 per share 1,200,000 shares to Ken Olsen, Former CEO and director, 2,098,600 shares to Glenn Grant, CEO and director, 125,000 shares to Raymond Skaff, director, 1,648,840 shares to Nelson Riis, advisor and 6,927,560 shares to other non-related parties that have been instrumental in the progress of the company for services rendered. The Company issued a total of 12 million shares at par value of $0.0001 per share for consulting services totaling $1,200.
On August 7, 2015, the Company issued at $0.0001 per share 12,000,000 shares to 1172321 Alberta Ltd., a related party, 12,000,000 shares to BOWER Solutions, a related party, 8,400,000 shares to Daniel Finch, COO and director, and on September 21, 2015, 10,000,000 shares to Richard Roy, CFO and director for services that have been instrumental in the progress of the company.
On August 7, 2015, the Company issued at $0.0001 per share 12,000,000 shares to 1778928 Alberta Ltd., a related party, 2,400,000 shares to Nelson Riis, advisor, 2,400,000 shares to Arnold Allsopp, advisor and 2,400,000 shares to Seal River Exploration Ltd., a non-related party, and on September 21, 2015, 3,600,000 shares to Dianne Finch, a related party, and 300,000 shares to Tammy Kaleta, a non-related party for exchange of services instrumental to the progress of the company.
On September 21, 2015, the Company issued 333,333 shares at $0.06 per share to Don Swartz, a non- related party for $20,000.
29
On October 31, 2015, the Company issued 100,000 shares at $0.10 Canadian per share to Shawn Rich, a non-related party for $10,000 Canadian.
On December 18, 2015, the Company issued 25,000 shares at $0.13 Canadian per share to Bob Fisher, a non-related party, for $3,250 Canadian; 25,000 shares at $0.13 Canadian per share to Lynda Fisher, a non-related party, for $3,250 Canadian.
On December 10, 2015, the Company issued 16,500,000 shares at $0.00939 per share to Engaged Mobility LLC, a related company, for the purchase of Good2Drive LLC.
There were 114,208,334 shares of common stock issued and outstanding at December 31, 2015.
NOTE 6. RELATED PARTY TRANSACTIONS
DUE TO RELATED PARTY
During the year ended December 31, 2015, Glenn Grant, CEO and director paid certain expenses on behalf of the Company and is due reimbursement travel expenses. As of December 31, 2015 the balance due to related party was $8,803.
NOTE PAYABLE
On December 4, 2014, Glenn Grant, advisor to the Company executed a demand note with the Company. The note carries an Eight percent (8%) annual percentage rate. The balance of the related party note as of December 31, 2015 and December 31, 2014 were $77,104 and $2,500, respectively.
INTANGIBLE ASSET
During the year, the Company purchased 100% of Good2Drive LLC in exchange for cash and common stock of Atacama Resources International Inc. The total cost of the acquisition is $155,000. The negotiation and acquisition was directed by Dan Finch, COO of Atacama Resources International Inc., who held a five (5%) interest in Good2Drive LLC.
EQUITY TRANSACTIONS
On August 29, 2014 through approval of its Board of Directors, the Company issued 2,098,600 shares at $0.05 per share to Glen Grant, CEO and director in exchange for services totaling $104,930.
30
On August 7, 2015 through approval of its Board of Directors, the Company issued at par value $0.0001 the followings shares to related parties for exchange of services instrumental to the progress of the company:
1172321 Alberta Ltd. 12,000,000 shares
1778928 Alberta Ltd. 12,000,000 shares
Bower Solutions Ltd. 12,000,000 shares
Daniel Finch (COO and director) 8,400,000 shares
On September 21, 2015 through approval of its Board of Directors, the Company issued at par value $0.0001 3,600,000 shares to Dianne Finch and 10,000,000 shares to Richard Roy, CFO and director for exchange of services instrumental to the progress of the company.
NOTE 7. NOTES PAYABLE