See the accompanying notes to the condensed consolidated financial
statements
See the
accompanying notes to the condensed consolidated financial statements
Note
1. Basis of Presentation and Significant Accounting Policies
Throughout
this report, the terms “our”, “we”, “us” and the “Company” refer to Barfresh Food
Group Inc., including its subsidiaries. The accompanying unaudited condensed financial statements of Barfresh Food Group Inc.
at March 31, 2016 and December 31, 2015 have been prepared in accordance with generally accepted accounting principles (“GAAP”)
for interim financial statements, instructions to Form 10-Q, and Regulation S-X. Accordingly, certain information and footnote
disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted. These condensed
financial statements should be read in conjunction with the financial statements and notes thereto included in our annual report
on Form 10-KT for the nine months ended December 31, 2015. In management’s opinion, all adjustments (consisting only of
normal recurring adjustments) considered necessary for a fair presentation to make our financial statements not misleading have
been included. The results of operations for the periods ended March 31, 2016 and 2015 presented are not necessarily indicative
of the results to be expected for the full year. The December 31, 2015 balance sheet has been derived from our audited financial
statements included in our annual report on Form 10-KT for the nine months ended December 31, 2015.
Basis
of Consolidation
The
condensed consolidated financial statements include the financial statements of the Company and our wholly owned subsidiaries
Barfresh Inc. and Barfresh Corporation, Inc.
Use
of Estimates
The
preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and revenues and expenses during the years reported. Actual results may differ
from these estimates.
Inventory
Inventory
consists of finished goods and is carried at the lower of cost or market on a first in first out basis.
Intangible
Assets
Intangible
assets are comprised of patents, net of amortization. The patent costs are being amortized over the life of the patents, which
is twenty years from the date of filing the patent applications. In accordance with ASC Topic 350
Intangibles - Goodwill and
Other
(“ASC 350”), the costs of internally developing other intangible assets, such as patents, are expensed as
incurred. However, as allowed by ASC 350, legal fees and similar costs relating to patents have been capitalized.
Property,
Plant and Equipment
Property,
plant and equipment is stated at cost less accumulated depreciation and accumulated impairment loss, if any. Depreciation is calculated
on a straight line basis over the estimated useful lives of the assets. Leasehold improvements are being amortized over the shorter
of the useful life of the asset or the lease term that includes any expected renewal periods deemed to be reasonably assured.
The estimated useful lives used for financial statement purposes are:
Furniture
and fixtures: 5 years
Equipment:
7 years
Leasehold
improvements: 2 years
Vehicle:
5 years
Revenue
Recognition
We
recognize revenue from products sold when there is persuasive evidence of an arrangement, delivery has occurred or services have
been rendered, the sales price is determinable and collection is reasonably assured.
Earnings
per Share
We
calculate net loss per share in accordance with ASC Topic 260,
Earnings per Share
. Basic net loss per share is computed
by dividing net loss by the weighted average number of shares of common stock outstanding for the period, and diluted earnings
per share is computed by including common stock equivalents outstanding for the period in the denominator. At March 31, 2016 and
2015 any equivalents would have been anti-dilutive as we had losses for the periods then ended.
Research
and Development
Expenditures
for research activities relating to product development and improvement are charged to expense as incurred. We incurred $23,568
and a credit of $2,061 in research and development expenses for the three-month periods ended March 31, 2016 and 2015, respectively.
Rent
Expense
We
recognize rent expense on a straight-line basis over the reasonably assured lease term as defined in ASC Topic 840,
Leases
(“ASC 840”).
Recent
pronouncements
From
time to time, new accounting pronouncements are issued that we adopt as of the specified effective date. We believe that the impact
of recently issued standards that are not yet effective may have an impact on our results of operations and financial position.
ASU
Update 2014-09 Revenue from Contracts with Customers (Topic 606) issued May 28, 2014 by FASB and IASB converged guidance on recognizing
revenue in contracts with customers on an effective date after December 31, 2017 will be evaluated as to impact and implemented
accordingly.
ASU
Update 2014-15 Presentation of Financial Statements-Going Concern (Sub Topic 205-40) issued August 27, 2014 by FASB defines managements
responsibility to evaluate whether there is a substantial doubt about an organizations ability to continue as a going concern.
The additional disclosure required is effective after December 31, 2015 and will be evaluated as to impact and implemented accordingly.
In
July 2015, the FASB issued ASU 2015-11,
Inventory
, which simplifies the measurement principle of inventories valued under
the First-In, First-Out (“FIFO”) or weighted average methods from the lower of cost or market to the lower of cost
and net realizable value. ASU 2015-11 is effective for reporting periods beginning after December 15, 2016 including interim periods
within those annual periods. We do not expect the standard to have a material impact on our Consolidated Financial Statements.
In
November 2015, the FASB issued ASU 2015-17,
Balance Sheet Classification of Deferred Taxes
, which requires that deferred
tax assets and liabilities be classified as noncurrent on the consolidated balance sheet. ASU 2015-17 is effective for annual
periods beginning after December 15, 2016, including interim periods within those annual periods. Early adoption is permitted
as of the beginning of an interim or annual reporting period. Upon adoption, ASU 2015-17 may be applied either prospectively or
retrospectively. We do not expect the adoption of this guidance to have a material impact on our Consolidated Financial Statements.
In
February 2016, the FASB issued ASU No. 2016-02,
Leases
, to improve financial reporting about leasing transactions. This
ASU will require organizations that lease assets (“lessees”) to recognize a lease liability and a right-of-use asset
on its balance sheet for all leases with terms of more than twelve months. A lease liability is a lessee’s obligation to
make lease payments arising from a lease, measured on a discounted basis and a right-of-use asset represents the lessee’s
right to use, or control use of, a specified asset for the lease term. The amendments in this ASU simplify the accounting for
sale and leaseback transactions primarily because lessees must recognize lease assets and lease liabilities. This ASU leaves the
accounting for the organizations that own the assets leased to the lessee (“lessor”) largely unchanged except for
targeted improvements to align it with the lessee accounting model and Topic 606, Revenue from Contracts with Customers.
The
amendments in ASU 2016-02 are effective for fiscal years beginning after December 15, 2018, including interim periods within those
fiscal years. Lessees (for capital and operating leases) and lessors (for sales-type, direct financing, and operating leases)
must apply a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest
comparative period presented in the financial statements. The modified retrospective approach would not require any transition
accounting for leases that expired before the earliest comparative period presented. Lessees and lessors may not apply a full
retrospective transition approach. The Company is evaluating the potential impact of ASU 2016-02 on its Consolidated Financial
Statements.
Note
2. Property Plant and Equipment
Major
classes of property and equipment at March 31, 2016 and December 31, 2015:
|
|
March 31, 2016
|
|
|
December 31, 2015
|
|
Furniture and fixtures
|
|
$
|
13,604
|
|
|
$
|
13,604
|
|
Equipment
|
|
|
738,006
|
|
|
|
705,782
|
|
Leasehold Improvements
|
|
|
3,300
|
|
|
|
3,300
|
|
Vehicle
|
|
|
116,752
|
|
|
|
116,752
|
|
|
|
|
871,662
|
|
|
|
839,438
|
|
Less: accumulated depreciation
|
|
|
(281,147
|
)
|
|
|
(249,732
|
)
|
|
|
|
590,515
|
|
|
|
589,706
|
|
Equipment not yet placed in service
|
|
|
487,974
|
|
|
|
99,066
|
|
Property and equipment, net of depreciation
|
|
|
1,078,489
|
|
|
|
688,772
|
|
We
recorded depreciation expense related to these assets of $31,415 and $24,025 for the three-month periods ended March 31, 2016
and 2015, respectively.
Note
3. Intangible Assets
As
of March 31, 2016 and December 31, 2015, intangible assets consist primarily of patent costs and trademarks of $760,845 and $760,475,
less accumulated amortization of $158,551 and $143,218, respectively.
The
amounts carried on the balance sheet represent cost to acquire, legal fees and similar costs relating to the patents incurred
by the Company. Amortization is calculated through the expiration date of the patent, which is December, 2025. The amount charged
to expenses for amortization of the patent costs was $15,332 and $15,373 for the three-month periods ended March 31, 2016 and
2015, respectively.
Estimated
amortization expense related to the patent as of March 31, 2016 is as follows:
Years Ending December 31,
|
|
|
|
2016 (9 months remaining)
|
|
$
|
45,996
|
|
2017
|
|
|
61,328
|
|
2018
|
|
|
61,328
|
|
2019
|
|
|
61,328
|
|
2020
|
|
|
61,328
|
|
2021
|
|
|
61,328
|
|
Thereafter
|
|
|
249,658
|
|
Total
|
|
$
|
602,294
|
|
Note
4. Related Parties
As
disclosed below in Note 5, there remains $50,000 outstanding in a Short-Term Note Payable to a related party, who is a significant
shareholder and a director.
As
disclosed below in Note 6, members of management, directors, and members of their families, participated in $635,000 of the total
$2,670,000 convertible notes offering.
As
disclosed below in Note 9, members of management and directors have received shares of stock and options in exchange for services.
Note
5. Short-Term Notes Payable (Related and Unrelated)
In
December 2013, we closed an offering of $775,000 in short-term notes payable (“Short-Term Notes”), $500,000 of which
was purchased by a significant shareholder and $100,000 was purchased by a company controlled by a director and significant shareholder.
The Short-Term Notes bear interest at a rate of 2% per annum and were due and payable on December 20, 2014. We also issued 1,291,667
warrants to the Short-Term Note holders for the right to purchase shares of our common stock. Each warrant entitles the holder
to purchase one share of our common stock at a price of $0.45 per share, may be exercised on a cashless basis and are exercisable
for a period of five years.
In
accordance with the guidance in ASC Topic 470-20
Debt with Conversion and Other Options
(“ASC 470”), we first
calculated the fair value of the warrants issued and then determined the relative value of the Short-Term Notes.
The
relative value of the warrants was $298,232, which was the amount recorded as debt discount to the short term notes. The amounts
recorded as debt discount were amortized over the one-year term, and accreted to interest expense. We estimated the effective
interest rate as calculated to be approximately 52% but paid cash at a rate of 2% per annum.
We
exercised our right to extend the due date of the Short-Term Notes to June 20, 2015. The extended Short-Term Notes bear at the
rate of 3% per annum and required us to issue additional warrants (“Extension Warrants”). We issued 898,842 Extension
Warrants to the Short-Term Note holders for the right to purchase shares of our common stock. Each Extension Warrant entitles
the holder to purchase one share of our common stock at a price of $0.485 per share, may be exercised on a cashless basis and
are exercisable for a period of three years.
As
discussed above, we accounted for the warrants as per the guidance in ASC 470. The relative value of the Extension Warrants, $164,638,
was the amount recorded as the new debt discount. The amounts recorded as debt discount were being amortized over the six-month
term of the note, and accreted to interest expense. We estimated the effective interest rate as calculated to be approximately
53% but pay cash at a rate of 3% per annum.
The
fair value of the Extension Warrant, $0.23 per share, was calculated using the Black-Sholes option pricing model using the following
assumptions:
Expected life (in years)
|
|
|
3
|
|
Volatility (based on a comparable company)
|
|
|
76.88
|
%
|
Risk Free interest rate
|
|
|
1.10
|
%
|
Dividend yield (on common stock)
|
|
|
-
|
%
|
On
June 20, 2015, some of the Short-Term Notes were amended again, and some of the Short-Term Notes were redeemed. Short-Term Notes
totaling $700,000 were amended to provide for repayment on June 20, 2015 of 50% of the face value, plus accrued interest to that
date ($10,500), and extension of the remaining balance until September 20, 2015, and the interest rate on the notes that were
extended was adjusted to 10%. The remaining Short-Term Notes were fully redeemed on June 20, 2015. One such note in the amount
of $25,000 was redeemed for cash, and one such note in the amount of $50,000 was redeemed for 71,429 shares of our common stock.
As a result of the above described amendments and redemptions of the Short-Term Notes, all remaining unamortized debt discount
was expensed as of June 20, 2015.
Of
the balance of the notes due that were payable on September 20, 2015, one note for $250,000 was repaid on October 1, 2015, and
two notes, one to a related party in the amount of $50,000, and one to an unrelated party in the amount of $50,000, were extended
until June 30, 2016, with 10% interest.
For
this note, interest expenses includes direct interest of $7,944 and $5,924 for the periods ended March 31, 2016 and 2015, respectively,
and amortization of debt discount of $78,327 for the three month period ended March 31, 2015. There was no amortization of debt
discount included interest expense for this note during the period ended March 31, 2016.
Note
6. Convertible Notes (Related and Unrelated)
In
August 2012, we closed an offering of $440,000 of convertible notes. The notes bear interest at a rate of 12% per annum and were
due and payable on September 6, 2013. In addition, the notes were convertible, at any time after the original issue date until
the notes are no longer outstanding, into our common stock at a conversion price of $0.372 per share. We also issued 956,519 warrants
to the note holders for the right to purchase shares of our common stock. Each warrant entitled the holder to purchase one share
of our common stock at a price of $0.46 per share for a term of seven years.
When
the convertible notes were due, we settled the notes by repaying $40,000 of the notes in cash, issuing new convertible notes in
the amount of $400,000 and received payment for another note in the amount of $20,000. The new notes bear interest at a rate of
12% per annum and were due and payable on September 6, 2015. In addition, the new notes were convertible at any time after the
original issue date until the new notes are no longer outstanding, into our common stock at a conversion price of $0.25 per share.
We also issued warrants to the new note holders for the right to purchase shares of our common stock. Each warrant entitles the
holder to purchase one share of our common stock at a price of $0.25 per share. There were 1,680,000 warrants issued. The warrants
issued with the original notes were cancelled.
In
accordance with the guidance in ASC 470, we first calculated the fair value of the warrants issued and then determined the relative
value of the notes and determined that there was a beneficial conversion feature.
The
fair value of the warrants, $0.13 per share ($216,531 in the aggregate), was calculated using the Black-Sholes option pricing
model using the following assumptions:
Expected life (in years)
|
|
|
3
|
|
Volatility (based on a comparable company)
|
|
|
85
|
%
|
Risk Free interest rate
|
|
|
0.91
|
%
|
Dividend yield (on common stock)
|
|
|
-
|
|
The
relative value of the warrants to the notes was $142,873, which was recorded as a portion of the debt discount. We also recorded
a beneficial conversion feature on the convertible notes of $125,905. The amounts recorded as debt discount are being amortized
over the two-year term, and accreted to interest expense. We estimated the effective interest rate as calculated to be approximately
74% but will be paying cash at a rate of 12% per annum.
All
debt discount has been amortized.
During
September 2015, all of the holders of the convertible notes elected to convert the then outstanding $420,000 of notes, and accumulated
interest of $21,955 to our common stock. We issued 1,767,822 shares of our common stock in conversion of these notes.
During
the late 2015, we raised $2,670,000 through the issuance of convertible promissory notes. The notes bore interest at a rate of
10% and matured in one year. Upon completion of an equity financing which occurred during the current quarter, holders of approximately
96% of these notes elected to convert all outstanding principal and accrued and unpaid interest under the notes into the class
of equity issued in such financing on the same terms as the other investors concurrently with the closing of such financing. During
late 2015 we also issued 1,335,000 warrants to the note holders for the right to purchase shares of our common stock. Each warrant
entitled the holder to purchase one share of our common stock at a price of $1.00 per share for a term of five years. Of the aggregate
offering amount, $635,000 of the notes and warrants to purchase up to 317,500 shares of common stock were placed with members
of the Company’s management, including officers and directors of the Company, and family members of certain officers and
directors.
We
elected early adoption of ASU 2015-03, accordingly issuance cost paid has been recorded as debt discount. The following is a breakdown
of the convertible promissory note
|
|
March 31, 2016
|
|
|
December 31, 2015
|
|
Convertible notes (including related party)
|
|
$
|
250,000
|
|
|
$
|
2,720,000
|
|
Less: Debt discount (warrant value)
|
|
|
(24,211
|
)
|
|
|
(564,462
|
)
|
Less: Debt discount (issuance costs paid)
|
|
|
-
|
|
|
|
(69,667
|
)
|
|
|
$
|
225,789
|
|
|
$
|
2,095,871
|
|
We
did not record any discount for beneficial conversion as the conversion terms were unknown at the time of issuance. The conversion
price was set during the February 2016 equity transaction. At that time the Company evaluated whether a beneficial conversion
feature should have been recorded, and concluded that so such beneficial conversion feature needed to be recorded.
The
fair value of the warrants, $0.586 per share ($782,863 in the aggregate), was calculated using the Black-Sholes option pricing
model using the following assumptions:
Expected life (in years)
|
|
|
3
|
|
Volatility (based on a comparable company)
|
|
|
77.5
|
%
|
Risk Free interest rate
|
|
|
1.73
|
%
|
Dividend yield (on common stock)
|
|
|
-
|
|
The
relative value of the warrants to the notes was $600,629, which was the amount recorded as a portion of the debt discount. The
amount recorded as debt discount are being amortized over the one-year term of the notes, one years, and accreted to interest
expense. We estimated the effective interest rate as calculated to be approximately 34% but will be paying cash at a rate of 10%
per annum.
Note
7. Long term Debt
Long
term debt at March 31, 2016 consists of installment agreements on four vehicles maturing on different dates through June 2020.
The installment agreements, are with one financial institution and bear no interest. Monthly payments are $1,171 per month.
The
annual maturities of long term debt as of March 31, 2016 are as follows:
For years ending December 31,
|
|
|
|
|
2016
|
|
$
|
14,039
|
|
2017
|
|
|
14,051
|
|
2018
|
|
|
14,051
|
|
2019
|
|
|
13,086
|
|
2020
|
|
|
1,292
|
|
|
|
$
|
56,519
|
|
Note
8. Commitments and Contingencies
We
lease office space under a non-cancelable operating lease, which expires on November 7, 2016. The aggregate minimum requirements
through December 31, 2016 total $54,529
Note
9. Stockholders’ Equity
During
the three months ended March 31, 2016 pursuant to a securities purchase agreement between us and certain accredited investors,
we sold 7,186,817 shares of our common stock (“Shares”) and warrants to purchase up to 3,593,408 Shares (“Warrants”)
for aggregate gross proceeds to us of $5,749,454. The financing consists of two components: a new equity raise in the amount of
$3,270,000 and the conversion into common equity of $2,479,456 of principal and interest of convertible promissory notes previously
issued. An additional $154,044 of the previously issued convertible promissory note had committed to the conversion prior to March
31, 2016 and subsequent to March 31, 2016 an additional 192,554 shares have been issued bringing the total number of shares sold
to 7,379,371, the total warrants issued to 3,689,686 and the aggregate gross proceeds to $5,903,498. See discussion in Note 6.
The Warrants are exercisable for a term of five-years at a per Share price of $1.00.
The
fair value of the warrants, $1,886,327, was estimated at the date of grant using the Black-Scholes option pricing model, with
an allocation of the proceeds applied to the warrants. The fair value of the warrants has been included in the total additional
paid in capital. The following assumptions were used in the Black-Scholes option pricing model:
Expected life (in years)
|
|
|
5
|
|
Volatility (based on a comparable company)
|
|
|
78.12
|
%
|
Risk Free interest rate
|
|
|
1.23
|
%
|
Dividend yield (on common stock)
|
|
|
-
|
|
In
addition, we had previously recorded debt discount on the convertible promissory note discussed above. As a result of the conversion
we wrote off the remaining balance, $440,201, against additional paid in capital.
Also,
during the three months ended March 31, 2016, we issued 210,455 shares of our common stock upon the conversion of outstanding
convertible debt, not included in the equity raise described above, representing $50,000 in principal and $2,613.70 in interest.
During
the three months ended March 31, 2016, the holder of warrants to purchase shares of common stock exercised their rights and purchased
400,000 shares of common stock for an aggregate price of $240,000.
Also
during the three months ended March 31, 2016 we issued 64,599 shares of stock to a member of our board of directors in lieu of
$50,000 in director fees due. We valued the shares based on the trading value on the date issued.
During
the three months ended March 31, 2016, we issued 45,000 options to purchase our common stock to employees of the Company. The
exercise price of the options ranged from $0.81 to $0.83 per share, and are exercisable for a period of 8 years and vest on the
third anniversary of issuance.
The
fair value of the options ($23,928 in the aggregate) was calculated using the Black-Sholes option pricing model, based on the
criteria shown below, and are being expensed over the vesting period of each option.
Expected life (in years)
|
|
|
5.5
|
|
Volatility (based on a comparable company)
|
|
|
76%
to 77
|
%
|
Risk Free interest rate
|
|
|
1.49%
to 1.73
|
%
|
Dividend yield (on common stock)
|
|
|
-
|
|
The
total amount of equity based compensation for the three months ended March 31, 2016 included in additional paid in capital was
$244,789.
The
following is a summary of outstanding stock options issued to employees and directors as of March 31, 2016:
|
|
Number of
Options
|
|
|
Exercise
price
per share
$
|
|
|
Average
remaining term
in years
|
|
|
Aggregate
intrinsic
value at date
of
grant
$
|
|
Outstanding December 31, 2015
|
|
|
3,575,000
|
|
|
|
0.50
|
|
|
|
-
|
|
|
|
210,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issued
|
|
|
45,000
|
|
|
|
0.81-0.83
|
|
|
|
7.87
|
|
|
|
-
|
|
Cancelled
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Exercised
|
|
|
(50,000
|
)
|
|
|
0.51
|
|
|
|
|
|
|
|
|
|
Outstanding March 31, 2016
|
|
|
3,570,000
|
|
|
|
0.45
-0.87
|
|
|
|
5.19
|
|
|
|
210,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable
|
|
|
1,570,000
|
|
|
|
0.45
-0.56
|
|
|
|
2.69
|
|
|
|
-
|
|
Note
10. Outstanding Warrants
The
following is a summary of all outstanding warrants as of March 31, 2016:
|
|
Number of
warrants
|
|
|
price per share
|
|
|
remaining term
in years
|
|
|
intrinsic value at
date of grant
|
|
Warrants issued in connection with private placements of common stock
|
|
|
16,934,241
|
|
|
$
|
0.25
- 1.50
|
|
|
|
1.97
|
|
|
$
|
1,590,567
|
|
Warrants issued in connection with private placement of convertible notes
|
|
|
1,680,000
|
|
|
$
|
0.25
|
|
|
|
0.44
|
|
|
$
|
-
|
|
Warrants issued in connection with short-term notes payable
|
|
|
3,525,509
|
|
|
$
|
0.45-$0.485
|
|
|
|
3.24
|
|
|
$
|
64,583
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrants issued for services
|
|
|
300,000
|
|
|
$
|
.025
|
|
|
|
0.67
|
|
|
|
|
|
During
the three-month period ended March, 2016 holders of 450,000 warrants to purchase shares of our common stock elected to exercise
those warrants. We issued 450,000 shares of our common stock in exchange for the warrants and we received $264,500.
Note
11. Interest Expense
Interest
expense includes direct interest of $56,010 and $18,766 for the three month periods ended March 31, 2016 and 2015, respectively,
calculated based on the interest rates stated in our various debt instruments.
In
addition, as more fully described in Notes 4 and 5 above, interest expense includes non-cash amortization of the debt discount
of $165,322 and $118,970 for the three months ended March 31, 2016 and 2015, respectively.
Note
12. Income Taxes
We
account for income taxes in interim periods in accordance with ASC Topic 740, Income Taxes (“ASC 740”). We have determined
an estimated annual effective tax rate. The rate will be revised, if necessary, as of the end of each successive interim period
during our fiscal year to our best current estimate. As of March 31, 2016 the estimated effective tax rate for the year will be
zero.
There
are open statutes of limitations for taxing authorities in federal and state jurisdictions to audit our tax returns from 2009
through the current period. Our policy is to account for income tax related interest and penalties in income tax expense in the
statement of operations. There have been no income tax related interest or penalties assessed or recorded.
ASC
740 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a
tax position taken or expected to be taken in a tax return. This pronouncement also provides guidance on derecognition, classification,
interest and penalties, accounting in interim periods, disclosure, and transition.
For
the three months ended March 31, 2016 and 2015, we did not have any interest and penalties associated with tax positions. As of
March 31, 2016 we did not have any significant unrecognized uncertain tax positions.
Note
13. Business Segments
During
the three months ended March 31, 2016 and 2015, we operated in only one business segment.
Note
14. Subsequent Events
Management
has evaluated all activity and concluded that no subsequent events have occurred that would require recognition in the financial
statements or disclosure in the notes to the financial statements.