PART
I
ITEM
1. DESCRIPTION OF BUSINESS.
General
Business Development
Corporate
History
Agritek
Holdings, Inc. (referred to hereafter as “AGTK,” or, the “Company”), was initially incorporated under
the laws of the State of Delaware in 1997 under the name Easy Street Online, Inc.
In
1997, the Company changed its name to Frontline Communications Corp. (“Frontline”) and operated as a regional Internet
service provider (“ISP”) providing Internet access, web hosting, website design, and related services to residential
and small business customers throughout the Northeast United States and, through a network partnership agreement, Internet access
to customers nationwide.
On
April 3, 2003, the Company acquired Proyecciones y Ventas Organizadas, S.A. de C.V. (“Provo Mexico”) and in December
2003 the Company changed the name to Provo International Inc. (“Provo”).
In
2008, Provo changed its name to Ebenefits Direct, Inc., which, through its wholly-owned subsidiary, L.A. Marketing Plans, LLC,
engaged in the business of direct response marketing. The Company’s principal business was to market and sell non-insurance
healthcare programs designed to complement medical insurance products and to provide savings for those who cannot afford or qualify
for traditional health insurance products.
On
October 14, 2008, Ebenefits Direct, Inc. changed its name to Seraph Security, Inc. (“Seraph”).
On
April 25, 2009, Seraph acquired Commerce Online Technologies, Inc., a credit and debit card processing company.
On
May 20, 2009, Seraph Security, Inc. changed its name to Commerce Online, Inc. to more accurately reflect its core business of
merchant processing, and financial services.
As
of February 18, 2010, Commerce Online, Inc. changed its name to Cannabis Medical Solutions, Inc. (“CMSI”) as a provider
of merchant processing payment technologies for the medical marijuana and wellness sector.
On
March 8, 2010, the Company completed the acquisition of 800 Commerce, Inc. (“800 Commerce”) a Florida Corporation
incorporated by the Company’s Chief Executive Officer. The company issued 1,000,000 shares of common stock to 800 Commerce
for all the issued and outstanding stock of 800 Commerce, Inc.
In
June 2010, 31,288,702 shares of common stock were issued as dividend shares (the “dividend”) to all existing shareholders
of common stock of record.
On
June 14, 2011, Cannabis Medical Solutions, Inc. changed its merchant name to MediSwipe Inc. (“MWIP”) as a result of
its focus on the processing and financial services related to medical marijuana business.
On
June 26, 2013, the Company formed American Hemp Trading Company, a wholly owned subsidiary.
On
June 26, 2013, the Company formed Agritech Innovations, Inc. (“AGTI”), a wholly owned subsidiary. On September 3,
2013, AGTI changed its name to Agritech Venture Holdings, Inc. (“AVH”).
On
November 12, 2013, the Board of Directors of the Company approved a 1-for-10 reverse stock split (the “Reverse Stock Split”)
and a decrease in the authorized common stock of the Company to 250,000,000. Pursuant to the Reverse Stock Split, each 10 shares
of the Company’s common stock automatically converted into one share of Company common stock.
On
November 12, 2013, the Financial Industry Regulatory Authority (“FINRA”) approved the Reverse Stock Split with an
effective date of December 11, 2013. All the share amounts in this annual report on Form 10-K reflect the Reverse Stock Split.
On
April 23, 2014, MWIP changed its name to Agritek Holdings, Inc. (“AGTK”) to more properly reflect the Company’s
current business model.
On
May 27, 2014, AVH changed its names to Agritek Venture Holdings, Inc. (“AVHI”).
On
August 27, 2014, American Hemp Trading Company changed its name to Prohibition Products, Inc. (“PPI”)
Unless
otherwise noted, references in this Form 10-K to “Seraph,” “Commerce Online, Inc.,” “Cannabis Medical
Solutions,” “Mediswipe,” the “Company,” “we,” “our” or “us”
means Agritek Holdings, Inc.
Description
of Business
Agritek’s
business plan is to acquire and lease real estate, then lease or sub-lease the real estate to licensed marijuana operators, including
providing complete turnkey growing space and related facilities to licensed marijuana growers and dispensary owners. Additionally,
the Company offers a variety of services and product lines to the medicinal marijuana sector, including the distribution of hemp-
based nutritional products and a line of innovative solutions for electronically processing merchant transactions.
The
Company does not grow, harvest, distribute or sell marijuana or any substances that violate the laws of the United States of America.
Real
Estate Leasing
Our
real estate leasing business primarily includes the acquisition and leasing of cultivation space and related facilities to licensed
marijuana growers and dispensary owners for their operations. Management anticipates that these facilities will range in size
from 5,000 to 50,000 square feet. These facilities will only be leased to tenants that possess the requisite state licenses to
operate cultivation facilities. The leases with the tenants will provide certain requirements that permit us to continually evaluate
our tenants’ compliance with applicable laws and regulations.
As
of the date of this report, we are a deed holder of one cultivation property that is located in a suburb of Pueblo, Colorado.
The property consists of approximately 80 acres of land zoned for cultivating cannabis. We are evaluating strategic options
for this property.
On
March 18, 2014, in conjunction with a land purchase of 80 acres in Pueblo County, Colorado, the Company paid $36,000 cash and
entered into a promissory note in the amount of $85,750. The Company plans to lease individual parcels of the 80 acre parcel to
fully-licensed and compliant growers and dispensaries within the regulated medicinal and recreational market of Colorado. The
Company plans to receive rents and management fees for providing infrastructure, water, electricity, equipment leasing and security
services to potential tenants. In November 2015, the Company was made aware that the land transaction regarding 80 acres in Pueblo County,
Colorado, may not have been properly deeded to the Company. The company was a party to the land purchase, however, it was
recently discovered the second party to the land contract never filed the original quit claim deed on behalf of the Company, even
though a copy of the notarized quit claim deed was sent to the Company. To date, the Company has paid a total of $47,438 ($36,000
at closing) and is on the deed of trust of the property. Accordingly, until the deed is properly recorded, the Company reduced
the remaining balance of the note payable for the acquisition of the land of $74,313 and recorded a reserve allowance for the
remaining balance of the asset of $54,490.
On
April 28, 2014, the Company entered into a lease agreement for 20 acres of an agricultural farming facility located in South Florida,
following the approval of the so-called “Charlotte’s Web” legislation, aimed at decriminalizing low grade marijuana
specifically for the use of treating epilepsy and cancer patients. Pursuant to the lease agreement, the Company has a first right
of refusal to purchase the property for three years.
On
July 11, 2014, the Company signed a 10- year
lease agreement for 40 acres in Pueblo, Colorado,
now bringing total land holdings in the country’s first recreational cannabis state to over 120 acres zoned for its planned
agricultural and cultivation facilities located in Pueblo County, Colorado. The lease requires monthly rent payments of $10,000
during the first year and is subject to a 2% annual increase over the life of the lease. The lease also provides rights to 50
acres of certain tenant water rights for $50,000 annually plus cost of approximately $2,400 annually. The water rights ensure
the Company’s non-interruption of operations on behalf of new tenants qualified as fully registered and licensed grow and
manufacturing operations.
We
plan to continue to acquire additional commercial real estate and lease land to licensed participants in the cannabis industry.
These participants include, cultivators, dispensary owners, product packaging, lighting, cultivation supplies, and financial services.
In exchange for certain services that may be provided to these tenants, we expect to receive rental income in the form of cash.
In certain cases, we may acquire equity interests or provide debt capital to these businesses.
Equipment
leasing and financing
We
will expand our division to lease cultivation equipment and facilities to customers in the cannabis industry. We expect we will
enter into sale lease-back transactions of grow lights, tenant improvements and other grow equipment. Since Colorado State law
does not allow entities operating under a cannabis license to pledge the assets or the license of the cannabis operation for any
type of general borrowing activity, we intend to provide loans to individuals and businesses in the cannabis industry on an unsecured
basis. Equipment will only be leased to tenants that possess the requisite state licenses to operate such facilities. The
leases with the tenants will provide certain requirements that permit us to continually evaluate its tenants’ compliance
with applicable laws and regulations.
We
are exploring lending opportunities in Oregon, Washington, Colorado, and Arizona. Our finance strategy will include making direct
term loans and providing revolving lines of credit to businesses involved in the cultivation and sale of cannabis and related
products. These loans will generally be secured to the maximum extent permitted by law. We believe there is a significant
demand for this financing. We are pursuing other finance services including customized finance, capital formation, and banking,
for participants in the cannabis industry.
Consulting
and Advisory
Through
AVH we offer comprehensive consulting services to the cannabis industry that include obtaining licenses, compliance, cultivation,
logistical support, facility design and building services. Our business plan is based on the future growth of the regulated
cannabis market in the United States. We will provide general advisory services for business development, facilities design and
construction, cultivation and retail operations, marketing and the improvement and expansion of existing operations.
Through
December 31, 2015, we operated in one reportable segment, wholesale sales.
Employees
Other
than the Company’s sole officer and director, the Company does not have any full-time employees. The Company relies on several
independent contractors and other agreements it has with other companies to provide the services needed. Each management hire
has been carefully selected to address immediate needs in particular functional areas, but also with consideration of the Company’s
future needs during a period of expected rapid growth and expansion. Value is placed not only on outstanding credentials in specific
areas of functional expertise, but also on cross-functionality, a strong knowledge of content acquisition and distribution, along
with hands-on experience in scaling operations from initial beta and development stage through successful commercial deployment.
Sales
and Marketing Strategy
Agritek’s plan is to gain market share within the medicinal and recreational cannabis industry. Agritek intends to accomplish
this by providing infrastructure and turnkey solutions to operators and licensees within legal jurisdictions. Agritek canprovide
these operations support with the licensing process, site selection, agriculture planning, build out, equipment leasing/financing,
security and oversight by operational expertise. The Company additionally has expanded its product offerings to include a proprietary
brand of vaporizers and accessories under its wholly owned subsidiary Prohibition Products Inc. and is planning to enter the edibles
and nutraceutical markets through third party licenses.
Competition
Currently,
there are a number of other companies that provide similar products and/or services, such as hydroponic supplies, hemp products,
leasing of real estate and consulting services to the cannabis industry. In the future we fully expect that other companies will
recognize the value of ancillary businesses serving the cannabis industry and enter into the marketplace as competitors.
The
cannabis industry in the United States is highly fragmented, rapidly expanding and evolving. The industry is characterized by
new and potentially disruptive or conflicting legislation propounded on a state-by-state basis. Our competitors may be local or
international enterprises and may have financial, technical, sales, marketing and other resources greater than ours. These companies
may also compete with us in recruiting and retaining qualified personnel and consultants.
Our
competitive position will depend on our ability to attract and retain qualified licensees in regulated jurisdictions, consultants
and advisors with industry depth, and talented managerial, operational and other personnel. Our competitive position will also
depend on our ability to develop and acquire effective proprietary products and solutions, personal relationships of our executive
officers and directors, and our ability to secure adequate capital resources. We compete to attract and retain customers of our
services. We expect to compete in this area on the basis of price, regulatory compliance, vendor relationships, usefulness, availability,
and ease of use of our services.
A
few of the companies competing within the recreational cannabis sector including:
Medbox,
Inc. (OTCB: MDBX) is seeking to become a dispensary and cultivation infrastructure and licensing specialist, patented technology
provider, and partner to the cannabis industry.
Terra
Tech Corp (OTCB: TRTC) is integrating the best of the natural world with technology to create sustainable renewable solutions
for food production, indoor cultivation, and agricultural research and development.
Cannabics
Pharmaceuticals, Inc. (OTCQB: CNBX) is an emerging drug development company focused on the development and commercialization of
advanced drugs, therapies, food supplements and administration routes based on the wide range of active ingredients found in diverse
and unique strains of the Cannabis plant.
Government
Regulation
As
of March 31, 2016, there are 23 states plus the District of Columbia that have laws and/or regulation that recognize in one form
or another legitimate medical uses for cannabis and consumer use of cannabis in connection with medical treatment. Many other
states are considering similar legislation. Conversely, the federal government regulates drugs through the Controlled Substances
Act (“CSA”), which does not recognize the difference between medical and recreational use of cannabis. Under federal
law, cannabis is treated like every other controlled substance, such as cocaine and heroin. The federal government places every
controlled substance in a schedule, in principle according to its relative potential for abuse and medicinal value. Under the
CSA, cannabis is classified as a Schedule I drug, which means that the federal government views medical cannabis as highly addictive
and having no medical value. Pursuant to the CSA, it is unlawful for any person (1) to sell or offer for sale drug paraphernalia;
(2) to use the mails or any other facility of interstate commerce to transport drug paraphernalia; or (3) to import or export
drug paraphernalia.
The
extent to which the regulation of drug paraphernalia under the CSA is applicable to our business and the sale of our product is
found in the definition of drug paraphernalia. Drug paraphernalia means any equipment, product, or material of any kind which
is
primarily
intended or designed for use in manufacturing, compounding, converting, concealing, producing processing,
preparing, injecting ingesting, inhaling or otherwise introducing into the human body a controlled substance, possession of which
is unlawful. Our products are primarily designed for general agricultural use.
In
an effort to provide guidance to federal law enforcement, the Department of Justice (the “DOJ”) has issued Guidance
Regarding Marijuana Enforcement to all United States Attorneys in a memorandum from Deputy Attorney General David Ogden on October
19, 2009, in a memorandum from Deputy Attorney General James Cole on June 29, 2011 and in a memorandum from Deputy Attorney General
James Cole (the “Cole Memo”) on August 29, 2013. Each memorandum provides that the DOJ is committed to enforcement
of the CSA but the DOJ is also committed to using its limited investigative and prosecutorial resources to address the most significant
threats in the most effective, consistent and rational way.
The
Cole Memo provides updated guidance to federal prosecutors concerning marijuana enforcement in light of state laws legalizing
medical and recreational marijuana possession in small amounts. The memorandum sets forth certain enforcement priorities that
are important to the federal government:
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Distribution of marijuana to children;
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Revenue from the sale of marijuana
going to criminals;
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Diversion of medical marijuana from
states where is legal to states where it is not;
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Using state authorized marijuana activity
as a pretext of other illegal drug activity;
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Preventing violence in the cultivation
and distribution of marijuana;
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Preventing drugged driving;
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Growing marijuana on federal property;
and
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Preventing possession or use of marijuana
on federal property.
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The
DOJ has not historically devoted resources to prosecuting individuals whose conduct is limited to possession of small amounts
of marijuana for use on private property but relied on state and local law enforcement to address marijuana activity. If the Department
of Justice (the “DOJ”) Guidance Regarding Marijuana Enforcement to all United States Attorneys from Deputy Attorney
General David Ogden on October 19, 2009, and from Deputy Attorney General James Cole on June 29, 2011 and again from Deputy Attorney
General James Cole on August 29, 2013, were reversed and it was determined that the Company violated the regulation of drug paraphernalia
under the CSA, then the Company would need to make appropriate modifications to its products to avoid violation of the CSA. Until
Congress amends the CSA with respect to medical marijuana, there is a risk that federal authorities may enforce current federal
law. Active enforcement of the current federal regulatory position on cannabis may thus indirectly, adversely and materially affect
revenues and profits of the Company. The risk of strict enforcement of the CSA in light of congressional activity, judicial holdings
and stated federal policy remains uncertain.
ITEM
1A – RISK FACTORS
You
should carefully consider the risks described below, as well as other information provided to you in this document, including
information in the section of this document entitled “Forward-Looking Statements.” The risks and uncertainties described
below are not the only ones facing the Company. If any of the following risks actually occur, the Company’s business, financial
condition or results of operations could be materially adversely affected.
Investors
should not place undue reliance on any such forward-looking statements. Further, any forward-looking statement speaks only as
of the date on which such statement is made, and we undertake no obligation to update any forward-looking statement to reflect
events or circumstances after the date on which such statement is made or to reflect the occurrence of anticipated or unanticipated
events or circumstances. Our business, financial condition and/or results of operation may be materially adversely affected by
the nature and impact of these risks. New factors emerge from time to time, and it is not possible for us to predict all of such
factors. Further, we cannot assess the impact of each such factor on our results of operations or the extent to which any factor,
or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.
Risk
Related to Our Company
Our
independent auditors have expressed substantial doubt about our ability to continue as a going concern.
We
incurred a net loss of $2,074,161 and $2,012,102 for the years ending December 31, 2015 and 2014, respectively. Because of our
continued operating losses, negative cash flows from operations and working capital deficit, in their report on our financial
statements for the year ended December 31, 2015, our independent auditors included an explanatory paragraph regarding their substantial
doubt about our ability to continue as a going concern. We will continue to experience net operating losses in the foreseeable
future. Our ability to continue as a going concern is subject to our ability to generate a profit and/or obtain necessary funding
from outside sources, including obtaining additional funding from the sale of our securities, increasing sales or obtaining loan
from various financial institutions where possible. Our continued net operating losses increase the difficulty in meeting such
goals and there can be no assurances that such methods will prove successful.
Federal
regulation and enforcement may adversely affect the implementation of medical marijuana laws and regulations may negatively impact
our revenues and profits.
Currently,
there are 23 states plus the District of Columbia that have laws and/or regulation that recognize in one form or another legitimate
medical uses for cannabis and consumer use of cannabis in connection with medical treatment. Many other states are considering
similar legislation. Conversely, under the Controlled Substances Act (the “CSA”), the policy and regulations of the
Federal government and its agencies is that cannabis has no medical benefit and a range of activities including cultivation and
use of cannabis for personal use is prohibited. Until Congress amends the CSA with respect to medical marijuana, there is a risk
that federal authorities may enforce current federal law, and we may be deemed to be facilitating the selling or distribution
of drug paraphernalia in violation of federal law. Active enforcement of the current federal regulatory position on cannabis may
thus indirectly and adversely affect revenues and profits of the Company. The risk of strict enforcement of the CSA in light of
congressional activity, judicial holdings and stated federal policy remains uncertain.
Federal
authorities have not focused their resources on such tangential or secondary violations of the Act, nor have they threatened to
do so, with respect to the leasing of real property or the sale of equipment that might be used by medical cannabis gardeners,
or with respect to any supplies marketed to participants in the emerging medical cannabis industry. We are unaware of such a broad
application of the CSA by federal authorities, and we believe that such an attempted application would be unprecedented.
We
depend on third party providers for a reliable Internet infrastructure and the failure of these third parties, or the Internet
in general, for any reason would significantly impair our ability to conduct our business.
We
outsource all of our data center facility management to third parties who host the actual servers and provide power and security
in multiple data centers in each geographic location. These third party facilities require uninterrupted access to the Internet.
If the operation of our servers is interrupted for any reason, including natural disaster, financial insolvency of a third party
provider, or malicious electronic intrusion into the data center, our business would be significantly damaged. If either a third
party facility failed, or our ability to access the Internet was interfered with because of the failure of Internet equipment
in general or we become subject to malicious attacks of computer intruders, our business and operating results will be materially
adversely affected.
The
gathering, transmission, storage and sharing or use of personal information could give rise to liabilities or additional costs
of operation as a result of governmental regulation, legal requirements, civil actions or differing views of personal privacy
rights.
We
transmit and plan to store a large volume of personal information in the course of providing our services. Federal and state laws
and regulations govern the collection, use, retention, sharing and security of data that we receive from our customers and their
users. Any failure, or perceived failure, by us to comply with U.S. federal or state privacy or consumer protection-related laws,
regulations or industry self-regulatory principles could result in proceedings or actions against us by governmental entities
or others, which could potentially have an adverse effect on our business, operating results and financial condition. Additionally,
we may also be contractually liable to indemnify and hold harmless our customers from the costs or consequences of inadvertent
or unauthorized disclosure of their customers’ personal data which we store or handle as part of providing our services.
The
interpretation and application of privacy, data protection and data retention laws and regulations are currently unsettled particularly
with regard to location-based services, use of customer data to target advertisements and communication with consumers via mobile
devices. Such laws may be interpreted and applied inconsistently from country to country and inconsistently with our current data
protection policies and practices. Complying with these varying international requirements could cause us to incur substantial
costs or require us to change our business practices in a manner adverse to our business, operating results or financial condition.
As
privacy and data protection have become more sensitive issues, we may also become exposed to potential liabilities as a result
of differing views on the privacy of personal information. These and other privacy concerns, including security breaches, could
adversely impact our business, operating results and financial condition.
In
the U.S., we have voluntarily agreed to comply with wireless carrier technological and other requirements for access to their
customers’ mobile devices, and also trade association guidelines and codes of conduct addressing the provision of location-based
services, delivery of promotional content to mobile devices and tracking of users or devices for the purpose of delivering targeted
advertising. We could be adversely affected by changes to these requirements, guidelines and codes, including in ways that are
inconsistent with our practices or in conflict with the rules or guidelines in other jurisdictions.
We
have identified material weaknesses in our internal control over financial reporting which could, if not remediated, result in
material misstatements in our financial statements.
Our
management is responsible for establishing and maintaining adequate internal control over our financial reporting, as defined
in Rule 13a-15(f) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). A material weakness
is defined as a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a
reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected
on a timely basis. During the fourth quarter of fiscal year 2015, management identified material weaknesses in our internal control
over financial reporting as discussed in Item 9A of this Annual Report on Form 10-K. As a result of these material weaknesses,
our management concluded that our internal control over financial reporting was not effective based on criteria set forth by the
Committee of Sponsoring Organization of the Treadway Commission in Internal Control-An Integrated Framework. We are planning to
engage in developing a remediation plan designed to address these material weaknesses. If our remedial measures are insufficient
to address the material weaknesses, or if additional material weaknesses or significant deficiencies in our internal control are
discovered or occur in the future, our consolidated financial statements may contain material misstatements and we could be required
to restate our financial results, which could lead to substantial additional costs for accounting and legal fees and shareholder
litigation.
We
may require additional capital in the future, which may not be available or may only be available on unfavorable terms.
We
monitor our capital adequacy on an ongoing basis. To the extent that our funds are insufficient to fund future operating requirements,
we may need to raise additional funds through corporate finance transactions or curtail our growth and reduce our liabilities.
Any equity, hybrid or debt financing, if available at all, may be on terms that are not favorable to us. If we cannot obtain adequate
capital on favorable terms or at all, our business, financial condition and operating results could be adversely affected.
Risks
Relating to Ownership of Our Common Stock
Although
there is presently a market for our common stock, the price of our common stock may be extremely volatile and investors may not
be able to sell their shares at or above their purchase price, or at all. We anticipate that the market may be potentially highly
volatile and may fluctuate substantially because of:
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Actual or anticipated fluctuations
in our future business and operating results;
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Changes in or failure to meet market
expectations;
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Fluctuations in stock market price
and volume
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As
a public company, we will incur substantial expenses.
The
U.S. securities laws require, among other things, review, audit, and public reporting of our financial results, business activities,
and other matters. Recent SEC regulation, including regulation enacted as a result of the Sarbanes-Oxley Act of 2002, has also
substantially increased the accounting, legal, and other costs related to becoming and remaining an SEC reporting company. If
we do not have current information about our Company available to market makers, they will not be able to trade our stock. The
public company costs of preparing and filing annual and quarterly reports, and other information with the SEC and furnishing audited
reports to stockholders, will cause our expenses to be higher than they would be if we were privately-held. These increased costs
may be material and may include the hiring of additional employees and/or the retention of additional advisors and professionals.
Our failure to comply with the federal securities laws could result in private or governmental legal action against us and/or
our officers and directors, which could have a detrimental effect on our business and finances, the value of our stock, and the
ability of stockholders to resell their stock.
FINRA
sales practice requirements may limit a stockholder’s ability to buy and sell our stock.
“FINRA”
has adopted rules that relate to the application of the SEC’s penny stock rules in trading our securities and require that
a broker/dealer have reasonable grounds for believing that the investment is suitable for that customer, prior to recommending
the investment. Prior to recommending speculative, low priced securities to their non-institutional customers, broker/dealers
must make reasonable efforts to obtain information about the customer’s financial status, tax status, investment objectives
and other information. Under interpretations of these rules, FINRA believes that there is a high probability that speculative,
low priced securities will not be suitable for at least some customers. The FINRA requirements make it more difficult for broker/dealers
to recommend that their customers buy our common stock, which may have the effect of reducing the level of trading activity and
liquidity of our common stock. Further, many brokers charge higher transactional fees for penny stock transactions. As a result,
fewer broker/dealers may be willing to make a market in our common stock, reducing a shareholder’s ability to resell shares
of our common stock.
The
Company’s common stock is currently deemed to be “penny stock”, which makes it more difficult for investors
to sell their shares
.
The
Company’s common stock is currently subject to the “penny stock” rules adopted under section 15(g) of the Exchange
Act. The penny stock rules apply to companies whose common stock is not listed on the NASDAQ Stock Market or other national securities
exchange and trades at less than $5.00 per share or that have tangible net worth of less than $5,000,000 ($2,000,000 if the company
has been operating for three or more years). These rules require, among other things, that brokers who trade penny stock to persons
other than “established customers” complete certain documentation, make suitability inquiries of investors and provide
investors with certain information concerning trading in the security, including a risk disclosure document and quote information
under certain circumstances. Many brokers have decided not to trade penny stocks because of the requirements of the penny stock
rules and, as a result, the number of broker-dealers willing to act as market makers in such securities is limited. If the Company
remains subject to the penny stock rules for any significant period, it could have an adverse effect on the market, if any, for
the Company’s securities. If the Company’s securities are subject to the penny stock rules, investors will find it
more difficult to dispose of the Company’s securities.
We
have raised capital through the use of convertible debt instruments that causes substantial dilution to our stockholders.
Because
of the size of our Company and its status as a “penny stock” as well as the current economy and difficulties in companies
our size finding adequate sources of funding, we have been forced to raise capital through the issuance of convertible notes and
other debt instruments. These debt instruments carry favorable conversion terms to their holders of up to 50% discounts to the
market price of our common stock on conversion and in some cases provide for the immediate sale of our securities into the open
market. Accordingly, this has caused dilution to our stockholders in 2014 and may for the foreseeable future. As of December 31,
2015, we had approximately $472,514 in convertible debt and potential convertible debt outstanding. This convertible debt balance
as well as additional convertible debt we incur in the future will cause substantial dilution to our stockholders.
Because
we are quoted on the OTCQB instead of an exchange or national quotation system, our investors may have a tougher time selling
their stock or experience negative volatility on the market price of our common stock.
Our
common stock is quoted on the OTCQB. The OTCQB is often highly illiquid, in part because it does not have a national quotation
system by which potential investors can follow the market price of shares except through information received and generated by
a limited number of broker-dealers that make markets in particular stocks. There is a greater chance of volatility for securities
that are quoted on the OTCQB as compared to a national exchange or quotation system. This volatility may be caused by a variety
of factors, including the lack of readily available price quotations, the absence of consistent administrative supervision of
bid and ask quotations, lower trading volume, and market conditions. Investors in our common stock may experience high fluctuations
in the market price and volume of the trading market for our securities. These fluctuations, when they occur, have a negative
effect on the market price for our securities. Accordingly, our stockholders may not be able to realize a fair price from their
shares when they determine to sell them or may have to hold them for a substantial period of time until the market for our common
stock improves.
We
do not intend to pay dividends.
We
do not anticipate paying cash dividends on our common stock in the foreseeable future. We may not have sufficient funds to legally
pay dividends. Even if funds are legally available to pay dividends, we may nevertheless decide in our sole discretion not to
pay dividends. The declaration, payment and amount of any future dividends will be made at the discretion of the board of directors,
and will depend upon, among other things, the results of our operations, cash flows and financial condition, operating and capital
requirements, and other factors our board of directors may consider relevant. There is no assurance that we will pay any dividends
in the future, and, if dividends are paid, there is no assurance with respect to the amount of any such dividend.
Our
operating history and lack of profits which could lead to wide fluctuations in our share price. You may be unable to sell your
common shares at or above your purchase price, which may result in substantial losses to you. The market price for our common
shares is particularly volatile given our status as a relatively unknown company with a small and thinly traded public float.
The
market for our common shares is characterized by significant price volatility when compared to seasoned issuers, and we expect
that our share price will continue to be more volatile than a seasoned issuer for the indefinite future. The volatility in our
share price is attributable to a number of factors. First, our common shares are sporadically and thinly traded. As a consequence
of this lack of liquidity, the trading of relatively small quantities of shares by our shareholders may disproportionately influence
the price of those shares in either direction. The price for our shares could, for example, decline precipitously in the event
that a large number of our common shares are sold on the market without commensurate demand, as compared to a seasoned issuer
which could better absorb those sales without adverse impact on its share price. Secondly, we are a speculative or “risky”
investment due to our limited operating history and lack of profits to date, and uncertainty of future market acceptance for our
potential products. As a consequence of this enhanced risk, more risk-adverse investors may, under the fear of losing all or most
of their investment in the event of negative news or lack of progress, be more inclined to sell their shares on the market more
quickly and at greater discounts than would be the case with the stock of a seasoned issuer. Many of these factors are beyond
our control and may decrease the market price of our common shares, regardless of our operating performance. We cannot make any
predictions or projections as to what the prevailing market price for our common shares will be at any time, including as to whether
our common shares will sustain their current market prices, or as to what effect that the sale of shares or the availability of
common shares for sale at any time will have on the prevailing market price.
Shareholders
should be aware that, according to SEC Release No. 34-29093, the market for penny stocks has suffered in recent years from patterns
of fraud and abuse. Such patterns include (1) control of the market for the security by one or a few broker-dealers that are often
related to the promoter or issuer; (2) manipulation of prices through prearranged matching of purchases and sales and false and
misleading press releases; (3) boiler room practices involving high-pressure sales tactics and unrealistic price projections by
inexperienced sales persons; (4) excessive and undisclosed bid-ask differential and markups by selling broker-dealers; and (5)
the wholesale dumping of the same securities by promoters and broker-dealers after prices have been manipulated to a desired level,
along with the resulting inevitable collapse of those prices and with consequent investor losses. Our management is aware of the
abuses that have occurred historically in the penny stock market. Although we do not expect to be in a position to dictate the
behavior of the market or of broker-dealers who participate in the market, management will strive within the confines of practical
limitations to prevent the described patterns from being established with respect to our securities. The occurrence of these patterns
or practices could increase the volatility of our share price.
Should
one or more of the foregoing risks or uncertainties materialize, or should the underlying assumptions prove incorrect, actual
results may differ significantly from those anticipated, believed, estimated, expected, intended or planned.
ITEM
1B. UNRESOLVED STAFF COMMENTS
Not
applicable to a smaller reporting company.
ITEM
2. DESCRIPTION OF PROPERTY
Office
Space
Effective
on April 1, 2013, the Company entered into a three year agreement to rent approximately 2,500 square feet of office space (the
“Office Lease”) in Detroit, Michigan. The monthly rent under this lease was $2,200 per month. Effective August 28,
2013, the Company and the landlord amended the Office Lease allowing the Company to move to a new location in downtown Detroit.
The new lease was for 3,657 square feet for monthly rent of $3,047. In November 2013, the Company was notified that the owner
of the building (the Company’s landlord) was delinquent in its obligations to the mortgage holder of the building. In January
2014, due to the uncertainty of the Company’s Office Lease in Detroit, Michigan, the Company decided to relocate its administrative
offices to West Palm Beach, Florida. Effective April 1, 2014, the Company entered into a rent sharing agreement for the use of
1,300 square feet with a company controlled by the Company’s CFO. The Company has agreed to pay $1,350 per month for the
space. The Company terminated the agreement in September 2015.
In
April 2014, the Company entered into a 10-year sublease agreement for the use of up to 7,500 square feet with a
Colorado
based oncology clinical trial and drug testing company and facility presently doing cancer research and testing for established
pharmaceutical companies seeking FDA approval for new drugs
. Pursuant to the lease, as amended, the Company has agreed
to pay $3,500 per month for the space, and it will be utilized to market, sell and distribute products to Colorado dispensaries.
The Company is currently in default of the lease.
Leased
Properties
On
April 28, 2014, the Company executed and closed a 10 year lease agreement for 20 acres of an agricultural farming facility located
in South Florida following the approval of the so-called “Charlotte’s Web” legislation, aimed at decriminalizing
low grade marijuana specifically for the use of treating epilepsy and cancer patients. Pursuant to the lease agreement,
the Company maintains a first right of refusal to purchase the property for three years. The Company prepaid the first year lease
amount of $24,000.
The Company is currently in default of the lease agreement, as rents
have not been for the second year of the lease beginning May 2015.
On
July 11, 2014, the Company signed a ten year
lease agreement for an additional 40 acres
in Pueblo, Colorado. The lease requires monthly rent payments of $10,000 during the first year and is subject to a 2% annual increase
over the life of the lease. The lease also provides rights to 50 acres of certain tenant water rights for $50,000 annually plus
cost of approximately $2,400 annually. The Company paid the $50,000 in July 2014. The Company is currently in default of the lease
agreement, as rents have not been paid since February 2015.
ITEM
3. LEGAL PROCEEDINGS.
On
March 2, 2015, the Company, the Company’s CEO and the Company’s CFO at the time were named in a civil complaint filed
by Erick Rodriguez in the District Court in Clark County, Nevada. The complaint alleges that Mr. Rodriguez never received 250,000
shares of Series B preferred stock that were initially approved by the Board of Directors in 2012. Mr. Rodriguez resigned in June
2013, and the Company cancelled the issuance of the shares to Mr. Rodriguez on the Company’s books and records.
On May 5,
2015, the Company’s CEO and the Company’s former CFO were named in a civil complaint filed by Justin Braune in
the Circuit Court of Palm Beach County, Florida. The complaint alleges that the Company has not delivered to Mr. Braune
certain stock certificates. Mr. Braune resigned on November 4, 2015, and his resignation letter as filed on Form 8-K with the
SEC on November 9, 2015, included the statement from Mr. Braune that he was cancelling these certificates.
ITEM
4. MINE SAFETY DISCLOSURES
Not
applicable.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
Note
1 -
Organization
Business
Agritek
Holdings, Inc. (the “Company” or “Agritek”), formerly known as Mediswipe, Inc., and its wholly owned subsidiary,
Agritek Venture Holdings, Inc. (“AVHI”), acquires and leases real estate to licensed marijuana operators, including
providing complete turnkey growing space and related facilities to licensed marijuana growers and dispensary owners. Additionally,
the Company offers a variety of services and product lines to the medicinal marijuana sector including the distribution of hemp
based nutritional products and a line of innovative solutions for electronically processing merchant transactions.
The
Company does not grow, harvest, distribute or sell marijuana or any substances that violate the laws of the United States of America.
On
June 26, 2015, the Company filed with the Delaware Secretary of State the Amended and Restated Designation Preferences and Rights
(the “Certificate of Designation”) of Class B Preferred Stock (the “Series B Preferred Stock”). Pursuant
to the Certificate of Designation, 1,000 shares constitute the Series B Preferred Stock. The Series B Preferred Stock and any
accrued and unpaid dividends thereon shall, with respect to rights on liquidation, winding up and dissolution, rank senior to
the Company’s issued and outstanding common stock and Series A preferred stock.
The
Series
B
P
ref
e
r
red
S
tock
has
the
right to vote in aggregate, on all shareholder matters equal to 51% of the total vote, no matter how many shares of common stock
or other voting stock of the Company are issued or outstanding in the future.
The Series B
Preferred Stock has a right to vote on all matters presented or submitted to the Company’s stockholders for approval in
pari passu with the common stockholders, and not as a separate class. The holders of Series B Preferred Stock have the right to
cast votes for each share of Series B Preferred Stock held of record on all matters submitted to a vote of common stockholders,
including the election of directors. There is no right to cumulative voting in the election of directors. The holders of Series
B Preferred Stock vote together with all other classes and series of common stock of the Company as a single class on all actions
to be taken by the common stockholders except to the extent that voting as a separate class or series is required by law.
On
June 26, 2015, the Company issued 1,000 shares of Series B Preferred Stock to Mr. B. Michael Friedman resulting in Mr. Friedman
having majority control in determining the outcome of all corporate transactions subject to vote (super voting rights, non-convertible
securities), including the election of directors of the Company (see Note 8).
On
October 5, 2015, the Company filed an amendment with the Secretary of State Delaware to increase the Company’s authorized
common stock from 250,000,000 shares to 500,000,000 shares.
Note
2 –
Summary of Significant Account Policies
Basis
of Presentation and Principles of Consolidation
The
accompanying consolidated financial statements are prepared in accordance with Generally Accepted Accounting Principles in the
United States of America ("US GAAP"). The consolidated financial statements of the Company
include
the consolidated accounts of Agritek and its’ wholly owned subsidiaries AVHI and PPI. PPI, a Florida corporation, was originally
formed on July 1, 2013 as The American Hemp Trading Company, Inc. (“AHTC”) and on August 27, 2014, AHTC changed its’
name to PPI. All intercompany accounts and transactions have been eliminated in consolidation.
Cash
and Cash Equivalents
The
Company considers all highly liquid investments with an original term of three months or less to be cash equivalents.
Accounts
Receivable
The
Company records accounts receivable from amounts due from its customers upon the shipment of products. The allowance for losses
is established through a provision for losses charged to expenses. Receivables are charged against the allowance for losses when
management believes collectability is unlikely. The allowance is an amount that management believes will be adequate to absorb
estimated losses on existing receivables, based on evaluation of the collectability of the accounts and prior loss experience.
While management uses the best information available to make its evaluations, this estimate is susceptible to significant change
in the near term. As of December 31, 2015, based on the above criteria, the Company has an allowance for doubtful accounts of
$43,408.
Inventory
Inventory
consists of finished goods and is valued at the lower of cost or market value. Cost is determined using the first in first out
(FIFO) method. Provision for potentially obsolete or slow moving inventory is made based on management analysis or inventory levels
and future sales forecasts.
Deferred
Financing Costs
The
costs related to the issuance of debt are capitalized and amortized to interest expense using the effective interest method through
the maturities of the related debt.
Derivative
Financial Instruments
The
Company does not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. The Company evaluates
all of it financial instruments, including stock purchase warrants, to determine if such instruments are derivatives or contain
features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the
derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the
fair value reported as charges or credits to income.
For
option-based simple derivative financial instruments, the Company uses the Black-Scholes option-pricing model to value the derivative
instruments at inception and subsequent valuation dates. The classification of derivative instruments, including whether such
instruments should be recorded as liabilities or as equity, is re-assessed at the end of each reporting period.
Debt
Issue Costs and Debt Discount
The
Company may record debt issue costs and/or debt discounts in connection with raising funds through the issuance of debt. These
costs may be paid in the form of cash, or equity (such as warrants). These costs are amortized to interest expense over the life
of the debt. If a conversion of the underlying debt occurs, a proportionate share of the unamortized amounts is immediately expensed.
Original
Issue Discount
For
certain convertible debt issued, the Company may provide the debt holder with an original issue discount. The original
issue discount would be recorded to debt discount, reducing the face amount of the note and is amortized to interest expense over
the life of the debt.
Investment
of Non-Marketable Securities
The
Company’s investment in non-marketable securities consist of cash investments in a less than 10% interest in two privately
held companies that provide merchant processing services. Petrogress, Inc. (formerly 800 Commerce, Inc. and a subsidiary of the
Company through its’ deconsolidation in May 2012) derived substantially all of its’ revenues, through April 2015,
form these privately held companies.
Property
and Equipment
Property
and equipment are stated at cost, and except for land, depreciation is provided by use of a straight-line method over the estimated
useful lives of the assets. The Company reviews property and equipment for potential impairment whenever events or changes in
circumstances indicate that the carrying amounts of assets may not be recoverable. In November 2015, the Company was made aware
that the land transaction regarding 80 acres in Pueblo County, Colorado, may not have been properly deeded to the Company. The
company was a party to the land purchase, however, it was recently discovered, and the second party to the land contract never
filed the original quit claim deed on behalf of the Company, even though a copy of the notarized quit claim deed was sent to the
Company. To date, the Company has paid a total of $47,438.00 ($36,000 at closing) and is on the deed of trust of the property
with a remaining note balance of approximately $75,000 held by the original owner. Accordingly, until the deed is properly recorded,
the Company reduced the remaining balance of the note payable for the acquisition of the land of $74,313 and recorded a reserve
allowance for the remaining balance of the asset of $54,490. The estimated useful lives of property and equipment are as follows:
Furniture
and equipment 5 years
The
Company's property and equipment consisted of the following at December 31, 2015 and December 31, 2014:
|
|
2015
|
|
2014
|
Land
|
|
$
|
129,803
|
|
|
$
|
354,269
|
|
Allowance for land
loss, including note elimination of $74,313
|
|
|
(129,803
|
)
|
|
|
—
|
|
Furniture and equipment
|
|
|
13,829
|
|
|
|
13,829
|
|
Accumulated
depreciation
|
|
|
(4,742
|
)
|
|
|
(1,976
|
)
|
Balance
|
|
$
|
9,087
|
|
|
$
|
366,122
|
|
Depreciation
expense of $2,766 and $1,789 was recorded for the year ended December 31, 2015 and 2014, respectively.
Long-Lived
Assets
Long-lived
assets are reviewed for impairment when events or changes in circumstances indicate that the carrying amount of an asset may not
be recoverable. Based on events and changes in circumstances on June 30, 2015, the Company reviewed the carrying amount of goodwill
initially recorded from an acquisition in September 2014, and determined that the carrying amount may not be recoverable and accordingly
recognized an impairment loss of $192,849 for the year ended December 31, 2015. The Company also recorded a reserve for inventory
loss of $37,639 for the year ended December 31, 2015.
Revenue
Recognition
The
Company recognizes revenue in accordance with FASB ASC 605, Revenue Recognition. ASC 605 requires that four basic criteria are
met: (1) persuasive evidence of an arrangement exists, (2) delivery of products and services has occurred, (3) the fee is fixed
or determinable and (4) collectability is reasonably assured. The Company recognizes revenue during the month in which products
are shipped or commissions are earned. No revenue has been recognized from leasing arrangements to date.
Fair
Value of Financial Instruments
Fair
value measurements are determined under a three-level hierarchy for fair value measurements that prioritizes the inputs to valuation
techniques used to measure fair value, distinguishing between market participant assumptions developed based on market data obtained
from sources independent of the reporting entity (“observable inputs”) and the reporting entity’s own assumptions
about market participant assumptions developed based on the best information available in the circumstances (“unobservable
inputs”).
Fair
value is the price that would be received to sell an asset or would be paid to transfer a liability (i.e., the “exit price”)
in an orderly transaction between market participants at the measurement date. In determining fair value, the Company primarily
uses prices and other relevant information generated by market transactions involving identical or comparable assets (“market
approach”). The Company also considers the impact of a significant decrease in volume and level of activity for an asset
or liability when compared with normal activity to identify transactions that are not orderly.
The
highest priority is given to unadjusted quoted prices in active markets for identical assets (Level 1 measurements) and the lowest
priority to unobservable inputs (Level 3 measurements). Securities are classified in their entirety based on the lowest level
of input that is significant to the fair value measurement.
The three
hierarchy levels are defined as follows:
Level 1 – Quoted
prices in active markets that is unadjusted and accessible at the measurement date for identical, unrestricted assets or liabilities;
Level 2 – Quoted
prices for identical assets and liabilities in markets that are not active, quoted prices for similar assets and liabilities in
active markets or financial instruments for which significant inputs are observable, either directly or indirectly;
Level 3 – Prices
or valuations that require inputs that are both significant to the fair value measurement and unobservable.
Credit
risk adjustments are applied to reflect the Company’s own credit risk when valuing all liabilities measured at fair value.
The methodology is consistent with that applied in developing counterparty credit risk adjustments, but incorporates the Company’s
own credit risk as observed in the credit default swap market.
The
Company's financial instruments consist primarily of cash, accounts receivable, notes receivable, accounts payable and accrued
expenses, note payable and convertible debt. The carrying amounts of such financial instruments approximate their respective
estimated fair value due to the short-term maturities and approximate market interest rates of these instruments. The
estimated fair value is not necessarily indicative of the amounts the Company would realize in a current market exchange or from
future earnings or cash flows.
Income
Taxes
The
Company accounts for income taxes in accordance with ASC 740-10, Income Taxes. Deferred tax assets and liabilities are recognized
to reflect the estimated future tax effects, calculated at the tax rate expected to be in effect at the time of realization. A
valuation allowance related to a deferred tax asset is recorded when it is more likely than not that some portion of the deferred
tax asset will not be realized. Deferred tax assets and liabilities are adjusted for the effects of the changes in tax laws and
rates of the date of enactment.
ASC
740-10 prescribes a recognition threshold that a tax position is required to meet before being recognized in the financial statements
and provides guidance on recognition, measurement, classification, interest and penalties, accounting in interim periods, disclosure
and transition issues. Interest and penalties are classified as a component of interest and other expenses. To date, the Company
has not been assessed, nor paid, any interest or penalties.
Uncertain
tax positions are measured and recorded by establishing a threshold for the financial statement recognition and measurement of
a tax position taken or expected to be taken in a tax return. Only tax positions meeting the more-likely-than-not recognition
threshold at the effective date may be recognized or continue to be recognized. The Company’s tax years subsequent to 2005
remain subject to examination by federal and state tax jurisdictions.
Earnings
(Loss) Per Share
Earnings
(loss) per share are computed in accordance with ASC 260, "Earnings per Share". Basic earnings (loss) per share is computed
by dividing net income (loss), after deducting preferred stock dividends accumulated during the period, by the weighted-average
number of shares of common stock outstanding during each period. Diluted earnings per share is computed by dividing net income
by the weighted-average number of shares of common stock, common stock equivalents and other potentially dilutive securities,
if any, outstanding during the period. As of December 31, 2015 there were warrants to purchase 1,300,000
shares of common stock and the Company’s outstanding convertible debt is convertible into 546,802,924 shares of common
stock These amounts are not included in the computation of dilutive loss per share because their impact is antidilutive.
Accounting
for Stock-based Compensation
The
Company accounts for stock awards issued to non-employees in accordance with ASC 505-50, Equity-Based Payments to Non-Employees.
The measurement date is the earlier of (1) the date at which a commitment for performance by the counterparty to earn the equity
instruments is reached, or (2) the date at which the counterparty's performance is complete. Stock awards granted to non-employees
are valued at their respective measurement dates based on the trading price of the Company’s common stock and recognized
as expense during the period in which services are provided.
For
the years ended December 31, 2015 and December 31, 2014, the Company recorded stock and warrant based compensation of $163,436
and $379,000, respectively. (See Notes 7 and 8).
Use
of Estimates
The
preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States
of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the consolidated financial statements and the reported amount
of revenues and expenses during the reported period. Actual results could differ from those estimates.
Advertising
The
Company records advertising costs as incurred. For the years ended December 31, 2015 and December 31, 2014, advertising expense
was $37,685 and $72,091, respectively.
Note
3 –
Recent Accounting Pronouncements
Accounting
standards that have been issued or proposed by the FASB or other standards-setting bodies that do not require adoption until a
future date are not expected to have a material impact on the consolidated financial statements upon adoption.
Note
4 –
Impairment of Goodwill
On
September 12, 2014, the Company completed the asset acquisition of the entire line of products, technology and customers
of Dry Vapes Holdings, Inc.
The
Company recorded the acquisition using the acquisition method, which requires the Company to record the acquired assets and assumed
liabilities (if any) at their acquisition date fair values and record any excess of the consideration given, including liabilities
assumed (if any) over the fair value of the assets acquired as goodwill. The acquired assets consisted solely of inventory. The
transaction resulted in the Company recording goodwill of $192,849. Based on events and changes in circumstances on June 30, 2015,
the Company reviewed the carrying amount of the goodwill, and determined that the carrying amount may not be recoverable and accordingly
recognized an impairment loss of $192,849 for the year ended December 31, 2015.
Note
5 –
Sales Concentration and Concentration of Credit Risk
Cash
Financial instruments that potentially subject the Company to concentrations
of credit risk consist principally of cash. The Company maintains cash balances at one financial institution,
which is insured by the Federal Deposit Insurance Corporation (“FDIC”). The FDIC insured institution insures
up to $250,000 on account balances. The company maintains its’ cash balance at a large financial institution and has not
experienced any losses in such accounts.
Sales
and Accounts Receivable
Following
is a summary of customers who accounted for more than ten percent (10%) of the Company’s revenues for the years ended December
31, 2015 and 2014 and the accounts receivable balance as of December 31, 2015:
|
Customer
|
|
Sales
% Year Ended
December
31, 2015
|
|
Sales
% Year Ended
December
31, 2014
|
|
Accounts
Receivable
Balance
as of
December
31, 2015
|
|
A
|
|
|
|
—
|
|
|
|
24.7
|
%
|
|
$
|
—
|
|
|
B
|
|
|
|
—
|
|
|
|
21.5
|
%
|
|
$
|
—
|
|
|
C
|
|
|
|
—
|
|
|
|
18.2
|
%
|
|
$
|
—
|
|
Purchases
For
the year end December 31, 2014, the Company’s purchases were from two vendors related to the purchase of our tobacco product
line.
Note
6 –
Convertible Debt and Note Payable
2014
Convertible Note
In
January 2014, the Company entered into a Secured Promissory Note for $1,660,000 (the “2014 Company Note”) to Tonaquint,
Inc. (“Tonaquint”) which includes a purchase price of $1,500,000 and transaction costs of $160,000. On January 31,
2014, the Company received $300,000 of the purchase price. Tonaquint also issued to the Company 6 secured promissory notes, each
in the amount of $200,000 (the 2014 “Investor Notes”). All or any portion of the outstanding balance of the 2014 Investor
Notes may be prepaid, without penalty, along with accrued but unpaid interest at any time prior to maturity. The Company has no
obligation to pay Tonaquint any amounts on the unfunded portion of the 2014 Company Note. The 2014 Company Note bears interest
at 8% per annum (increases to 22% per annum upon an event of default) and is convertible into shares of the Company’s common
stock at Tonaquint’s option at a price of $0.55 per share, exercisable in seven tranches, consisting of a first tranche
of $340,000 of principal and any interest, fees costs or charges, and six additional tranches of $220,000 each, plus any interest,
costs, fees or charges.
Beginning
on the date that is six (6) months after the later of (i) the Issuance Date, and (ii) the date the Initial Cash Purchase Price
is paid to the Company (the “Initial Installment Date”), and on each applicable Installment Date thereafter, the Company
is to pay the Holder, the applicable Installment Amount due on such date. Ten Installment Amounts of $166,000 plus the sum of
any accrued and unpaid interest, fees, costs or charges may be made (a) in cash (a “Company Redemption”), (b) by converting
such Installment Amount into shares of Common Stock (a “Company Conversion”), or (c) by any combination of a Company
Conversion and a Company Redemption so long as the entire amount of such Installment Amount due shall be converted and/or redeemed
by the Company on the applicable Installment Date. The 2014 Company Note matured fifteen months after the Issuance Date.
During
the year ended December 31, 2014, the Company received an additional $800,000 of the purchase price and an additional $200,000
(including $21,188 of interest) during the year ended December 31, 2015. On December 16, 2015, the Company and AVHI, the Company’s
wholly owned subsidiary entered into a Deed in Lieu of Foreclosure Agreement (the “DLF Agreement”) with Tonaquint,
pursuant to which in exchange for the Company conveying its’ interest in the Company’s Nevada owned real estate (the
“Property”), Tonaquint agreed to refrain and forbear from exercising and enforcing its remedies under their 2014 Convertible
Note. Additionally, the Company received $25,000 and a reduction of the Note balance of $500,000. AVHI had a cost of approximately
$224,466 for the Property.
During
the year ended December 31, 2015, the Company recorded interest expense of $281,607, and increased accrued interest expense by
$281,607 for amounts due Tonaquint, pursuant to the 2014 Company Note. Additionally, as of the date of the DLF Agreement, the
Company and Tonaquint agreed to offset the remaining unpaid principal balance of the Investor Notes of $176,642 to the Note. The
parties further agreed that accrued and unpaid interest of $316,723 would be added to the Note and further agree that the Note
balance as the DLF Agreement the Note balance was $311,815, resulting in a net gain of debt forgiveness of $292,372. As of December
31, 2015, $311,815 of principal and accrued interest of $1,041 is outstanding on the 2014 Company Note.
A
summary of the Company Note balance as of December 31, 2015 is as follows:
|
|
2015
|
Beginning Balance
|
|
$
|
1,256,658
|
|
Accrued interest added to Note
|
|
|
316,723
|
|
Conversion of convertible notes
|
|
|
(584,925
|
)
|
Investor Notes applied to Note
|
|
|
(176,642
|
)
|
Property applied to Note
|
|
|
(224,466
|
)
|
Gain
on debt settlement
|
|
|
(277,533
|
)
|
Ending Balance
|
|
$
|
311,815
|
|
During
the year ended December 31, 2015, the Company issued the following shares of common stock upon the conversions of portions of
the 2014 Company Note:
|
Date
|
|
Principal
Conversion
|
|
Interest
Conversion
|
|
Total
Conversion
|
|
Conversion
Price
|
|
Shares
Issued
|
|
1/3/15
|
|
$
|
65,460
|
|
|
$
|
9,540
|
|
|
$
|
75,000
|
|
|
$
|
.045
|
|
|
|
1,665,445
|
|
|
1/28/15
|
|
$
|
54,123
|
|
|
$
|
8,377
|
|
|
$
|
62,500
|
|
|
$
|
.0334
|
|
|
|
1,869,187
|
|
|
2/20/15
|
|
$
|
55,901
|
|
|
$
|
9,099
|
|
|
$
|
65,000
|
|
|
$
|
.0244
|
|
|
|
2,668,309
|
|
|
3/13/15
|
|
$
|
60,000
|
|
|
$
|
—
|
|
|
$
|
60,000
|
|
|
$
|
.0244
|
|
|
|
2,463,045
|
|
|
3/31/15
|
|
$
|
66,555
|
|
|
$
|
8,445
|
|
|
$
|
75,000
|
|
|
$
|
.0125
|
|
|
|
5,985,634
|
|
|
5/5/15
|
|
$
|
66,731
|
|
|
$
|
8,269
|
|
|
$
|
75,000
|
|
|
$
|
.0125
|
|
|
|
6,008,171
|
|
|
6/2/15
|
|
$
|
67,277
|
|
|
$
|
7,723
|
|
|
$
|
75,000
|
|
|
$
|
.0095
|
|
|
|
7,917,238
|
|
|
6/29/15
|
|
$
|
67,483
|
|
|
$
|
7,517
|
|
|
$
|
75,000
|
|
|
$
|
.0055
|
|
|
|
13,678,643
|
|
|
7/29/15
|
|
$
|
29,368
|
|
|
$
|
7,262
|
|
|
$
|
36,630
|
|
|
$
|
.003663
|
|
|
|
10,000,000
|
|
|
8/13/15
|
|
$
|
27,473
|
|
|
$
|
—
|
|
|
$
|
27,473
|
|
|
$
|
.003663
|
|
|
|
7,500,000
|
|
|
10/16/15
|
|
$
|
10,549
|
|
|
$
|
13,924
|
|
|
$
|
24,473
|
|
|
$
|
.001003
|
|
|
|
24,400,000
|
|
|
11/16/15
|
|
$
|
14,005
|
|
|
$
|
6,792
|
|
|
$
|
20,797
|
|
|
$
|
.001
|
|
|
|
21,730,000
|
|
|
|
|
|
$
|
584,925
|
|
|
$
|
86,947
|
|
|
$
|
671,873
|
|
|
|
|
|
|
|
105,885,685
|
|
2015
Convertible Notes
On
March 2, 2015, the Company issued a Convertible Promissory Note for $79,000 to Vis Vires Group (“Vis Vires”). The
Company received net proceeds of $75,000 after debt issuance costs of $4,000 paid for lender legal fees. The Note matured on November
25, 2015 and can be converted at a 39% discount to the market price as defined in the Note. On September 3, 2015, Vis Vires converted
$10,000 of principal at a conversion price of $0.0019 and the Company issued 5,263,158 shares of common stock. On September 10,
2015, Vis Vires converted $19,800 of principal at a conversion price of $0.0012 and the Company issued 16,500,000 shares of common
stock. As of December 31, 2015, the principal balance of the Vis Vires note is $49,200.
On
March 27, 2015, the Company issued a Convertible Promissory Note for $27,000 to GW Holding Group, LLC (“GW”). On March
31, 2015, the Company received net proceeds of $25,000 after debt issuance costs of $2,000 paid for lender legal fees. The Note
matures March 27, 2016 and converts at a 42% discount to the market price as defined in the Note. On October 12, 2015, the Company
issued 4,494,567 shares of common stock upon the conversion of $3,500 of principal and $150 accrued and unpaid interest on the
2015 GW Note. The shares were issued at approximately $0.000812 per share. As of December 31, 2015, the principal balance of the
GW note is $23,500.
March
27, 2015, the Company issued a Convertible Promissory Note for $78,750 to LG Capital Funding, LLC (“LG”). The Company
received net proceeds of $75,000 after debt issuance costs of $3,750 paid for lender legal fees. The Note matures March 27, 2016
and converts at a 42% discount to the market price as defined in the Note. On October 1, 2015, the Company issued 3,524,027 shares
of common stock upon the conversion of $2,750 of principal and $112 accrued and unpaid interest on the 2015 LG Note. The shares
were issued at approximately $0.000812 per share. On October 13, 2015, the Company issued 5,995,275 shares of common stock upon
the conversion of $5,000 of principal and $216 accrued and unpaid interest on the 2015 LG Note. The shares were issued at approximately
$0.00087 per share. On November 5, 2015, the Company issued 9,036,379 shares of common stock upon the conversion of $5,500 of
principal and $265 accrued and unpaid interest on the 2015 LG Note. The shares were issued at approximately $0.000638 per share.
As of December 31, 2015, the principal balance of the LG Note is $65,500.
On
March 30, 2015,
the Company issued a Convertible Promissory
Note for $27,000 to Service Trading Company, LLC (“Service”). On April 6, 2015, the Company received net proceeds
of $25,000 after debt issuance costs of $2,000 paid for lender legal fees. The Note matures March 30, 2016 and converts at a 42%
discount to the market price as defined in the Note. On October 9, 2015, the Company issued 7,340,834 shares of common stock upon
the conversion of $4,500 of principal and $184 accrued and unpaid interest on the 2015 Service Note. The shares were issued at
approximately $0.000638 per share. As of December 31, 2015, the principal balance of the Service Note is $22,500.
The
debt issuance costs of $11,750 in the aggregate included in the 2015 Convertible Notes, will be amortized over the earlier of
the terms of the Note or any redemptions and accordingly, $10,187 has been expensed as debt issuance costs (included in interest
expense) for the year ended December 31, 2015. As of December 31, 2015, $160,700 of principal and accrued interest of $8,750 is
outstanding on the 2015 Convertible Notes, and the principal amount is carried at $133,480, net of a remaining note discount of
$27,220.
Among
other terms the 2015 Notes are due nine to twelve months from their issuance date, bearing interest at 8% per annum, payable in
cash or shares at a conversion price (the “Conversion Price”) for each share of common stock equal to 39% - 42% of
the average of the lowest three trading prices (as defined in the note agreements) per share of the Company’s common stock
for the ten to eighteen trading days immediately preceding the date of conversion. Upon the occurrence of an event of default,
as defined in the 2015 Convertible Notes, the Company was required to pay interest at 22% per annum and the holders could at their
option declare a Note, together with accrued and unpaid interest, to be immediately due and payable. In addition, the 2015 Convertible
Notes provide for adjustments for dividends payable other than in shares of common stock, for reclassification, exchange or substitution
of the common stock for another security or securities of the Company or pursuant to a reorganization, merger, consolidation,
or sale of assets, where there is a change in control of the Company.
The
Company determined that the conversion feature of the 2015 Convertible Notes represent an embedded derivative since the Notes
are convertible into a variable number of shares upon conversion. Accordingly, the 2015 Convertible Notes were not considered
to be conventional debt under EITF 00-19 and the embedded conversion feature was bifurcated from the debt host and accounted for
as a derivative liability. Accordingly, the fair value of these derivative instruments being recorded as a liability on the consolidated
balance sheet with the corresponding amount recorded as a discount to each Note. Such discount is being amortized from the date
of issuance to the maturity dates of the Notes. The change in the fair value of the liability for derivative contracts are recorded
in other income or expenses in the consolidated statements of operations at the end of each quarter, with the offset to the derivative
liability on the balance sheet. The embedded feature included in the 2015 Convertible Notes resulted in an initial debt discount
of $211,750, an initial derivative liability expense of $71,761 and an initial derivative liability of $283,511.
As
of December 31, 2015 the Company revalued the embedded conversion feature of the 2015 Convertible Notes and warrants (see Note
8). The fair value of the 2015 Convertible Notes was calculated at December 31, 2015 based on the Black Scholes method consistent
with the terms of the related debt.
A
summary of the derivative liability balance as of December 31, 2015 is as follows:
|
|
2015
|
Beginning Balance
|
|
$
|
—
|
|
Initial Derivative Liability
|
|
|
283,511
|
|
Fair Value Change
|
|
|
(40,845
|
)
|
Reduction for conversions
|
|
|
(75,652
|
)
|
Ending Balance
|
|
$
|
167,014
|
|
The
fair value at the commitment and re-measurement dates for the Company’s derivative liabilities were based upon the following
management assumptions as of December 31, 2015:
|
|
|
Commitment date
|
|
|
|
Remeasurement date
|
|
Expected dividends
|
|
|
-0-
|
|
|
|
-0-
|
|
Expected volatility
|
|
|
121%-194%
|
|
|
|
190%-239%
|
|
Expected term
|
|
|
3-12 months
|
|
|
|
3-6 months
|
|
Risk free interest
|
|
|
.06%-.27%
|
|
|
|
.02%-.16%
|
|
A
summary of the convertible notes payable balance as of December 31, 2015 is as follows:
|
|
2015
|
Beginning Balance
|
|
$
|
1,256,658
|
|
Convertible notes-newly issued
|
|
|
211,750
|
|
Accrued interest added to Note
|
|
|
333,562
|
|
Conversion of convertible notes
|
|
|
(635,975
|
)
|
Investor Notes applied to Note
|
|
|
(176,642
|
)
|
Property applied to Note
|
|
|
(224,466
|
)
|
Gain on debt settlement
|
|
|
(292,372
|
)
|
Unamortized discount
|
|
|
(27,220
|
)
|
Ending Balance
|
|
$
|
445,294
|
|
Note
Payable Land
On
March 18, 2014, in conjunction with the land purchase of 80 acres in Pueblo County, Colorado, the Company paid $36,000 cash and
entered into a promissory note in the amount of $85,750. The promissory note is being amortized on the basis of five (5) years,
with principal payments of $17,150 plus interest at 3.5% due annually on December 1 of each year. Payments begin December 1, 2014,
and shall be due on the first day of each succeeding December, with any balance of principal and accrued interest due December
1, 2020. On March 4, 2015, and May 4, 2015, the Company paid $9,000 and $2,437, respectively, of the December 1, 2014 amount.
As of September 30, 2015, the balance of note is $74,313, including a past due amount of $5,713 of the December 2014 amount due.
In November 2015, the Company was made aware that the land transaction regarding 80 acres in Pueblo County, Colorado, may
not have been properly deeded to the Company. The company was a party to the land purchase, however, it was recently discovered
the second party to the land contract never filed the original quit claim deed on behalf of the Company, even though a copy of
the notarized quit claim deed was sent to the Company. To date, the Company has paid a total of $47,438 ($36,000 at closing) and
is on the deed of trust of the property. Accordingly, until the deed is properly recorded, the Company reduced the remaining balance
of the note payable for the acquisition of the land of $74,313 and recorded a reserve allowance for the remaining balance of the
asset of $54,490.
Future
principle payments due on the Company’s convertible debt and note payable as of December 31, 2015, are as follows
Twelve months ending
December 31,
|
|
Amount
|
2016
|
|
$
|
472,514
|
|
Less current portion
|
|
|
445,294
|
|
Less discounts
|
|
|
27,220
|
|
Long term portion
|
|
$
|
-0-
|
|
Note
7 –
Related Party Transactions
Management
Fees and Stock Compensation Expense
Effective
January 1, 2013, the Company agreed to an annual compensation of $150,000 for its CEO, Mr. Michael Friedman (resigned March
20, 2015, re-appointed November 4, 2015), and $96,000 for the CFO, Mr. Barry Hollander (resigned September 15, 2015). For
2014, the Company and Mr. Hollander agreed that up to $5,000 per month can be paid in cash and the balance in restricted
shares of common stock. Effective March 20, 2015, Mr. Justin Braune was named CEO and President. Mr. Braune also was
appointed to the Board of Directors. B. Michael Friedman resigned his role as CEO and also from the Board of Directors. The
Company agreed to an annual compensation of $100,000 for Mr. Braune in his role of CEO and Director of the Company and to
issue Mr. Braune 15,000,000 shares of restricted common stock. The Company also initially issued Mr. Braune 12,500,000 shares
of common stock on October 13, 2015. On October 16, 2015, Mr. Braune advised the Company and the Company’s transfer
agent at the time to cancel the shares. Mr. Braune resigned from the board of directors and as CEO on November 4, 2015,
and agreed to cancel the 15,000,000 shares in his letter of resignation.
For
the years ended December 31, 2015 and 2014, the Company recorded expenses to its officers the following amounts included in Administrative
and Management Fees in the consolidated statements of operations, included herein:
|
|
|
|
|
|
2015
|
|
|
|
2014
|
|
Mr. Braune
|
|
$
|
62,821
|
|
|
$
|
—
|
|
Mr. Friedman
|
|
|
62,500
|
|
|
|
150,000
|
|
Mr. Hollander
|
|
|
68,000
|
|
|
|
96,000
|
|
Total
|
|
$
|
193,321
|
|
|
$
|
246,000
|
|
As
of December 31, 2015 and 2014, the Company owed the following amounts, included in deferred compensation on the Company’s
consolidated balance sheet:
|
|
|
|
|
|
|
2015
|
|
2014
|
Mr. Friedman
|
|
$
|
8,580
|
|
|
$
|
80,082
|
|
Mr. Braune
|
|
|
16,667
|
|
|
|
—
|
|
Mr. Hollander
|
|
|
12,731
|
|
|
|
1,579
|
|
Total
|
|
$
|
37,978
|
|
|
$
|
81,661
|
|
On
April 14, 2015, the Company appointed Dr. Stephen Holt to the Advisory Board of the Board of Directors of the Company. The Company
issued 5,000,000 shares of restricted common stock to Dr. Holt for his appointment. The Company valued the 5,000,000 shares of
common stock at $100,000 ($0.02 per share, the market price of the common stock on the grant date) as stock compensation expense
for the year ended December 31, 2015. Additionally, the Company agreed the advisor shall receive a non-qualified stock option
to purchase 1,000,000 shares (“Option Shares”) of the Company’s common stock at an exercise price equal to $0.05
per share. 400,000 Option Shares vested immediately and the remaining 600,000 Option Shares vest over 12 months. Accordingly,
as of December 31, 2015, 850,000 option shares have vested and the Company has recorded $13,436 for the year ended December 31,
2015 in stock compensation expense.
Effective
June 26, 2015, the Company issued 1,000 shares of Class B Preferred Stock (super voting rights, non-convertible securities) to
Mr. Friedman, resulting in Mr. Friedman having majority control in determining the outcome of all corporate transactions subject
to vote, including the election of officers.
On
October 13, 2015, the Company issued 12,500,000 shares of common stock to Mr. Friedman for services. The Company valued the shares
of common stock at $25,000 ($0.002 per share, the market price of the common stock on the grant date) as stock compensation expense
for the year ended December 31, 2015.
On October 13, 2015, the Company
issued 12,500,000 shares of common stock to Mr. Braune for services. The Company valued the common stock at $25,000 ($0.002
per share, the market price of the common stock on the grant date) as stock compensation expense for the year ending
December, 31 2015. On October 16, 2015, Mr. Braune adviseed the Company and the Company’s transfer agent at the time to
cancel the shares. Since then, Mr. Braune is claiming ownership of the shares, which the Company disputes.
On
December 31, 2014, the Company issued 17,226,778 shares of restricted common stock to Mr. Friedman upon the conversion of 450,000
shares of Class B Preferred Stock.
On
December 31, 2014, the Company issued 1,230,484 shares of restricted common stock to Venture Equity upon the conversion of 50,000
shares of Class B Preferred Stock.
On
January 13, 2014, the Company issued 545,454 shares of common stock to Venture Equity, LLC, (“Venture Equity”) a Florida
limited liability Company, controlled by the Company’s former CFO, upon the conversion of $60,000 of accrued management
fees. The shares were issued at $0.11 per share, the market price of the common stock on December 31, 2013, the date on which
the board of directors approved the issuance. On December 31, 2014, the Company issued 444,444 shares of restricted common stock
to Venture Equity, upon the conversion of $40,000 of accrued and unpaid management fees as of December 31, 2014, the date on which
the board of directors approved the issuance. The shares were issued at $0.09 per share, the average market price of the common
stock for the period.
Amounts
Due from 800 Commerce, Inc.
800
Commerce, Inc., a commonly controlled entity until February 29, 2016, owed Agritek $282,947 and $236,759 as of December 31, 2015
and 2014, respectively, as a result of advances received from or payments made by Agritek on behalf of 800 Commerce. These advances
are non-interest bearing and are due on demand and are included in Due from Related Party on the balance sheet herein. In February
2016, the Company entered into a Debt Settlement Agreement (the “Settlement Agreement”) with 800 Commerce, Inc. (now
known as Petrogress, Inc.) whereby the Company accepted 1,101,642 shares of common stock of Petrogress in settlement of the amount
due. Based on the market value of the Petrogress common stock on the date of the Settlement Agreement, the Company recognized
a loss of $266,422 for the year ended December 31, 2015.
Note
8 –
Common and Preferred Stock
Common
Stock
2015
Issuances
During
the year ended December 31, 2015, the Company issued the following shares of common stock upon the conversions of portions of
the 2014 Company Note and portions of the 2015 Convertible Notes:
Date
|
|
Principal
Conversion
|
|
Interest
Conversion
|
|
Total
Conversion
|
|
Conversion
Price
|
|
Shares
Issued
|
|
Issued to
|
|
1/3/15
|
|
$
|
65,460
|
|
|
$
|
9,540
|
|
|
$
|
75,000
|
|
|
$
|
.045
|
|
|
|
1,665,445
|
|
|
Tonaquint
|
|
1/28/15
|
|
$
|
54,123
|
|
|
$
|
8,377
|
|
|
$
|
62,500
|
|
|
$
|
.0334
|
|
|
|
1,869,187
|
|
|
Tonaquint
|
|
2/20/15
|
|
$
|
55,901
|
|
|
$
|
9,099
|
|
|
$
|
65,000
|
|
|
$
|
.0244
|
|
|
|
2,668,309
|
|
|
Tonaquint
|
|
3/13/15
|
|
$
|
60,000
|
|
|
$
|
—
|
|
|
$
|
60,000
|
|
|
$
|
.0244
|
|
|
|
2,463,045
|
|
|
Tonaquint
|
|
3/31/15
|
|
$
|
66,555
|
|
|
$
|
8,445
|
|
|
$
|
75,000
|
|
|
$
|
.0125
|
|
|
|
5,985,634
|
|
|
Tonaquint
|
|
5/5/15
|
|
$
|
66,731
|
|
|
$
|
8,269
|
|
|
$
|
75,000
|
|
|
$
|
.0125
|
|
|
|
6,008,171
|
|
|
Tonaquint
|
|
6/2/15
|
|
$
|
67,277
|
|
|
$
|
7,723
|
|
|
$
|
75,000
|
|
|
$
|
.0095
|
|
|
|
7,917,238
|
|
|
Tonaquint
|
|
6/29/15
|
|
$
|
67,483
|
|
|
$
|
7,517
|
|
|
$
|
75,000
|
|
|
$
|
.0055
|
|
|
|
13,678,643
|
|
|
Tonaquint
|
|
7/29/15
|
|
$
|
29,368
|
|
|
$
|
7,262
|
|
|
$
|
36,630
|
|
|
$
|
.003663
|
|
|
|
10,000,000
|
|
|
Tonaquint
|
|
8/13/15
|
|
$
|
27,473
|
|
|
$
|
—
|
|
|
$
|
27,473
|
|
|
$
|
.003663
|
|
|
|
7,500,000
|
|
|
Tonaquint
|
|
9/3/15
|
|
$
|
10,000
|
|
|
$
|
—
|
|
|
$
|
10,000
|
|
|
$
|
.0019
|
|
|
|
5,263,158
|
|
|
Vis Vires
|
|
9/10/15
|
|
$
|
19,800
|
|
|
$
|
—
|
|
|
$
|
19,800
|
|
|
$
|
.00083
|
|
|
|
16,500,000
|
|
|
Vis Vires
|
|
10/1/15
|
|
$
|
2,750
|
|
|
$
|
112
|
|
|
$
|
2,862
|
|
|
$
|
.000812
|
|
|
|
3,524,027
|
|
|
LG
|
|
10/9/15
|
|
$
|
4,500
|
|
|
$
|
183
|
|
|
$
|
4,683
|
|
|
$
|
.000638
|
|
|
|
7,340,834
|
|
|
Service
|
|
10/12/15
|
|
$
|
3,500
|
|
|
$
|
150
|
|
|
$
|
3,650
|
|
|
$
|
.000812
|
|
|
|
4,494,567
|
|
|
GW
|
|
10/13/15
|
|
$
|
5,000
|
|
|
$
|
216
|
|
|
$
|
5,216
|
|
|
$
|
.00087
|
|
|
|
5,995,275
|
|
|
LG
|
|
10/16/15
|
|
$
|
10,549
|
|
|
$
|
13,924
|
|
|
$
|
24,473
|
|
|
$
|
.001003
|
|
|
|
24,400,000
|
|
|
Tonaquint
|
|
11/6/15
|
|
$
|
5,500
|
|
|
$
|
265
|
|
|
$
|
5,765
|
|
|
$
|
.000638
|
|
|
|
9,036,379
|
|
|
LG
|
|
11/16/15
|
|
$
|
14,005
|
|
|
$
|
6,792
|
|
|
$
|
20,797
|
|
|
$
|
.001
|
|
|
|
21,730,000
|
|
|
Tonaquint
|
|
|
|
|
$
|
635,975
|
|
|
$
|
87,873
|
|
|
$
|
723,848
|
|
|
|
|
|
|
|
158,039,912
|
|
|
|
In
addition to the above during the year ended December 31, 2015, the Company:
On
October 13, 2015, the Company issued 12,500,000 shares of common stock to Mr. Friedman for services. The Company valued the shares
of common stock at $25,000 ($0.002 per share, the market price of the common stock on the grant date) as stock compensation expense
for the year ended December 31, 2015.
On October 13, 2015, the Company
issued 12,500,000 shares of common stock to Mr. Braune for services. The Company valued the common stock at $25,000 ($0.002
per share, the market price of the common stock on the grant date) as stock compensation expense for the year ending
December, 31 2015. On October 16, 2015, Mr. Braune adviseed the Company and the Company’s transfer agent at the time to
cancel the shares. Since then, Mr. Braune is claiming ownership of the shares, which the Company disputes.
On
April 14, 2015, the Company appointed Dr. Stephen Holt to the Advisory Board of the Board of Directors of the Company. The Company
issued 5,000,000 shares of restricted common stock to Dr. Holt for his appointment.
On
March 20, 2015, the Company issued 15,000,000 shares of common stock to the Company’s CEO in connection with an employment
and board of director’s agreement naming Mr. Braune as CEO, President and a member of our Board of Directors. The shares
of common stock were to vest as follows: 5,000,000, shares on the six month anniversary of the Agreement and 10,000,000 shares
on the one year anniversary of the Agreement. Mr. Braune resigned from the board of directors and as CEO on November 4, 2015,
and agreed to cancel the 15,000,000 shares in his letter of resignation.
2014
Issuances
In
January 2014 the Company issued in the aggregate 8,467,388 shares of common stock to Typenex upon the conversion of $523,564 of
the Company Note and accrued and unpaid interest of $3,716. The shares were issued at approximately $0.06227 per share.
On
January 13, 2014, the Company issued 545,454 shares of common stock to Venture Equity upon the conversion of $60,000 of accrued
management fees. The shares were issued at $0.11 per share, the market price of the common stock on December 31, 2013.
On
January 14, 2014, the Company issued 2,460,968 shares of common stock upon the conversion of 100,000 shares of Class B Preferred
Stock.
On
January 30, 2014, February 3, 2014 and February 5, 2014, the Company issued in the aggregate 369,420 shares of common stock to
Asher upon the conversion of $65,000 of the 2013 Notes and accrued and unpaid interest of $2,600. The shares were issued at approximately
$0.18299.
In
March 2014, the Company issued in the aggregate 843,654 shares of common stock to Typenex upon the conversion of $116,611 of the
Company note and accrued and unpaid interest. The shares were issued at approximately $0.1382 per share.
On
March 17, 2014, the Company issued 4,312,420 shares of common stock upon the conversion of 150,000 shares of Class B Preferred
Stock.
On
March 31, 2014, the Company issued 56,948 shares of common stock to James Canton upon the conversion of $25,000 of accrued stock
compensation.
On
April 17, 2014, the Company issued 188,088 shares of common stock in satisfaction of $36,000 of the October 2013 Asher Note. The
shares were issued at approximately $0.19 per share.
On
April 20, 2014, the Company issued 202,867 shares of common stock in satisfaction of $34,000 of the October 2013 Asher convertible
note and accrued and unpaid interest of $2,800. The shares were issued at approximately $0.18 per share.
On
July 22, 2014, the Company issued 150,000 shares of Company common stock to
Mr. Bartoletta
as an advisor to the Board of the Directors of the Company. The Company recorded an expense of $33,000 (based on the market price
of the Company’s common stock of $0.22 per share) and is included in professional and consulting fees in the consolidated
statements of operations for the year ended December 31, 2014, respectively.
On
August 6, 2014, the Company issued 625,978 shares of common stock upon the conversion of $19,933 of principal of the 2014 Company
Note and $80,067 of accrued and unpaid interest. The shares were issued at approximately $0.16 per share.
On
September 5, 2014, the Company issued 871,460 shares of common stock upon the conversion of $88,804 of principal of the 2014 Company
Note and $11,196 of accrued and unpaid interest. The shares were issued at approximately $0.115 per share.
On
September 18, 2014, the Company issued 208,333 shares of common stock to James Canton upon the conversion of $25,000 of accrued
stock compensation.
On
September 18, 2014, the Company issued 1,300,000 shares of common stock to Philip Johnston pursuant to a consulting agreement
for services including but not limited to business modeling and strategies, strategic alliances, introduction to investment bankers,
identify property acquisitions for agricultural use in Canada and to identify retail chains/outlets for wellness products throughout
Canada.
The Company recorded an expense of $156,000 (based on the market price of the Company’s
common stock of $0.12 per share) and is included in professional and consulting fees in the consolidated statements of operations
for the year ended December 31, 2014, respectively.
On
September 18, 2014, the Company issued in the aggregate 1,500,000 shares of common stock pursuant to the APA for the acquisition
of Dry Vapes Holdings, Inc. The shares were valued at $0.12 per share.
On
October 13, 2014, the Company issued 562,272 shares of common stock upon the conversion of $38,745 of principal of the 2014 Company
Note and $11,255 of accrued and unpaid interest. The shares were issued at approximately $0.089 per share.
On
October 21, 2014, the Company issued 2,011,142 shares of common stock upon the conversion of $89,369 of principal of the 2014
Company Note and $10,631 of accrued and unpaid interest. The shares were issued at approximately $0.05 per share.
On
October 21, 2014 the Company issued 735,895 shares of common stock to a consultant for investor relation services.
The
Company recorded an expense of $90,000 (based on the market price of the Company’s common stock of approximately $0.12 per
share) and is included in professional and consulting fees in the consolidated statements of operations for the year ended December
31, 2014, respectively.
On
November 11, 2014, the Company issued 1,541,163 shares of common stock upon the conversion of $76,483 of principal of the 2014
Company Note and $147 of accrued and unpaid interest. The shares were issued at approximately $0.05 per share.
On
December 5, 2014, the Company issued 1,712,241 shares of common stock upon the conversion of $90,007 of principal of the 2014
Company Note and $9,993 of accrued and unpaid interest. The shares were issued at approximately $0.058 per share.
On
December 31, 2014, the Company issued 17,226,778 shares of restricted common stock to Mr. Friedman upon the conversion of 450,000
shares of Class B Preferred Stock.
On
December 31, 2014, the Company issued 1,230,484 shares of restricted common stock to Venture Equity upon the conversion of 50,000
shares of Class B Preferred Stock. The Company also issued Venture Equity 444,444 shares of restricted common stock for accrued
and unpaid management fees of $40,000 owed to Venture Equity.
On
December 31, 2014, the Company issued 277,778 shares of common stock to James Canton upon the conversion of $25,000 of accrued
stock compensation.
Previously
the Company appointed Mr. James Canton to be an advisor to the Company’s Board of Directors. In April 2013, the Company
agreed to issue to Mr. Canton 200,000 shares of common stock, a warrant to purchase 300,000 shares of common stock at an exercise
price of $0.50 per share with an expiration date on the third year anniversary of the grant, and $25,000 to be paid in shares
of common stock to be issued at the end of each calendar quarter beginning on June 30, 2013 and ending on the earlier of March
31, 2015 (the term of Canton’s advisor role) or the date Canton is no longer serving as an advisor to the board of directors.
The Company included $100,000 in stock based compensation expense for the year ended December 31, 2014. As of December 31, 2015,
the Company owed Mr. Canton $25,000, which is included in accounts payable and accrued expenses on the consolidated balance sheet
herein.
P
referred
Stock
On
June 26, 2015, the Company filed with the Delaware Secretary of State the Amended and Restated Designation Preferences and Rights
(the “Certificate of Designation”) of Class B Preferred Stock (the “Series B Preferred Stock”). Pursuant
to the Certificate of Designation, 1,000 shares constitute the Series B Preferred Stock. The Series B Preferred Stock and any
accrued and unpaid dividends thereon shall, with respect to rights on liquidation, winding up and dissolution, rank senior to
the Company’s issued and outstanding common stock and Series A preferred stock.
The
Series
B
P
ref
e
r
red
S
tock
has
the
right to vote in aggregate, on all shareholder matters equal to 51% of the total vote, no matter how many shares of common stock
or other voting stock of the Company are issued or outstanding in the future.
The Series B
Preferred Stock has a right to vote on all matters presented or submitted to the Company’s stockholders for approval in
pari passu with the common stockholders, and not as a separate class. The holders of Series B Preferred Stock have the right to
cast votes for each share of Series B Preferred Stock held of record on all matters submitted to a vote of common stockholders,
including the election of directors. There is no right to cumulative voting in the election of directors. The holders of Series
B Preferred Stock vote together with all other classes and series of common stock of the Company as a single class on all actions
to be taken by the common stockholders except to the extent that voting as a separate class or series is required by law.
On
June 26, 2015, the Company issued 1,000 shares of Class B Preferred Stock. The Company estimated the fair value of the shares
of the Series B Preferred Stock (super voting rights, non-convertible securities) at $276,300 for purposes of solely determining
the proper accounting treatment and valuation in accordance with ASC 820, Fair Value in Financial Instruments. The Company recorded
$40,000 as payment towards accrued and unpaid fees owed Mr. Friedman and $236,300 as a loss on settlement of debt extinguishment.
As
of December 31, 2015 and 2014, there were 1,000 and -0- shares of Class B Preferred Stock outstanding, respectively.
Warrants
On
April 14, 2015, in connection with the appointment of Dr. Stephen Holt to the advisory board, the Company agreed the advisor shall
receive a non-qualified stock option to purchase 1,000,000 shares (“Option Shares”) of the Company’s common
stock at an exercise price equal to $0.05 per share and expiring April 14, 2018. Option Shares of 400,000 vested immediately and
50,000 Option Shares vest each month form April 2015 through March 2016. Accordingly, as of December 31, 2015, 850,000 Option
Shares have vested and the Company recorded $13,436 as stock compensation expense, based on Black-Scholes.
On
April 26, 2013 and in connection with the appointment of Mr. James Canton to the Company’s advisory board, the Company issued
a warrant to Mr. Canton to purchase 300,000 shares of common stock. The warrant has an exercise price of $0.50 per share, remains
outstanding and expires April 26, 2016.
Additionally,
the Company also evaluated all outstanding warrants to determine whether these instruments may be tainted. All warrants outstanding
were considered tainted as a result of the Company not having reserved the underlying shares of common stock of the warrants.
The Company valued the embedded derivatives within the warrants using the Black-Scholes valuation model. In 2015, the Company
estimated the fair value of the derivative using the Black-Scholes valuation method with assumptions including: (1) term of .29
to 3.0 years; (2) a computed volatility rate of 127% to 239%; (3) a discount rate of .24% to 1.091%; and (4) zero dividends. The
valuation of $10,478 of these embedded derivatives was initially recorded as an expense and based on the fair value as of December
31, 2015, the Company reduced the liability by $9,545 with an offsetting gain on derivative liability.
Note
9 –
Income Taxes
Deferred
income taxes reflect the net tax effects of operating loss and tax credit carry forwards and temporary differences between carrying
amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. 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 temporary differences representing net future deductible amounts become deductible.
Due to the uncertainty of the Company’s ability to realize the benefit of the deferred tax assets, the deferred tax assets
are fully offset by a valuation allowance at December 31, 2015 and 2014.
Income
tax expense for 2015 and 2014 is as follows:
|
|
2015
|
|
2014
|
|
|
|
|
|
Current:
|
|
|
|
|
|
|
|
|
Federal
|
|
$
|
—
|
|
|
$
|
—
|
|
State
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
Deferred:
|
|
|
|
|
|
|
|
|
Federal
|
|
$
|
(657,937
|
)
|
|
$
|
(682,302
|
)
|
State
|
|
|
(70,244
|
)
|
|
|
(72,846
|
)
|
Change in Valuation allowance
|
|
|
728,181
|
|
|
|
755,148
|
|
|
|
$
|
—
|
|
|
$
|
—
|
|
The
following is a summary of the Company’s deferred tax assets at December 31, 2015 and 2014:
|
|
2015
|
|
2014
|
|
|
|
|
|
|
|
|
|
Deferred Tax Assets:
|
|
|
|
|
|
|
|
|
Net operating losses
|
|
$
|
1,414,628
|
|
|
$
|
1,005,711
|
|
Stock compensation
|
|
|
1,632,947
|
|
|
|
1,491,934
|
|
Debt discounts and derivatives
|
|
|
277,597
|
|
|
|
199,228
|
|
Other
|
|
|
120,990
|
|
|
|
20,487
|
|
Net deferred tax assets
|
|
|
3,446,162
|
|
|
|
2,717,360
|
|
Valuation allowance
|
|
|
(3,446,162
|
)
|
|
|
(2,717,360
|
)
|
|
|
$
|
—
|
|
|
$
|
—
|
|
A
reconciliation between the expected tax expense (benefit) and the effective tax rate for the years ended December 31, 2015 and
2014 are as follows:
|
|
2015
|
|
2014
|
|
|
|
|
|
|
|
|
|
Statutory federal income tax rate
|
|
|
(34.00
|
%)
|
|
|
(34.00
|
%)
|
State taxes, net of federal income tax
|
|
|
(3.63
|
%)
|
|
|
(3.63
|
%)
|
Effect of change in valuation allowance
|
|
|
—
|
|
|
|
—
|
|
Non-deductible expenses
|
|
|
37.63
|
%
|
|
|
37.63
|
%
|
|
|
|
0
|
%
|
|
|
0
|
%
|
As
of December 31, 2015, the Company had a tax net operating loss carry forward of approximately $3,759,000. Any unused portion of
this carry forward expires in 2030. Utilization of this loss may be limited in the event of an ownership change pursuant to IRS
Section 382.
Note
10 –
Commitments and Contingencies
Office
Space
Effective
April 1, 2014, the Company entered into a rent sharing agreement for the use of 1,300 square feet with a company controlled by
the Company’s CFO. The Company agreed to pay $1,350 per month for the space. The Company terminated the agreement in September
2015.
In
April 2014, the Company entered into a ten year sublease agreement for the use of up to 7,500 square feet with a
Colorado
based oncology clinical trial and drug testing company and facility presently doing cancer research and testing for established
pharmaceutical companies seeking FDA approval for new drugs
. Pursuant to the lease, as amended, the Company agreed to pay
$3,500 per month for the space, and it will be utilized to market, sell and distribute products to Colorado dispensaries. The
Company is currently in default of the lease.
Effective
April 10, 2015, the Company entered into a four month lease agreement for the use of 170 square feet in California, for office
space for our CEO. The Company agreed to pay $1,300 for the use of the space. The agreement expired in August 2015.
For
the years ended December 31, 2015 and 2014, the Company recorded rent expense of $72,936 and $63,489, respectively.
On
April 10, 2015, the Company entered into a Consulting Agreement (the “Agreement”) with Windsor McKenna (the “Consultant”).
Pursuant to the Agreement, the Consultant will provide professional marketing and strategy consulting services to the Company
for a one year period unless terminated by either party with a 30-day written notice. The Company will compensate the Consultant
a one-time fee of $9,000 plus $2,500 in additional costs for travel during Phase 1, expected to be 30-45 days, $8,000 a month
for the following 3 months and $10,000 a month for the remainder of the term of the Agreement.
On
May 29, 2015, the Company entered into a Contract Services Agreement (the “Services Agreement”) with Kazzlo International,
LLC (“Kazzlo”). Pursuant to the Services Agreement, Kazzlo will test, develop and deploy a new, responsive website
to the Company for a one year period unless terminated by either party with a 10 day written notice. The Company will compensate
Kazzlo at a rate of $40 per hour, not to exceed $7,000 for the website development.
Leased
Properties
On
April 28, 2014, the Company executed and closed a 10 year lease agreement for 20 acres of an agricultural farming facility located
in South Florida following the approval of the so-called “Charlotte’s Web” legislation, aimed at decriminalizing
low grade marijuana specifically for the use of treating epilepsy and cancer patients. Pursuant to the lease agreement,
the Company maintains a first right of refusal to purchase the property for three years. The Company prepaid the first year lease
amount of $24,000 and based on the straight line expense over the term of the lease, the Company has recorded $38,244 and $25,496
of expense (included in leased property expenses) for the years ended December 31, 2015 and 2014, respectively.
The
Company is currently in default of the lease agreement, as rents have not been for the second year of the lease beginning May
2015.
On
July 11, 2014, the Company signed a ten year
lease agreement for an additional 40 acres
in Pueblo, Colorado. The lease requires monthly rent payments of $10,000 during the first year and is subject to a 2% annual increase
over the life of the lease. The lease also provides rights to 50 acres of certain tenant water rights for $50,000 annually plus
cost of approximately $2,400 annually. The Company paid the $50,000 in July 2014. Based on the straight line expense over the
lease term the Company has recorded $158,485 and $77,667 of expense for the years ended December 31, 2015 and 2014, respectively,
(included in leased property expenses) related to the land and water rights. The Company is currently in default of the lease
agreement, as rents have not been paid since February 2015.
Future
rent payments for the next five years and thereafter are as follows:
Twelve months ending December 31,
|
|
Amount
|
|
2016
|
|
|
$
|
152,460
|
|
|
2017
|
|
|
|
157,832
|
|
|
2018
|
|
|
|
163,544
|
|
|
2019
|
|
|
|
169,626
|
|
|
2020
|
|
|
|
176,112
|
|
|
Thereafter
|
|
|
|
655,490
|
|
|
|
|
|
$
|
1,475,065
|
|
Note
11 –
Going Concern
The
accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern. As of
December 31, 2015 the Company had an accumulated deficit of $13,405,211
and working capital deficit
of $925,820. These conditions raise substantial doubt about the Company's ability to continue as a going concern.
The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Note
12 –
Segment Reporting
Description
of Segments
During
the years ended December 31, 2015 and 2014, the Company operated in one reportable segment, wholesale sales.
Note
13 –
Subsequent Events
2016
Debt Purchase Agreements
On
January 6, 2016, the Company accepted and agreed to a Debt Purchase Agreement (the “DPA”), whereby LG Capital Funding,
LLC (“LG”) acquired the 2015 convertible promissory note from Vis Vires. The Company issued an 8% Replacement Note
to LG for $53,613 (the “First Replacement Note”). The First Replacement Note is due January 5, 2017 and is convertible
into shares of the Company’s common stock at any time at the discretion of LG at a variable conversion price (“VCP”).
The VCP is calculated as the lowest trading price during the eighteen (18) trading days immediately prior to the conversion date
multiplied by fifty eight percent (58%), representing a forty two percent (42%) discount.
On
January 19, 2016, the Company accepted and agreed to a DPA, whereby LG acquired $157,500 of the Tonaquint 2014 Convertible Note
in exchange for $75,000. The Company issued an 8% Replacement Note to LG for $157,500 (the “Second Replacement Note”).
The Second Replacement Note is due January 19, 2017 and is convertible into shares of the Company’s common stock at any
time at the discretion of LG at a VCP. The VCP is calculated as the lowest trading price during the eighteen (18) trading days
immediately prior to the conversion date multiplied by fifty eight percent (58%), representing a forty two percent (42%) discount.
On
January 19, 2016, the Company accepted and agreed to a DPA, whereby Cerebrus Finance Group, LTD (“Cerebrus”) acquired
$156,749.09 of the Tonaquint 2014 Convertible Note in exchange for $75,000. The Company issued an 8% Replacement Note to Cerebrus
for $156,749.09 (the “Third Replacement Note”). The Third Replacement Note is due January 19, 2017 and is convertible
into shares of the Company’s common stock at any time at the discretion of LG at a VCP. The VCP is calculated as the lowest
trading price during the eighteen (18) trading days immediately prior to the conversion date multiplied by fifty eight percent
(58%), representing a forty two percent (42%) discount.
The
LG DPA and the Cerebrus DPA resulted in the Tonaquint Note being paid in full, accordingly as of January 19, 2016, the Company
does not owe any amounts to Tonaquint.
2016
Convertible Notes
On
January 19, 2016, the Company completed the closing of a private placement financing transaction with LG, pursuant to a Securities
Purchase Agreement (the “LG Purchase Agreement”). Pursuant to the LG Purchase Agreement, LG purchased an 8% Convertible
Debenture (the “LG Debenture”) in the aggregate principal amount of $76,080, and delivered on January 31, 2016, gross
proceeds of $62,500 excluding transaction costs, fees, and expenses.
On
January 19, 2016, the Company completed the closing of a private placement financing transaction with Cerebrus, pursuant to a
Securities Purchase Agreement (the “Cerebrus Purchase Agreement”). Pursuant to the Cerebrus Purchase Agreement, Cerebrus
purchased an 8% Convertible Debenture (the “Cerebrus Debenture”) in the aggregate principal amount of $34,775, and
delivered on January 25, 2016, gross proceeds of $25,000 excluding transaction costs, fees, and expenses.
On
March 23, 2016, the Company completed the closing of a private placement financing transaction with Cerebrus, pursuant to a Securities
Purchase Agreement (the “Cerebrus Purchase Agreement”). Pursuant to the Cerebrus Purchase Agreement, Cerebrus purchased
an 8% Convertible Debenture (the “Cerebrus Debenture”) in the aggregate principal amount of $22,000, and delivered
on March 28, 2016, gross proceeds of $20,000 excluding transaction costs, fees, and expenses.
On
April 15, 2016, the Company completed the closing of a private placement financing transaction with LG. Pursuant to the LG Purchase
Agreement, LG purchased an 8% Convertible Debenture in the aggregate principal amount of $65,625, and delivered on April 15, 2016,
gross proceeds of $62,500 excluding transaction costs, fees, and expenses.
Principal
and interest on the above three is due and payable one year from their respective funding date, and the LG and Cerebrus Debentures
are convertible into shares of the Company’s common stock at any time at the discretion of LG and Cerebrus, respectively,
at a VCP. The VCP is calculated as the lowest trading price during the eighteen (18) trading days immediately prior to the conversion
date multiplied by fifty eight percent (58%), representing a forty two percent (42%) discount.
The
Company may prepay the LG and/or the Cerebrus Debentures, subject to prior notice to the holder within an initial 30 day period
after issuance, by paying an amount equal to 118% multiplied by the amount that the Company is prepaying. For each additional
30 day period the amount being prepaid is multiplied by an additional 6%, up to a maximum of 148% on the 180
th
day
from issuance. Beginning on the 180
th
day after the issuance of the Debentures, the Company is not permitted to
prepay the Debenture, so long as the Debenture is still outstanding, unless the Company and the holder agree otherwise in writing.
2016
Convertible Note Conversions
Since
January 1, 2016 the Company issued the following shares of common stock upon the conversions of portions of the 2015 Convertible
Notes (see Note 6):
Date
|
|
Principal
Conversion
|
|
Interest
Conversion
|
|
Total
Conversion
|
|
Conversion
Price
|
|
Shares
Issued
|
|
Issued to
|
|
3/7/16
|
|
$
|
6,500
|
|
|
$
|
489
|
|
|
$
|
6,989
|
|
|
$
|
.00174
|
|
|
|
4,016,471
|
|
|
LG
|
|
3/8/16
|
|
$
|
7,425
|
|
|
$
|
928
|
|
|
$
|
8,353
|
|
|
$
|
.00174
|
|
|
|
4,800,354
|
|
|
GW
|
|
3/17/16
|
|
$
|
9,000
|
|
|
$
|
696
|
|
|
$
|
9,696
|
|
|
$
|
.002436
|
|
|
|
3,980,431
|
|
|
LG
|
|
3/17/16
|
|
$
|
3,000
|
|
|
$
|
138
|
|
|
$
|
3,138
|
|
|
$
|
.000638
|
|
|
|
4,918,624
|
|
|
Service
|
|
|
|
|
$
|
25,925
|
|
|
$
|
2,251
|
|
|
$
|
28,176
|
|
|
|
|
|
|
|
17,715,880
|
|
|
|
Effective
February 29, 2016, the Company received 1,102,462 shares of common stock of Petrogress, Inc. (formerly known as 800 Commerce,
Inc.) as settlement of the $282,947 owed to the Company.
On May 6, 2016, the Company, B.
Michael Freidman and Barry Hollander (former CFO) were named as defendants in a Summons/Complaint filed by Justin Braune in
Palm Beach County Civil Court, Florida. The complaint alleges that Mr. Braune is entitled to 27,500,000 shares of
common stock of the Company. The defendants will defend this lawsuit as Mr. Braune sent an email to the Company and
the Company’s transfer agent cancelling 12,500,000 shares on October 16, 2015 and his letter of resignation dated
November 4, 2015, clearly stated that he confirmed he had cancelled 15,000,000 shares of common stock. Mr. Braune’s
letter of resignation was filed as Exhibit 5.1 on Form 8-K with the SEC on November 9, 2015.
F-25