Note 1 - Organization and Nature of Business
History
Tautachrome, Inc. (formerly Roadships Holdings, Inc.) was formed in Delaware on June 5, 2006 as Caddystats, Inc. (Tautachrome, Inc. and hereinafter be collectively referred to as "Tautachrome", the "Company", "we' or "us").
The Company adopted the accounting acquirer's year end, December 31.
Our Business
The Division operates in the internet applications space, a space uniquely able to embrace fast growing and novel business. The iPhone, Google, Facebook, Amazon, Twitter, Android, Uber and numerous other examples are reminders of the ability of the internet applications space to surprise us with the arrival –seemingly from out of nowhere- of wholly new business universes.
Click is developing a system branded "KlickZie" aimed at turning smartphones, including iPhones, Android phones and other smartphones, into trustable imagers and advanced communicators. Trustable imagers means that the pictures and videos can be trusted to be the original, untampered, un-Photoshopped pictures and videos made by the smartphone. Advanced communicators means that the pictures and videos can be used as living, trusted portals to communicate with others.
The KlickZie system concept consists of downloadable software able to securitize the imaging process in the smartphone, together with an advanced cloud system to authenticate KlickZie pictures and videos and to make possible imagery based communication among people who happen upon KlickZie pictures and videos.
Note 2 - Basis of Presentation and Summary of Significant Accounting Policies
Basis of Presentation
The Company's financial statements are presented in accordance with accounting principles generally accepted (GAAP) in the United States. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the periods presented have been reflected herein.
Principles of Consolidation
Our consolidated financial statements include Roadships Holdings, Inc. and its wholly owned subsidiaries. All significant inter-company accounts and transactions have been eliminated in consolidation.
Use of Estimates
The preparation of 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, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expense during the reporting period. Actual amounts could differ significantly from these estimates.
Cash and Cash Equivalents
The Company considers all highly liquid investments with an initial maturity of 3 months or less to be cash equivalents. The Company maintains its deposits with high quality financial institutions and, accordingly, believes its credit risk exposure associated with cash is remote. There were no cash equivalents as of December 31, 2015 and 2014.
Property, Plant and Equipment
We record our property plant and equipment at historical cost. The estimated useful lives of these assets range from three to seven years and are depreciated using the straight-line method over the asset's useful life.
Foreign Currency Risk
We currently have two subsidiaries operating in Australia. At December 31, 2015 and 2014, we had $3,648 and $500 Australian Dollars, respectively ($2,657 and $407 US Dollars, respectively) deposited into Australian banks.
Earnings Per Share
Basic earnings per common share is computed by dividing net earnings or loss (the numerator) by the weighted average number of common shares outstanding during each period (the denominator). Diluted earnings per common share is similar to the computation for basic earnings per share, except that the denominator is increased by the dilutive effect of stock options outstanding and unvested restricted shares and share units, computed using the treasury stock method. There are currently no common stock equivalents.
Fair Value of Financial Instruments
We adopted the Financial Accounting Standards Board's (FASB) Accounting Codification Standard No. 820 ("ASC 820),
Fair Value Measurements and Disclosures
. ASC 820 defines fair value, establishes a framework for measuring fair value and expands disclosure of fair value measurements. ASC 820 applies under other accounting pronouncements that require or permit fair value measurements and accordingly, does not require any new fair value measurements. ASC 820 clarifies that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, ASC 820 established a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:
Level 1 - Observable inputs such as quoted prices in active markets;
Level 2 - Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and
Level 3 - Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.
The following table presents assets and liabilities that were measured and recognized at fair value as of December 31, 2015 on a recurring basis:
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total Gains
(Losses)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable and accrued expenses
|
|
$
|
181,275
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Bank overdraft
|
|
|
89
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Accounts payable - related party
|
|
|
722
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Accrued interest - related party
|
|
|
6,637
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Loans from related parties
|
|
|
80,108
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Convertible note payable, related party
|
|
|
22,160
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Short-term convertible notes payable
|
|
|
409,456
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Short-term notes payable
|
|
|
16,025
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Derivative liability
|
|
|
-
|
|
|
|
-
|
|
|
|
23,812
|
|
|
|
(17,882
|
)
|
Long-term convertible notes payable
|
|
|
110,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Discounts on long-term convertible notes payable
|
|
|
(5,052
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES
|
|
$
|
821,420
|
|
|
$
|
-
|
|
|
$
|
23,812
|
|
|
$
|
(17,882
|
)
|
The following table presents assets and liabilities that were measured and recognized at fair value as of December 31, 2014 on a recurring basis:
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total Gains
(Losses)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable and accrued expenses
|
|
$
|
5,016
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Convertible note payable, related party
|
|
|
23,500
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
TOTAL LIABILITIES
|
|
$
|
28,516
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Income Taxes
We recognize deferred tax assets and liabilities based on differences between the financial reporting and tax bases of assets and liabilities using the enacted tax rates that are expected to be in effect when the differences are expected to be recovered. We provide a valuation allowance for deferred tax assets for which we do not consider realization of such assets to be more likely than not.
See Note 7 for our reconciliation of income tax expense and deferred income taxes as of and for the years ended December 31, 2015 and 2014.
Recent Accounting Pronouncements
On November 2014, The Financial Accounting Standards Board (FASB) issued Accounting Standard Update No. 2014-16—
Derivatives and Hedging (Topic 815): Determining Whether the Host Contract in a Hybrid Financial Instrument Issued in the Form of a Share Is More Akin to Debt or to Equity
(a consensus of the FASB Emerging Issues Task Force). The amendments in this Update do not change the current criteria in GAAP for determining when separation of certain embedded derivative features in a hybrid financial instrument is required. That is, an entity will continue to evaluate whether the economic characteristics and risks of the embedded derivative feature are clearly and closely related to those of the host contract, among other relevant criteria. The amendments clarify how current GAAP should be interpreted in evaluating the economic characteristics and risks of a host contract in a hybrid financial instrument that is issued in the form of a share. The effects of initially adopting the amendments in this Update should be applied on a modified retrospective basis to existing hybrid financial instruments issued in the form of a share as of the beginning of the fiscal year for which the amendments are effective. Retrospective application is permitted to all relevant prior periods.
On November 2014, The Financial Accounting Standards Board (FASB) issued Accounting Standard Update No. 2014-17—
Business Combinations (Topic 805): Pushdown Accounting
(a consensus of the FASB Emerging Issues Task Force). The amendments in this Update provide an acquired entity with an option to apply pushdown accounting in its separate financial statements upon occurrence of an event in which an acquirer obtains control of the acquired entity. The amendments in this Update are effective on November 18, 2014. After the effective date, an acquired entity can make an election to apply the guidance to future change-in-control events or to its most recent change-in-control event. However, if the financial statements for the period in which the most recent change-in-control event occurred already have been issued or made available to be issued, the application of this guidance would be a change in accounting principle.
On August 2014, The Financial Accounting Standards Board (FASB) issued Accounting Standard Update No. 2014-15,
Presentation of Financial Statements – Going Concerns
(Subtopic 205-40): Disclosures of Uncertainties about an Entity's Ability to Continue as a Going Concern. The amendments require management to assess an entity's ability to continue as a going concern by incorporating and expanding upon certain principles that are currently in U.S. auditing standards. Specifically, the amendments (1) provide a definition of the term substantial doubt, (2) require an evaluation every reporting period including interim periods, (3) provide principles for considering the mitigating effect of management's plans, (4) require certain disclosures when substantial doubt is alleviated as a result of consideration of management's plans, (5) require an express statement and other disclosures when substantial doubt is not alleviated, and (6) require an assessment for a period of one year after the date that the financial statements are issued (or available to be issued). The amendments in this Update are effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. Early application is permitted.
In June 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2014-10 -
Development Stage Entities
. The amendments in this update remove the definition of a development stage entity from the Master Glossary of the ASC thereby removing the financial reporting distinction between development stage entities and other reporting entities from U.S. GAAP. In addition, the amendments eliminate the requirements for development stage entities to (1) present inception-to-date information in the statements of income, cash flows, and shareholder equity, (2) label the financial statements as those of a development stage entity, (3) disclose a description of the development stage activities in which the entity is engaged, and (4) disclose in the first year in which the entity is no longer a development stage entity that in prior years it had been in the development stage. The amendments in this update are applied retrospectively. The adoption of ASU 2014-10 removed the development stage entity financial reporting requirements from the Company.
In June 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2014-12,
Compensation – Stock Compensation (Topic 718): Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period
. The new guidance requires that share-based compensation that require a specific performance target to be achieved in order for employees to become eligible to vest in the awards and that could be achieved after an employee completes the requisite service period be treated as a performance condition. As such, the performance target should not be reflected in estimating the grant-date fair value of the award. Compensation costs should be recognized in the period in which it becomes probable that the performance target will be achieved and should represent the compensation cost attributable to the period(s) for which the requisite service has already been rendered. If the performance target becomes probable of being achieved before the end of the requisite service period, the remaining unrecognized compensation cost should be recognized prospectively over the remaining requisite service period. The total amount of compensation cost recognized during and after the requisite service period should reflect the number of awards that are expected to vest and should be adjusted to reflect those awards that ultimately vest. The requisite service period ends when the employee can cease rendering service and still be eligible to vest in the award if the performance target is achieved. This new guidance is effective for fiscal years and interim periods within those years beginning after December 15, 2015. Early adoption is permitted. Entities may apply the amendments in this Update either (a) prospectively to all awards granted or modified after the effective date or (b) retrospectively to all awards with performance targets that are outstanding as of the beginning of the earliest annual period presented in the financial statements and to all new or modified awards thereafter. The adoption of ASU 2014-12 is not expected to have a material impact on our financial position or results of operations.
In June 2014, the FASB issued ASU No. 2014-10:
Development Stage Entities (Topic 915): Elimination of Certain Financial Reporting Requirements, Including an Amendment to Variable Interest Entities Guidance in Topic 810, Consolidation
, to improve financial reporting by reducing the cost and complexity associated with the incremental reporting requirements of development stage entities. The amendments in this update remove all incremental financial reporting requirements from U.S. GAAP for development stage entities, thereby improving financial reporting by eliminating the cost and complexity associated with providing that information. The amendments in this Update also eliminate an exception provided to development stage entities in Topic 810, Consolidation, for determining whether an entity is a variable interest entity on the basis of the amount of investment equity that is at risk. The amendments to eliminate that exception simplify U.S. GAAP by reducing avoidable complexity in existing accounting literature and improve the relevance of information provided to financial statement users by requiring the application of the same consolidation guidance by all reporting entities. The elimination of the exception may change the consolidation analysis, consolidation decision, and disclosure requirements for a reporting entity that has an interest in an entity in the development stage. The amendments related to the elimination of inception-to-date information and the other remaining disclosure requirements of Topic 915 should be applied retrospectively except for the clarification to Topic 275, which shall be applied prospectively. For public companies, those amendments are effective for annual reporting periods beginning after December 15, 2014, and interim periods therein. Early adoption is permitted. The adoption of ASU 2014-10 is not expected to have a material impact on our financial position or results of operations.
The adoption of these standards is not expected to have a material impact on our financial position or results of operations.
Note 3 – Going Concern
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As shown in the accompanying financial statements, we had negative cash flows from operations of $366,403 and $23,249 for the years ended December 31, 2015 and 2014, respectively, recurring losses, and negative working capital at December 31, 2015 and 2014. These conditions raise substantial doubt as to our ability to continue as a going concern. The financial statements do not include any adjustments that might be necessary if we are unable to continue as a going concern.
The Company may raise additional capital through the sale of its equity securities, through an offering of debt securities, or through borrowings from financial institutions or related parties. Management believes that actions presently being taken to obtain additional funding may provide the opportunity for the Company to continue as a going concern. There is no guarantee the Company will be successful in achieving these objectives.
Note 4 – Related Party Transactions
For the years ended December 31, 2015 and 2014, we had the following transactions with the Twenty Second Trust (the "Trust"), the trustee of whom is Tamara Nugent, the wife of our major shareholder and former Chief Executive Officer, Micheal Nugent:
|
·
|
We received $5,408 and $68,023, respectively, in cash loans to pay operating expenses and repaid $162,918 and $11,844, respectively, in principal.
|
|
·
|
We accrued $4,329 and $1,819, respectively, in interest payable to the Trust and paid $1,571 and $1,796, respectively, in interest payments.
|
|
·
|
On April 20, 2015, the Registrant and Tamara Nugent, as trustee for Twenty Second Trust, entered into a Common Stock Repurchase Agreement whereby the Trust agreed to sell 1,796,571,210 shares of the our common stock to the Company in exchange for the sum of $17,966 in the form a promissory note.
|
According to our agreement with Mr. Nugent, we accrue interest on all unpaid amounts at 5%. Principal and interest are callable at any time. If principal and interest are called and not repaid, the loan is considered in default after which interest is accrued at 10%.
The outstanding balance at December 31, 2015 is $80,108 and $6,637, respectively, for principal and interest to the Twenty Second Trust, which includes the $98,281 in the following paragraph and the related interest payable.
On December 9, 2014, we redeemed 39,312 shares of Series B Convertible Preferred Stock issued in 2013 to our then Chief Executive Officer, by issuing a promissory note in the amount of $98,281. The promissory note is due December 31, 2015 and bears interest at 5% (see Note 5). Through December 31, 2015, we have accrued $4,920 in interest and have paid no interest or principal payments.
On May 5, 2013 (and on August 8, 2013 with an enlargement amendment) the Company entered into a no interest demand-loan agreement with our current Chairman, Jon N Leonard ("Jon") under which the Company may borrow such money from Jon as Jon in his sole discretion is willing to loan. Under this agreement and its enlargement amendment (an amendment enlarging the amount of money that can be borrowed) the Company borrowed $28,000 from Jon between May 30, 2013 and October 31, 2013, and repaid Jon $3,500 of the $28,000 in cash between December 11, 2013 and December 31, 2013, leaving an unpaid balance on this note of $24,500 at December 31, 2013. On August 28, 2014, the Company repaid in cash an additional $1,000 on the note, and on January 5, 2015, an additional principal payment was made in the amount of $1,500. A loan of $160 was added to this loan during the year ended December 31, 2015 for expenses paid by Dr. Leonard on the company's behalf. The outstanding loan amount at December 31, 2015 is $22,160.
The terms of the note provide that at the Company's option, the Company may make repayments in stock, at a fixed share price of $1.00 per share. Also, because this loan is a no interest loan an imputed interest expense of $1,767 and $1,920 was recorded as additional paid-in capital for the years ended December 31, 2015 and 2014, respectively. The Company evaluated Dr. Leonard's note for the existence of a beneficial conversion feature and determined that none existed.
On September 18, 2015, we entered into an agreement with Novagen Ingenium Inc, a Nevada corporation ("Novagen") under which we agreed to sell to Novagen all of the transportation assets of Roadships which had, at the time of the exchange, carrying values of zero, for 2,000,000 shares of Novagen common stock. Shares of Novagen's common stock are quoted under the symbol "NOVZ" on the OTC Pink operated by OTC Markets Group, Inc. Novagen's controlling shareholder is Micheal Nugent who is on our Board of Directors and is a major shareholder. Since the shares represent a transaction with a related party, we recorded the value of these shares at zero.
On August 9, 2015, we issued a $5,000 convertible promissory note to the brother of our Board Chairman and Chief Executive Officer in return for cash. The terms of this note are provided in Note 7, subheading "Convertible Notes Payable".
Note 5 – Capital Structure
Common Stock
At December 31, 2014, we had 1,184,906,041 common shares issued and outstanding from a total of four billion authorized.
On April 20, 2015, the Registrant and Tamara Nugent, as trustee for Twenty Second Trust, entered into a Common Stock Repurchase Agreement whereby the Trust agreed to sell 1,796,571,210 shares of the our common stock to the Company in exchange for the sum of $17,966 in the form a promissory note.
During the year ended December 31, 2015, we issued 6,156,179 shares for services to several consultants according to our agreements with them. We valued these shares at the pre-merger valuation which was based on private equity raises done in 2013 and 2014 ($0.012 per share) and recorded an increase in Capital Stock and Additional Paid in Capital of $73,601. Included in these shares were shares promised and accrued for before December 31, 2014. We therefore reduced Common Stock Payable by $26,667 to zero.
On May 21, 2015, we issued 1,796,571,210 common shares to the shareholders of Click Evidence, Inc. in exchange for all the issued and outstanding shares of that Company (see Note 6), effecting the merger between Click and Roadships.
Series A Convertible Preferred Stock
- The Series A Preferred Stock is convertible into the number of shares of Common Stock which equals 4 times the sum of: i) the total number of shares of Common Stock which are issued and outstanding at the time of conversion, plus ii) the total number of shares of Series B Preferred Stocks which are issued and outstanding at the time of conversion.
The Series A Preferred Stock voting rights are equal to the number of shares of Common Stock which equals 4 times the sum of: i) the total number of shares of Common Stock which are issued and outstanding, plus ii) the total number of shares of Series B Preferred Stocks which are issued and outstanding.
Series B Convertible Preferred Stock
- Each share of Series B Preferred Stock is convertible at par value $0.0001 per share (the "Series B Preferred"), at any time, and/or from time to time, into the number of shares of the Corporation's common stock, par value $0.0001 per share (the "Common Stock") equal to the price of the Series B Preferred Stock ($2.50), divided by the par value of the Series B Preferred (par value of $0.0001per share), subject to adjustment as may be determined by the Board of Directors from time to time (the "Conversion Rate").
Based on the $2.50 price per share of Series B Preferred Stock, and a par value of $0.0001 per share for Series B Preferred each share of Series B Preferred Stock is convertible into 250,000 shares of Common Stock.
Each share of Series B Preferred Stock has 10 votes for any election or other vote placed before the shareholders of the Common stock.
The Preferred A stock has a stated value of $.0001 and no stated dividend rate and is non-participatory. The Series A and Series B has liquidation preference over common stock. The Voting Rights for each share of Series A is equal to 1 vote per share (equal to 4 times the number of common and Preferred B shares outstanding) and Series B Preferred Stock have 10 votes per shares.
The Holder has the right to convert the Preferred A and B to common shares of the Company with the Series A convertible to 4 times the number of common and Preferred B shares outstanding and Series B convertible to 250,000 common shares per Preferred B share. The Preferred Series A and Series B represents voting control based on management's interpretation of the Company bylaws and Certificate of Designation.
On March 12, 2013, the Company issued 1 share of Series A Convertible Preferred Stock and 39,312 shares of Series B Convertible Preferred Stock to our Chief Executive Officer, Micheal Nugent, in exchange for a reduction of debt in the amount of $98,281. The value assigned to the preferred shares was derived from a model generated by an independent valuation expert that specializes in valuing equity instruments with no quoted markets. The Company recorded increases to Preferred Stock and Additional Paid in Capital collectively of $1,598,110, a reduction in debt of $98,281 and a loss on conversion of $1,499,829.
On December 9, 2014, we redeemed the 39,312 shares of Series B Convertible Preferred Stock issued in 2013 to our Chief Executive Officer, by issuing a promissory note in the amount of $98,281. The promissory note is due December 31, 2015 and bears interest at 5%. We valued the shares at their fair values on the date of their conversion to this promissory note and valued the shares at $2,914,843. Because the transaction was with a related party, we recorded the removal of the Series B shares by recording a liability in the amount of $98,281, and reducing the par value of the shares and Additional Paid in Capital by $4 and $98,277, respectively, recording no gain on the conversion.
Imputed Interest
Several of our loans made in our Australian subsidiary were made without any nominal interest. As such, we imputed interest at 8% to these loans, crediting Additional Paid in Capital and charging Interest Expense. For the year ended December 31, 2015 and 2014, these amounted to $7,501 and $1,920, respectively.
Beneficial Conversion Features of Convertible Promissory Notes
During the year ended December 31, 2015, we borrowed $425,788 from 87 accredited investors in Australia (see Note 6) which contained features allowing the holder to convert the principal and accumulated interest into common stock. We evaluated these notes for beneficial conversion features and calculated a value of $405,954, all of which has been immediately expensed as interest expense as the notes are due on demand.
Short-term convertible notes payable
During the year ended December 31, 2015, we borrowed $425,788 from 87 accredited investors in Australia. Of this amount, $336,215 was acquired after the reverse merger (see Note 6). The remainder was prior to the reverse merger, was included as part of that transaction and as such, is not included in the financing section of the Statement of Cash Flows.
These promissory notes can be converted into shares of our common stock at the rate of $0.01 per share (the aggregate of which shares convertible is 56,213,300). These notes are callable by the makers at any time and accrue interest at 5%. For the year ended December 31, 2015, we accrued $4,511 of interest on these notes and made no interest payments. We evaluated these notes for beneficial conversion features and calculated a value of $405,954, all of which has been immediately expensed as interest expense as the notes are due on demand.
Options Awards
On July 2, 2012, we granted 10 million options to purchase our common stock to each of our Chief Executive and Chief Financial Officers (20 million total) of which 5 million each vest immediately (10 million total).
In addition to the 10 million options vesting in 2012, 10 million options vested as follows:
|
·
|
5 million options to our Chief Financial Officer vested on April 19, 2013.
|
|
·
|
5 million options to our Chief Executive Officer vested on July 2, 2013.
|
All 20 million of these options expired during the year ended December 31, 2014.
Note 6 – Business Combinations
Acquisition of Click Evidence, Inc.
On May 21, 2015, we acquired all the issued and outstanding shares of Click Evidence, Inc. ("Click"), an emerging growth company existing under the laws of the State of Arizona that has developed and owns a patent pending trustable imaging technology for smartphones. Under the terms of the Acquisition, we issued 1,796,571,209 shares of our common stock from treasury in exchange for 14,239,705 shares of Click common stock. As a result of the Acquisition, Click has become a wholly-owned subsidiary of the Registrant.
The Roadships shares were issued by the Registrant at a deemed price of $0.0012 per share to 16 Click shareholders (the "Click Shareholders") on the basis of 83.644 Roadships shares for each of the issued and then outstanding Click Shares. The number of Roadships shares issued for the Click Shares was determined by negotiation between the parties to the Acquisition and was approved by our board of directors as being fair and in the best interest of the Registrant.
As a result of the issuance of the Roadships shares, Dr. Jon N. Leonard, the President, Chief Executive Officer and a director of Click, has acquired sole voting and investment control over 1,387,829,545 shares of Roadships' common stock, representing 46.4% voting control of the Registrant. At the time of the Acquisition, Dr. Leonard directly owned 10,000,000 Click Shares and had sole voting and investment control over a further 1,000,000 Click Shares.
We deemed the transaction a reverse merger and recorded no goodwill.
Assets and liabilities of Click Evidence are as follows:
Fair value of assets and liabilities obtained from Click Evidence
|
|
|
|
|
|
|
|
Cash
|
|
$
|
10,597
|
|
Other current assets
|
|
|
2,000
|
|
Shareholder note payable
|
|
|
(22,000
|
)
|
Net liabilities acquired
|
|
$
|
(9,403
|
)
|
Upon merging the two companies, we closed all historical operating results prior to the reverse merger date of May 21, 2015 of Roadships and consolidated subsidiaries to Additional Paid in Capital. Operating results and cash flows and historical equity presented in this report and subsequent reports will be that of Click Evidence, Inc.
A summary of pro-forma financial information for the years ended December 31, 2014 and 2013 are as follows:
|
|
Year Ended December 31,
|
|
|
|
2014
|
|
|
2013
|
|
Total assets
|
|
$
|
32,072
|
|
|
$
|
26,746
|
|
Total liabilities
|
|
|
260,133
|
|
|
|
83,039
|
|
Total stockholders' deficit
|
|
|
(228,061
|
)
|
|
|
(56,293
|
)
|
Net loss
|
|
|
(311,477
|
)
|
|
|
(27,286,649
|
)
|
Other comprehensive income (loss)
|
|
|
6,423
|
|
|
|
(11,325
|
)
|
Net comprehensive loss
|
|
|
(305,054
|
)
|
|
|
(27,297,974
|
)
|
Weighted average shares outstanding (basic and diluted)
|
|
|
2,987,633,430
|
|
|
|
2,412,838,909
|
|
Net loss per share (basic and diluted)
|
|
|
(0.00
|
)
|
|
|
(0.01
|
)
|
Sale of Roadships Holdings' Assets
On September 18, 2015, we entered into an agreement with Novagen Ingenium Inc, a Nevada corporation ("Novagen") under which we agreed to sell to Novagen all of the transportation assets of Roadships which had, at the time of the exchange, carrying values of zero, for 2,000,000 shares of Novagen common stock. Shares of Novagen's common stock are quoted under the symbol "NOVZ" on the OTC Pink operated by OTC Markets Group, Inc. Novagen's controlling shareholder is Micheal Nugent who is on our Board of Directors and is a major shareholder. Since the shares represent a transaction with a related party, we recorded the value of these shares at zero.
The description of the terms and conditions of the Share Exchange Agreement set forth herein does not purport to be complete and is qualified in its entirety by reference to the terms of the Share Exchange Agreement, which is filed as Exhibit 10.1 to this Current Report.
The sale of these assets to Novagen was completed on September 18, 2015. As a result, Novagen has acquired all of the Transport Assets and we have exited the transport and shipping business. Management intends to focus all the resources of the registrant on the development and commercialization of its smartphone imaging technology.
Note 7 - Debt
Our debt in certain categories went from $23,500 at December 31, 2014 to $632,697 at December 31, 2015 as follows:
|
|
12/31/14
|
|
|
12/31/15
|
|
Loans from related parties
|
|
$
|
-
|
|
|
$
|
80,108
|
|
Convertible notes payable, related party
|
|
|
23,500
|
|
|
|
22,160
|
|
Short-term convertible notes payable
|
|
|
-
|
|
|
|
409,456
|
|
Short-term notes payable
|
|
|
-
|
|
|
|
16,025
|
|
Long-term convertible notes payable
|
|
|
-
|
|
|
|
110,000
|
|
Discounts on long-term convertible notes payable
|
|
|
-
|
|
|
|
(5,052
|
)
|
Totals
|
|
$
|
23,500
|
|
|
$
|
632,697
|
|
See Note 4 for a discussion of our related-party debts, including the first two entries in the above table.
Short-term convertible notes payable
During the year ended December 31, 2015, we borrowed $425,788 from 87 accredited investors in Australia. Of this amount, $336,215 was acquired after the reverse merger (see Note 6). The remainder was prior to the reverse merger, was included as part of that transaction and as such, is not included in the financing section of the Statement of Cash Flows.
These promissory notes can be converted into shares of our common stock at the rate of $0.01 per share (the aggregate of which shares convertible is 56,213,300). These notes are callable by the makers at any time and accrue interest at 5%. For the year ended December 31, 2015, we accrued $4,511 of interest on these notes and made no interest payments. We evaluated these notes for beneficial conversion features and calculated a value of $405,954, all of which has been immediately expensed as interest expense as the notes are due on demand.
Aggregate totals for these short-term convertible notes payable are:
Proceeds from issuance of short-term convertible notes
|
|
$
|
425,788
|
|
Foreign exchange effect at balance sheet date
|
|
|
(16,332
|
)
|
Balance, December 31, 2015
|
|
$
|
409,456
|
|
Long-term convertible notes payable
During the year ended December 31, 2015, we borrowed $110,000 from eight accredited investors in the United States. These notes bear interest at 5% and are due eighteen months from the date of the note (all of which mature during the first or second quarter of 2017). Each note is convertible into a sum of shares which varies depending on the note date. The aggregate sum of the shares into which these notes are convertible is 16,478,937. We evaluated these notes for embedded derivates and determined that they contained such derivatives as set forth in the Statement of Financial Accounting Standard ASC 820–10–35–37 Fair Value in Financial Instruments ( herein referenced as "ASC 820"); Statement of Financial Accounting Standard ASC 815
Accounting for Derivative Instruments and Hedging Activities
(herein referenced as "ASC 815"); and ASC 815–40 (formerly Emerging Issues Task Force ("EITF") Issue No. 00–19 and EITF 07–05).
Aggregate totals for these eight long-term convertible notes payable are:
Proceeds from issuance of long-term convertible notes
|
|
$
|
110,000
|
|
Discounts on notes payable:
|
|
|
|
|
Discounts at issuance
|
|
|
(5,930
|
)
|
Less: amortization
|
|
|
878
|
|
Net unamortized discounts at December 31, 2015
|
|
|
(5,052
|
)
|
|
|
|
|
|
Long-term convertible notes payable, net of discounts
|
|
$
|
104,948
|
|
One of the eight accredited investors included in the above paragraph is the brother of our Board Chairman and Chief Executive Officer, Dr. Jon Leonard. This $5,000 related-party convertible promissory note is dated August 9, 2015, matures on February 26, 2017, pays interest at 5%, and may convert into 1,020,408 common shares. The initial derivative recorded on this instrument was $226 with a value at December 31, 2015 of $2,334. The initial discount recorded on this instrument was $226, of which $414 has been amortized to interest expense.
Derivative liability
The above-referenced eight convertible promissory notes issued during the year ended December 31, 2015 were analyzed in accordance with EITF 07–05 and ASC 815. EITF 07–5, which is effective for fiscal years beginning after December 15, 2009, and interim periods within those fiscal years. The objective of EITF 07–5 is to provide guidance for determining whether an equity–linked financial instrument is indexed to an entity's own stock. This determination is needed for a scope exception under Paragraph 11(a) of ASC 815 which would enable a derivative instrument to be accounted for under the accrual method. The classification of a non–derivative instrument that falls within the scope of EITF 00–19 -
Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company's Own Stock
also hinges on whether the instrument is indexed to an entity's own stock. A non–derivative instrument that is not indexed to an entity's own stock cannot be classified as equity and must be accounted for as a liability.
Derivative financial instruments should be recorded as liabilities in the consolidated balance sheet and measured at fair value. For purposes of this engagement and report, we utilized fair value as the basis for formulating our opinion which has been defined by the Financial Accounting Standards Board ("FASB") as "the amount for which an asset (or liability) could be exchanged in a current transaction between knowledgeable, unrelated willing parties when neither party is acting under compulsion". The FASB has provided guidance that its definition of fair value is consistent with the definition of fair market value in IRS Rev. Rule 59–60.
In valuing the derivative liabilities, w made the following assumptions:
|
·
|
The underlying stock price was used as the fair value of the common stock $0.02 – as of 12/31/15;
|
|
·
|
The stock price projection was modeled such that it follows a geometric Brownian motion with constant drift and a constant volatility;
|
|
·
|
The stock projections are based on the Company historical annual volatilities using the term remaining for each Note and Valuation date and ranged from 311-338%.
|
|
·
|
An event of default would occur 0% of the time, increasing .50% per month to a maximum of 5.0%;
|
|
·
|
Capital raising events would occur quarterly at $150,000 per quarter through 2017 with potential dilutive resets for the Notes;
|
|
·
|
Discount rates were based on risk free rates in effect based on the remaining term and date of each valuation and instrument.
|
|
·
|
The Holder would redeem based on availability of alternative financing, 0% of the time increasing 0% monthly to a maximum of 0%;
|
|
·
|
The Holder would convert the note starting after 12 months to maturity (18 months from issuance) assuming the company was not in default subject to trading volume limits.
|
We recorded the initial derivative as both a derivative liability and a debt discount (or initial reduction in carrying value of the debt). We then amortized the debt discounts using the Effective Interest Method which recognizes the cost of borrowing at a constant interest rate throughout the contractual term of the obligation. The effective interest rates on these seven instruments range from 5.0% to 10.6%.
At each reporting date, we determine the fair market value for each derivative associated with each of the eight above instruments. At December 31, 2015, we determined the fair value of these derivatives were $23,812. We therefore included the difference in the Statement of Operations as "Change in Fair Value of Derivatives".
Short-term notes payable
During the year ended December 31, 2015, we inherited three short-term notes upon our May 21, 2015 reverse merger with Roadships Holdings, Inc. whose aggregate value at December 31, 2015 is $16,025.
Changes in outstanding derivative liabilities are as follows:
Balance, December 31, 2014
|
|
$
|
-
|
|
Changes due to new issuances
|
|
|
5,930
|
|
|
|
|
|
|
Changes due to adjustments to fair value
|
|
|
17,882
|
|
Balance, December 31, 2015
|
|
$
|
23,812
|
|
Note 8 – Income Taxes
Deferred income taxes reflect the tax consequences on future years of differences between the tax bases:
|
|
12/31/15
|
|
|
12/31/14
|
|
Net operating loss carry-forward
|
|
$
|
1,109,259
|
|
|
$
|
116,103
|
|
|
|
|
|
|
|
|
|
|
Deferred tax asset at 39%
|
|
|
432,611
|
|
|
|
45,280
|
|
Valuation allowance
|
|
|
(432,611
|
)
|
|
|
(45,280
|
)
|
Net deferred tax asset
|
|
$
|
-
|
|
|
$
|
-
|
|
In assessing the realizability of future tax assets, management considers whether it is more likely than not that some portion or all of the future tax assets will not be realized. The ultimate realization of future tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of future tax liabilities, projected future taxable income and tax planning strategies in making this assessment. Management has provided for a valuation allowance on all of its losses as there is no assurance that future tax benefits will be realized.
Our tax loss carry-forwards will begin to expire in 2022.
Note 9 – Subsequent Events
On January 8, 2016, we entered into a material definitive agreement to acquire 100% of the member interest in Photosweep, LLC, an Arizona limited liability company. Photosweep is the developer and operator of a software application for mobile devices that allows each user to order prints of digital photographs on the user's mobile device to be delivered at such date and location in the United States that the user may specify. Total consideration paid by the Registrant for the Acquisition consists of $39,000 and 13 million shares of the Registrant's common stock. We closed on the transaction on January 15, 2016.
We have evaluated subsequent events through the date of this report.