NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(unaudited)
|
1.
|
PRINCIPAL BUSINESS ACTIVITY, MATERIAL DEFINITIVE AGREEMENT
AND SIGNIFICANT ACCOUNTING POLICIES
|
Interim Financial Statements
The condensed consolidated financial statements
as of June 30, 2016 and for the three months and six months ended June 30, 2016 and 2015 are unaudited. However, in the opinion
of management of the Company, these condensed consolidated financial statements reflect all material adjustments, consisting solely
of normal recurring adjustments, necessary to present fairly the consolidated financial position and results of operations for
such interim periods. The results of operations for the interim periods presented are not necessarily indicative of the results
to be obtained for a full year. The accompanying condensed consolidated financial statements have been prepared in accordance with
U.S. generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Rule
8-03 of Regulation S-X for smaller reporting companies. Accordingly, these condensed consolidated financial statements
do not include all of the information required by U.S. generally accepted accounting principles for complete financial statements. These
unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements
and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2015.
Liquidity and Going Concern
Going Concern - The accompanying
condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization
of assets and the satisfaction of liabilities in the normal course of business. The Company generated net income for the six
months ended June 30, 2016 of approximately $937,000 and had negative working capital and stockholders’ deficiency of
approximately $3,628,000 at June 30, 2016. Since, inception the Company’s growth has been funded through a combination
of convertible and non-convertible debt from private investors, issuances of common stock and from cash advances from its
former parent Technology Innovations, LLC. These factors, among others, may indicate that the Company will be unable
to continue as a going concern for a reasonable period of time. The Company’s continuation as a going concern is
dependent upon its ability to generate sufficient cash flow to meet its obligations, to obtain additional financing,
renegotiate the terms of existing financing obligations and ultimately to attain successful operations. The ability to
successfully achieve those items is uncertain. The financial statements do not include any adjustments that might result from
the uncertainty.
As of June 30, 2016, the Company continued
to require waivers for debt covenant violations and extensions of maturity dates. Refer to Note 2 for lender waivers and maturity
extensions received from the lenders.
Basis of Consolidation
The condensed consolidated financial statements
include the accounts of NaturalNano, Inc. (“NaturalNano” or the “Company”), a Nevada corporation, and its
wholly owned subsidiaries Omni Shrimp, Inc., a Florida corporation. All significant inter-company
accounts and transactions have been eliminated in consolidation.
Accounting for Reverse Capitalization
The Company follows the guidelines set forth in
Topic 12:
Reverse Acquisitions and Reverse Capitalizations of the SEC Financial Reporting
Manual (“SEC Manual”) for the acquisition
of Omni Shrimp, Inc. (“Omni”) (See
Material Definitive Agreement
below.) For both accounting and legal purposes,
Omni Shrimp, Inc. (“Omni”) has been deemed the acquiring entity due to the fact that the owners of Omni have effective
voting and operating control of the combined company. The Company believes it was not a shell company
On July 5, 2016, the
staff of the Securities and Exchange Commission’s Division of Corporation Finance advised the Company that in light of the
information set forth in the Form 8-K filed on June 29, 2016, the Staff was of the opinion that the Company was a “shell
company” as defined in Rule 405 under the Securities Act of 1933 and Rule 12b-2 of the Exchange Act. The Company replied
with a letter to the Staff contesting the factual basis of such determination, and the Staff replied with a subsequent letter affirming
its prior determination.
The Company intends
to have further communications with the Staff regarding their determination as to the Company’s shell company status.
The financial statements
enclosed herewith were prepared on the assumption that the Company was not a shell company on June 23, 2016 and is not a shell
company at the present time.
Pursuant to the SEC Manual, the Company filed a form 8-K/A on
September 1, 2016. In Item 9.01 of that filing, the Company reported the required financial statements, including audited financial
statements of Omni and pro forma financial information.
Material Definitive Agreement
The Company announced
on June 23, 2016 (the “Effective Date”) , it entered into a Share Exchange Agreement (the "Exchange Agreement")
with all of the shareholders of Omni Shrimp, Inc., a Florida corporation ("Omni"), pursuant to which the shareholders
exchanged with the Company all of the outstanding shares of stock of Omni and Omni thereupon became a wholly owned subsidiary of
the Company. In consideration for the exchange of those Omni shares, the Company issued 28,500 shares of a newly created
Series E Preferred Stock of the Company (the "Series E Preferred Stock").
As a result of their
ownership of the Series E Preferred Stock, the Omni shareholders acquired the right to vote 95% of the voting control of the Company.
The Series E Preferred Stock is also convertible into common stock which, in the aggregate, would represent up to 95% of the outstanding
common stock after the conversion. In addition, on the Effective Date, the holders of all of the Company's outstanding Series B
and Series D Preferred Stock, including James Wemett, who is a director of the Company and was an officer and principal
shareholder of the company prior to the effective date, as the holder of the Series D shares, surrendered those shares to
the Company.
Additionally, on the
Effective Date the Company entered into an Asset Purchase Agreement with James Wemett, the former President and CEO, pursuant to
which Mr. Wemett acquired all right, title and interest to the existing business activities of the Company prior to that date;
specifically, those activities were (i) developing and commercializing material additives based on a technology utilizing halloysite
nanotubes and (ii) reselling Ebola personal protective equipment and ancillary supplies, and assumed the related liabilities. In
connection with that transaction, Mr. Wemett waived all accumulated compensation due to him from the Company.
In connection with
the Asset Purchase Agreement, the Company and Mr. Wemett exchanged releases, and the Company issued to Mr. Wemett a six year divisible
Warrant with cashless exercise to purchase up to 2,000,000 shares of the Company's common stock at a purchase price of $0.05 per
share.
New Forbearance Agreement (“New Forbearance”)
Concurrent with the Material Definitive Agreement on the Effective
Date, owners of the Senior Secured Convertible Notes and Promissory Notes agreed to surrender the following back to the Company:
|
·
|
$297,873 of face value debt, and
|
|
·
|
$198,798 of related accrued interest.
|
The Company did not issue any additional consideration for these
securities and recorded a Gain on forgiveness, conversion and modification of debt for $496,671.
In addition, the Company retired the following owned by its
former Chief Executive Officer
|
·
|
5,000 shares of Series B Preferred Stock
|
|
·
|
100 shares of Series D Preferred stock
|
Concurrent with this retirement, the Company issued 2,000,000
warrants and recorded stock based compensation expense of $61,486
Description of the Business
Omni Shrimp (“Omni”) is a subsidiary
of the Company and was incorporated on September 22, 2015 in the State of Florida. Omni is a provider of shrimp in the United States.
According to Marine Science Today Magazine, shrimp is the most eaten seafood within the United States. Shrimps come in many varieties
which are differentiated by their color.
The highest quality shrimp are called “pinks”
and are primarily located in American waters off the Florida coast. The Company specializes in these “Key West pinks”
which are enjoyed as “peel and eat” or in a wide variety of recipes. The harvesting season for pinks is from November
through June. Throughout the year, Omni also harvests “brown” and “white” shrimp.
Omni believes that it differentiates itself
from its competitors not only by the quality of its product but its relationships with distributors allowing it to get its product
to market as quickly as possible in order to guarantee freshness and taste. Our contacted vessels have refrigeration units on board
which lock in freshness, and we use a processor in Louisiana which allows our haul to get out to the dining public within two to
three days of catch resulting in as tasty a dining experience as possible.
Most consumers in the United States are
not aware of the origin of their store-bought shrimp or that which they consume in restaurants. Omni’s shrimp
product is free of pesticide, chemicals and antibiotics, a fact that we believe is highly attractive and beneficial in terms of
our eventual marketing success.
Estimates
The preparation of consolidated financial
statements in conformity with accounting principles generally accepted in the United States requires us to make estimates and assumptions
that affect the amounts reported and disclosed in the financial statements and the accompanying notes. Actual results could differ
materially from these estimates. On an ongoing basis, we evaluate such estimates. We base our estimates on historical experience
and on various other assumptions that are believed to be reasonable, the results of which form the basis for making judgments about
the carrying values of assets and liabilities.
Fair Value of Financial Instruments
Fair value is defined as the price that
would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the
measurement date. The Fair Value Measurement Topic of the Financial Accounting Standards Board (“FASB”) Accounting
Standards Codification (“ASC”) establishes a three-tier fair value hierarchy which prioritizes the inputs used in measuring
fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or
liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). These tiers include:
|
·
|
Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities.
|
|
·
|
Level 2 inputs are quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument.
|
|
·
|
Level 3 inputs are unobservable inputs based on the Company’s own assumptions used to measure assets and liabilities at fair value.
|
A financial asset or liability’s
classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement.
The carrying amounts reported in the balance sheet of cash, accounts receivable, inventory, prepaid assets, accounts payable and
accrued expenses approximate fair value because of the immediate or short-term maturity of these financial instruments. The fair
value of notes payable approximates their carrying value as the terms of this debt reflects market conditions. The Company’s
derivative liability was determined utilizing Level 3 inputs.
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 its financial instruments 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 then is revalued at
each reporting date, with changes in fair value reported in the consolidated statement of operations. For stock based derivative
financial instruments, the Company estimated the total enterprise value based upon trending the firm value from December 2006 to
June 2016 considering company specific factors including the changes in forward estimated revenues and market factors, market
multiples for comparable companies, and the Company’s market share price, all equally weighted. Once the enterprise
value was determined an option pricing model was used to allocate the enterprise value to the individual derivative securities
in the Company’s capital structure. The classification of derivative instruments, including whether such instruments
should be recorded as liabilities or equity, is evaluated at the end of each reporting period. Derivative instrument liabilities
are classified in the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument
could be required within twelve months of the balance sheet date.
Reclassifications
Certain prior year amounts have been reclassified
to conform to the current year presentation.
Discontinued Operations
We classified our Nanotechnology and Viral Protec businesses
as discontinued operations. The Balance sheet, Statements of Operations and Statements of Cash flows for these businesses are separately
reported as discontinued operations for all periods presented.
Income Taxes
The Company accounts for income taxes in
accordance with FASB ASC 740 which requires recognition of estimated income taxes payable or refundable on income tax returns for
the current year and for the estimated future tax effect attributable to temporary differences and carry-forwards. Measurement
of deferred income tax items is based on enacted tax laws including tax rates, with the measurement of deferred income tax assets
being reduced by available tax benefits not expected to be realized. The Company recognizes penalties and accrued interest
related to unrecognized tax benefits in income tax expense. Income tax expense was $0 for the three and six month periods ending
June 30, 2016 and 2015.
Net income/ (Loss) Per Share
Loss per common share is computed by dividing
net income or loss by the weighted-average number of shares of common stock outstanding during the period. Diluted income or loss
per common share gives effect to dilutive convertible preferred stock, convertible debt, options and warrants outstanding during
the period. Shares to be issued upon the exercise of these instruments have not been included in the computation of diluted loss
per share as their effect is anti-dilutive based on the net loss incurred.
As of June 30, 2016 and 2015 there
were 139,561,843 and 25,940,237 shares, respectively, underlying preferred stock, convertible debt, outstanding
options and warrants that could potentially dilute future earnings. In addition to these potentially dilutive shares as of
June 30, 2015 were an additional 6,666,667 reserved shares underlying the July 23, 2014 Exchange and Right to Shares
Agreement with Cape One Master Fund II LLP further described in Note 2 below.
These potentially dilutive shares have
been limited by certain debt and equity agreements with lenders. These agreements provide limitations on the conversion of the
dilutive instruments such that the number of shares of Common Stock that may be acquired by the holder upon conversion of such
instruments shall be limited to ensure that following such conversion the total number of shares of Common Stock then beneficially
owned by the holder does not exceed 4.99% of the total number of issued and outstanding shares of Common Stock. The Company does
not have sufficient authorized shares to satisfy conversion of all the potentially dilutive instruments.
Shares associated with the issuance of
Series E Preferred stock are reported on an as converted basis
Recent Accounting Pronouncements
In July 2015, the Financial Accounting
Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2015-011 to Topic 330, Inventory. This
ASU requires entities using inventory costing methods other than last-in-first-out and retail inventory method to value their inventory
at the lower of cost and net realizable value. This ASU is effective for fiscal years beginning after December 15, 2016 and is
to be applied prospectively. Early adoption of this ASU is permitted. The Company does not expect adoption of this ASU to have
a material impact on its Consolidated Financial Statements.
Notes payable consisted of the following:
Notes Payable
|
|
June 23,
2016
|
|
|
December 31,
2015
|
|
Senior Secured Convertible Notes
|
|
$
|
289,115
|
|
|
$
|
441,988
|
|
Senior Secured Promissory Notes
|
|
|
398,938
|
|
|
|
398,938
|
|
2014-2015 Convertible Promissory Notes
|
|
|
594,515
|
|
|
|
745,015
|
|
Convertible Promissory Notes
|
|
|
344,000
|
|
|
|
344,000
|
|
Total Notes Payable Outstanding
|
|
|
1,626,468
|
|
|
|
1,929,941
|
|
Lines of credit
|
|
|
161,528
|
|
|
|
|
|
|
|
|
1,788,096
|
|
|
|
1,929,941
|
|
Senior Secured Convertible Notes and
Senior Secured Promissory Notes
As of June 30, 2016 and December 31,
2015 Notes payable on the balance sheets includes $688,053 and $840,926 respectively for senior secured convertible and
non-convertible senior secured promissory notes. The conversion rate for principal and accrued interest on Senior
Secured Convertible Notes is 75% of the lowest volume weighted average price (VWAP) of the Company’s common stock for
the 1, 5 or 10 days immediately prior to the conversion. As further described below, the Company has defaulted on certain
provisions of the notes. The Company has obtained a waiver of default on the outstanding principal. As a condition of this
forbearance the interest rate on certain of these notes has been increased to 18%. The maturity date has been extended to
June 30, 2017.
Pursuant to the New Forbearance
agreement, $152,873 of this debt was forgiven at the Closing on June 23, 2016.
2014-2015 Convertible Promissory Notes
During six months ended June
30, 2015, the Company entered into two Senior Secured Convertible Promissory Notes aggregating $61,000. The 2014-2015
Senior Secured Promissory Notes are secured by, among other things, (i) the continuing security interest in certain
assets of the Company pursuant to the terms of the Initial Notes dated March 7, 2007, (ii) the Pledge Agreement, as defined
in the Initial Notes, and (iii) the Patent Security Agreement, dated as of March 6, 2007. The proceeds from the 2014-2015
Senior Secured Promissory Notes are available for general working capital purposes and cannot be used to redeem or make any
payment on account of any securities due to the Lenders. As a condition of this forbearance the interest rate on certain
of these notes has been increased to 18%. On March 10, 2016, an investor converted $5,500 of principal into 110,000 shares at
a conversion price of $.05. The maturity date has been extended to June 30, 2017.
On January 5, 2016 the conversion price on the debt was adjusted to $0.02 per
share upon the issuance of 450,000 warrants exercisable at $0.02 per share.
Pursuant to the New Forbearance
agreement, $145,000 of this debt was forgiven on June 23, 2016.
Subordinated Secured Convertible Note
and Exchange and Right to Shares Agreement - Cape One Master Fund II LP
On July 23, 2014, the Company and Cape
One Master Fund II LLP agreed to exchange the Subordinated Secured Convertible Note and related accrued and unpaid interest totaling
a combined $379,624 in exchange for 6,666,667 reserved shares of the Company’s common stock. The Company and Cape One agreed
that a beneficial ownership limitation of 4.99% shall be maintained at all times as to the number of the shares of the common stock
outstanding immediately after giving effect to the issuance of the common stock issuable under this agreement. Cape One also agreed
to a Lockup provision in the agreement that specifies that Cape One will not sell, transfer or hypothecate any of the reserved
shares until Alpha Capital Anstalt has received $3,500,000 from the proceeds of sales of shares obtained upon conversion of notes
issued by the Company and held by Alpha as of the date of this agreement. Upon expiration of the Lockup period, Cape One shall
be allowed to sell the lesser of (i) 5% of the daily trading volume of the Company’s common stock or, (ii) 10% of the reserved
shares in any calendar month.
2015 Exchange of Cape One Master Fund
II LLP shares for Convertible Promissory Notes
On December 15, 2015, the Company’s
board of directors determined that it was in the best interest of the corporation to exchange 6,666,667 reserved shares of the
Company’s common stock, held by Cape One Master Fund II LLP (as described below), for four convertible promissory notes totaling
$344,000 with an interest rate of 8% per annum due June 30, 2017. These promissory notes are convertible to common stock at the
rate of $0.05 per share. In the event that the Company shall, at any time, issue any additional shares of common stock or equivalents
at a price per share less than the $0.05 conversion price then the conversion price for these convertible promissory notes shall
be reduced. The Company recognized a loss on the exchange of the rights to reserved commons shares upon the issuance of these convertible
promissory notes of approximately $305,000 in 2015. On January 5, 2016 the conversion price on the debt was adjusted to $0.02 per
share upon the issuance of 450,000 warrants exercisable at $0.02 per share.
Bridge Loans
Bridge loans are short term notes taken on demand. They totaled
$161,528 at June 30, 2016 as follows:
Omni Shrimp, Inc.
|
|
$
|
133,743
|
|
Parent company
|
|
|
27,785
|
|
Total
|
|
$
|
161,528
|
|
The $133,743 at Omni Shrimp, Inc. was as follows:
Date Issued
|
|
Amount
|
|
|
Interest Rate
|
|
|
Holder
|
February 12, 2016
|
|
$
|
85,000
|
|
|
|
5.25%
|
|
|
Madeira Beach Seafood, Inc.
|
|
|
|
|
|
|
|
|
|
|
|
April 7, 2016
|
|
|
48,743
|
|
|
|
5.25%
|
|
|
Madeira Beach Seafood, Inc.
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
133,743
|
|
|
|
|
|
|
|
Subsequent to the Acquisition of Omni and the disposition of
the Nanotechnology and Viral Protec businesses, the Company operates in only segment, Shrimp. Therefore, Segment data is not required.
For stock based derivative financial instruments,
the Company estimated the total enterprise value based upon a combination of the trending of the firm value from December 2006
to June 2016, market comparables, and the market value of the Company’s stock, considering company specific factors including
the changes in forward estimated revenues and market factors. Once the enterprise value was determined an option pricing
model was used to allocate the enterprise value to the individual derivative and other securities in the Company’s capital
structure. The classification of derivative instruments, including whether such instruments should be recorded as liabilities
or equity, is evaluated at the end of each reporting period. Derivative instrument liabilities are classified in the balance sheet
as current or non-current based on whether or not net-cash settlement of the derivative instrument could be required within twelve
months of the balance sheet date.
The Company’s derivative liabilities
as of June 30, 2016 and December 31, 2015 are as follows:
·
|
The debt conversion feature embedded in the various Convertible Promissory Notes which contain anti-dilution provisions that would be triggered if the Company issued instruments with rights to the Company’s common stock at prices below this exercise price (described in Note 2.)
|
·
|
Derivative liabilities related to outstanding warrants and options due to the Company having insufficient authorized shares to satisfy the exercise or conversion of all outstanding instruments as of June 30, 2016 and December 31, 2015.
|
The fair value of the derivative liabilities as of June 30,
2016 and December 31, 2015 are as follows:
|
|
June 30,
2016
|
|
|
December 31,
2015
|
|
Note conversion feature liabilities
|
|
$
|
615,243
|
|
|
$
|
686,255
|
|
Warrant liability
|
|
|
3,590
|
|
|
|
759
|
|
Total
|
|
|
618,833
|
|
|
|
687,014
|
|
Authorized Common Stock:
In 2013
the Company received a unanimous written consent in lieu of a meeting from the members of the Board of Directors and a written
consent from the Series D stockholder to amend its articles of incorporation to increase the Company’s authorized common
shares to 800,000,000 common shares. As of June 30, 2016 there were approximately 140 million shares underlying preferred stock,
convertible debt, outstanding options and warrants that could potentially dilute future earnings. The company does not have sufficient
authorized shares to facilitate conversion of all the potentially dilutive instrument.
Preferred Stock Issuances
The Series E Convertible Preferred Stock
is convertible into 95% of the Company’s common stock and votes on an as-converted basis. The Series E designation
limits the holders’ rights to convert its Convertible Preferred Stock, and the aggregate voting powers, to no more than 4.99%
of the votes attributable to the total outstanding common shares. As a result of the Company not having sufficient authorized
shares to satisfy the conversion of all outstanding convertible debt, share rights, convertible preferred stock, warrants and options,
the Series B preferred shares have been moved into temporary equity classification on the balance sheet.
Preferred Stock Cancellations
As a part of the New Forbearance
agreement, 5,000 shares of Series B Preferred stock and 100 shares of Series D Preferred stock were also cancelled.
Warrants Grants
The Company has issued warrants to purchase
shares of its common stock to certain consultants and debt holders. As of June 23, 2016 and December 31, 2015 there were common
stock warrants outstanding to purchase an aggregate of 2,917,941 and 1,217,941 shares of common stock, respectively, pursuant to
the warrant grant agreements.
On February 15, 2015, the Company granted
a total of 300,000 warrants to the Company’s board members. These warrants, included in the summary below, grant the right
to purchase one share of common stock at an exercise price of $0.10 per share. The warrants were fully vested as of the grant date
and contain a cashless exercise provision. The fair value of the warrants on the date of grant was determined using the Black-Scholes
model and was measured on the date of grant at $61,106. An expected volatility assumption of 140% was used based on
the volatility of the Company’s stock price utilizing a look-back basis and the risk-free interest rate of 1.62% which was
derived from the U.S. treasury yields on the date of grant. The market price of the Company’s common stock on
the grant date was $0.22 per share. The expiration date used in the valuation model aligns with the warrant life of
five years as indicated in the agreements. The dividend yield was assumed to be zero.
On January 6, 2016, the Company granted
a total of 450,000 warrants to the Company’s board members and one consultant. These warrants, included in the summary below,
grant the right to purchase one share of common stock at an exercise price of $0.02 per share. The warrants were fully vested as
of the grant date and contain a cashless exercise provision. The fair value of the warrants on the date of grant was determined
using the Black-Scholes model and was measured on the date of grant at $25,292. An expected volatility assumption of
140% was used based on the volatility of the Company’s stock price utilizing a look-back basis and the risk-free interest
rate of 1.00% which was derived from the U.S. treasury yields on the date of grant. The market price of the Company’s
common stock on the grant date was $0.06 per share. The expiration date used in the valuation model aligns with the
warrant life of five years as indicated in the agreements. The dividend yield was assumed to be zero
On June 23, 2016, the Company granted a total of 2,000,000 warrants
to the Company’s former Chief Executive Officer. These warrants, included in the summary below, grant the right to purchase
one share of common stock at an exercise price of $0.05 per share. The warrants were fully vested as of the grant date and contain
a cashless exercise provision. The fair value of the warrants on the date of grant was determined using the Black-Scholes model
and was measured on the date of grant at $.031. An expected volatility assumption of 140% was used based on the volatility
of the Company’s stock price utilizing a look-back basis and the risk-free interest rate of 1.00% which was derived from
the U.S. treasury yields on the date of grant. The market price of the Company’s common stock on the grant date
was $0.034 per share. The expiration date used in the valuation model aligns with the warrant life of six years as indicated
in the agreements. The dividend yield was assumed to be zero.
A summary of the outstanding warrants is presented below:
|
|
Shares
|
|
|
Weighted
Average
Exercise
Price
|
|
|
Weighted
Average
Remaining
Life-years
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at January 1, 2016
|
|
|
1,217,941
|
|
|
$
|
.35
|
|
|
|
4.07
|
|
Issued
|
|
|
2,450,000
|
|
|
$
|
.05
|
|
|
|
5.98
|
|
Exercised
|
|
|
(750,000
|
)
|
|
$
|
.05
|
|
|
|
4.75
|
|
Warrants outstanding at June 23, 2016
|
|
|
2,917,941
|
|
|
$
|
.17
|
|
|
|
4.75
|
|
A summary of the status of the outstanding incentive stock plans
is presented below:
|
|
Shares
|
|
|
Weighted
Average
Exercise Price
|
|
|
Weighted Average
Remaining
Life-years
|
|
|
|
|
|
|
|
|
|
|
|
Options outstanding at January 1, 2016
|
|
|
1,099
|
|
|
$
|
2,008
|
|
|
|
1.32
|
|
Options exercisable at June 30, 2016
|
|
|
1,099
|
|
|
$
|
2,008
|
|
|
|
.82
|
|
All compensation costs for the above options
have been previously recognized in operations. As of June 30, 2016, the aggregate intrinsic value of the stock options outstanding
and exercisable was $0. There were no option grants made in the three month periods ended June 30, 2016 and 2015.
Issuance of Common shares and Conversion
of debt
On July 6, 2016, the Company issued 142,811
shares due to the conversion of $1,000 of notes payable plus $785 of accrued interest.
On August 9, 2016, the Company issued
143,602 shares due to the conversion of $230 of notes payable plus $653 of accrued interest.
On August 23, 2016,
the Company issued 144,254 shares due to the conversion of $125 of notes payable plus $100 of accrued interest.
Change in Independent Registered Public
Accounting Firm
On August 3, 2016, the
Board of Directors of the Company notified Freed Maxick CPAs, P.C (“Freed Maxick”) that it had determined to dismiss
them as the Company’s independent registered public accounting firm, effective as of August 3, 2016. Also on August 3, 2016,
the Board determined to engage Scrudato & Co., PA as its new independent registered public accounting firm to replace Freed
Maxick. Please see our form 8-K filed on August 3, 2016 for more detail.
Issuance of Debt
On August 8, 2016, the
Company borrowed $15,000 from a third party. The convertible promissory note bears interest at 10% per annum and matures on August
1, 2017. The third party has the option to convert all or a portion of the note plus accrued interest into common stock
at a conversion price equal to 50% of the lowest closing bid price for the twenty days prior to the conversion.
On August 29, 2016, the
Company borrowed $15,000 from a third party. The convertible promissory note bears interest at 10% per annum and matures on
September 1, 2017. The third party has the option to convert all or a portion of the note plus accrued interest into common
stock at a conversion price equal to 50% of the lowest closing bid price for the twenty days prior to the conversion.
New Lease
Commencing August 1, 2016, the
Company entered into a lease for a period of twelve months for its Madeira Beach location. The monthly rent will be $1,500.