TKLS Trutankless Inc (CE)

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PART I

ITEM 1.                      BUSINESS

Bollente Companies Inc. was incorporated in the state of Nevada on March 7, 2008. The Company is headquartered in Scottsdale, Arizona and currently operates through its wholly-owned subsidiary, Bollente, Inc., a Nevada corporation incorporated on December 3, 2009.

Bollente manufactures and sells a high quality, whole-house, electric tankless water heater that is more energy efficient than conventional products.

On August 13, 2015, the Company formed a wholly-owned subsidiary, Bollente International, Inc. (“Bollente International”) to begin international manufacturing and sales expansion for our trutankless® line of water heaters.

Bollente International has partnered with international manufacturing firm to increase production and efficiently handle distribution to customers in the United Kingdom and throughout Europe, Asia, Dubai, Australia and New Zealand.  We have begun the testing and certification process for several international standards, demonstrating that the product complies with the essential requirements of European health, safety and environmental protection legislation and opening the gate for future sales to more than 30 European countries.

Products

Trutankless®

We manufacture and distribute trutankless® water heaters, a line of new, high-quality, highly efficient electric tankless water heaters. Our trutankless® water heaters are engineered to outperform and outlast both its tank and tankless predecessors in energy efficiency, output, and durability. It provides endless hot water on demand for a whole household and it also integrates with home automation systems. We have several features and design innovations which are new to the electric tankless water heater market that we believe will give our products a sustainable competitive advantage over our rivals in the market. Our trutankless® water heaters are available through wholesale plumbing distributors, including Ferguson, Hajoca, Hughes Supply, WinSupply locations, Morrison Supply, and several regional distributors. A partial listing of wholesalers may be found on our website (www.trutankless.com).

Our trutankless® water heaters are designed to provide an endless hot water supply because they are designed to heat water as it flows through the system. We believe that our products are capable of higher temperature rise than competitive units at given flow rates because of its improved design and greater efficiency. Our trutankless® water heaters can save energy and reduce operating costs compared to tank systems because unlike tanks, if there is no hot water demand, no energy is being used. In addition, we intend to improve life-cycle costs with an improved design conceived not only to increase efficiency, but also the longevity of our products versus competitive units. Generally, a typical tank water heater lasts about 11 years, whereas gas tankless systems may last longer, but requires more routine maintenance. Our product line is designed to last longer than tank water heaters without any routine maintenance required under most conditions.

 

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We created a custom heat exchanger for our trutankless® product line that utilizes our patent pending Velix technology to heat water as it flows through the system, which means customers need not worry about running out of hot water. We believe we’ve selected the best materials available and a collection of exclusive design elements and features to maximize capacity, minimize energy use, and provide a truly maintenance free experience.

Our trutankless® water heaters were officially launched in the first quarter of 2014 and is sold throughout the wholesale plumbing distribution channel. As of the fiscal year ended December 31, 2015, we generated $265,504   in revenue.

 

In July of 2014, we launched MYtankless .com , a customizable online control panel for our trutankless® line of smart electric water heaters. From the dashboard, residential and commercial users can obtain real-time status reports, adjust unit temperature settings, view up to three years of water usage data, and change notification settings from anywhere in the world, using a computer or web-enabled smart device at www.mytankless.com.

Additionally, service professionals can also use the dashboard to monitor system status on every unit they install, allowing them to proactively contact their customers if a service or warranty appointment is needed.

Our primary markets, Florida, Texas, Arizona, and the rest of the Sunbelt region are centers of growth in the U.S. construction industry with green building at an all-time high, and an unprecedented appliance replacement cycle. We intend to take advantage of these powerful macro-economic trends.

MYTankless.com is available as a service to consumers of trutankless® water heaters. We have applications available for download from the Google Play and Apple iOS stores, which like the online control panels, allows monitoring and control of the tankless systems.

Industry Recognition and Awards

Bollente’s trutankless® received the Best of IBS 2014 Award for Best Home Technology Product from the National Association of Home Builders (NAHB) at this year’s International Builders Show (IBS) in Las Vegas. The IBS is produced by NAHB and is the largest annual light construction show in the world - featuring more than 1,100 exhibitors and attracting 75,000 attendees including high level decision makers from some of the largest home builders in the world as well as plumbing and HVAC professionals from top outfits in major markets.

Bollente’s trutankless® received the Governor's Award of Merit for Energy and Technology Innovation for the trutankless line of electric tankless heaters at Arizona Forward's 2014 Environmental Excellence Awards.

Bollente’s trutankless® received Kitchen and Bath Business Magazine’s 2014 K*BB Product Innovator’s Award Judges Choice Product.

truCirc

truCirc is a high-tech, smart-home water circulation pump. The energy reducing, water-saving truCirc can be used as a standalone product or with our multi-award winning trutankless® electric tankless water heater. truCirc represents the next step in our mission to pioneer forward-thinking technology that changes the way people think about hot water.

 

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A traditional water circulation pump circulates hot water through a home’s pipes, enabling homeowners to have instant, on-demand hot water as soon as they turn on the faucet and saving countless gallons of water that would have been wasted. truCirc takes the traditional pump to the next level with multiple hot water delivery strategies including a self-aware learning mode that tracks water usage in a household and predicts when hot water will be needed-- thereby using energy to keep water hot only when it’s desired. truCirc’s simple, modern, high-tech interface allows homeowners to quickly and easily change delivery modes or choose a zone or fixture to send hot water. Thermostatic shut-off valves can be installed at showerhead points of use throughout a home to further eliminate wasted water.

Our new product, truCirc, was unveiled on January 20, 2015 at the 2015 International Builders’ Show in Las Vegas and is still in the development phase. While not yet commercially available, trutankless products are expected to be compatible. Alternatively, truCirc is expected to be a stand alone product for customers who don’t utilize trutankless .

Vero

On April 16, 2015, we announced the release of Vero, our new line of electric tankless water heaters geared towards budget-driven customers. Vero boasts the same water heating performance, durability and space savings of our flagship tankless water heater. Our trutankless® water heaters are available through wholesale plumbing distributors, including Ferguson, Hajoca, Hughes Supply, WinSupply locations, Morrison Supply, and several regional distributors. A partial listing of wholesalers may be found on our website (www.trutankless.com).

Customers and Markets

We sell our products to plumbing wholesale distributors and dealers.

Wholesalers . Approximately 98.3% of our sales in 2015 and 93.5% of our sales in 2014 were to wholesale distributors for commercial and residential applications. We rely on commissioned manufacturers’ representatives to market our product lines. Additionally, our products are sold to independent dealers throughout the United States.

Manufacturing and Distribution

Our principal supplier is Sinbon Electronics, a contract manufacturer and engineering company based in Taiwan with manufacturing facilities in China. Sinbon handles procurement and supply chain management. We have an engineering agreement which is ongoing and our manufacturing agreement is currently being negotiated.

Finished products are generally shipped Free on Board (FOB) Shanghai via ocean freight and are warehoused at Associated Global Systems located in Phoenix, Arizona. Merchandise is typically shipped using common carriers or freight companies are selected at the time of shipment based on order volume and the best available rates.

 

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Intellectual Property & Proprietary Rights

Upon completion of our brand development, we will regard substantial elements of our brands and underlying intellectual property as proprietary and attempt to protect them by relying on trademark, service mark and trade secret laws, restrictions on disclosure and transferring title and other methods.

Our plans are to actively pursue patent and trademark protection for all of newly developed products, both domestically and abroad. We have novel and proprietary technologies related to our product line and the central focus of our patent counsel has been to work with our engineers to build a defensible patent portfolio.

To date, we have filed and received a United States federal trademark registration for trutankless® and our logo design with the help of our outside marketing and branding experts and have acquired several unique domain registrations reflective of our online marketing strategy (www.bollente.com). During the year ended December 31, 2013, our patent agent filed ta provisional patent with the US Patent and Trademark Office with the US Patent and Trademark Office with 37 claims based on our prototype design. Upon completion of our engineered prototype, we expect to file additional patents with additional claims. There is no guarantee that we will be able to obtain a formal patent for our tankless water heater. We will continue to protect our intellectual property through confidentiality agreements with vendors and consultants and trade secret protocols employed by employees, consultants, and contractors.

Growth Strategy

Bollente’s product launched in Q1 2014 and is sold through the wholesale plumbing distribution channel. Gas tankless manufacturers’ support of this sales channel was critical in their ability to quickly capture appreciable market share in the $3.6 billion replacement market. No electric tankless has been available solely through wholesale distribution which has welcomed the arrival of trutankless. Bollente’s sales and service training programs geared towards plumbers and contractors are the primary focal point of the Company’s sales strategy. Bollente is employing several outside manufacturers rep agencies to quickly scale sales and educate distributors, plumbers, builders, and contractors.

The Company is also leveraging online marketing strategies and social media. By continually building an immersive and educational web experience at www.trutankless.com Bollente is efficiently building brand awareness among consumers. Launch efforts are focused in Arizona, Texas, and the Southeast which accounts for over 1,000,000 electric water heater shipments annually. Licensing and co-branding opportunities are being assessed, since strategic partnerships would eliminate the channel conflicts that have historically obstructed previous electric tankless entries in the marketplace. Electric tankless has traditionally not been able to warrant such partnerships because of generally poor quality and product support, but co-branding open up sales of Bollente’s products through big box retailers.

In addition, we have determined that as part of our growth strategy, we will seek to partner with or acquire entities operating in various fields, with a bias towards green and "clean-tech" sectors. Our management has experience in marketing, product launches, business development strategies, and certain other areas specific to the success of growth companies. We will operate with a view towards identifying acquisition candidates as we seek the rights to provide the market with products and services geared toward environmental responsibility.

 

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We have identified several agents who are well suited to provide consulting to high-growth technology and consumer products companies. We are currently negotiating with several agents possessing technical expertise related to planning, structuring, and capitalizing growth companies in the green and "clean-tech" sectors who will be tasked with creating additional revenues and assist the Company with our own planning, structure, and capitalization.

We have identified several entities that fit our criteria. We are focused on adding value to these companies and acquiring either the entity or its business, maintaining and growing that business, and hiring and utilizing existing management where appropriate. We have begun the design of a website which we believe will help us attract relationships with possible acquisition targets.

Margin Expansion

Cost reduction measures, including outsourcing of key components and certain quality control testing protocols, are currently being undertaken on an expedited basis to rapidly reduce costs and improve manufacturing scalability. Such reductions are expected to take place in stages over the next three quarters and are likely to result in gross sales margins approaching 50-60% which is far higher than other companies in the sector.

Market Outlook

Bollente is entering the market in front of the largest water heater replacement cycle ever at a time when homeowners are seeking ways reduce their carbon footprint without sacrificing comfort. Shares of companies like Whirlpool (WHR) and AO Smith (AOS) have soared - fueled by the unprecedented Consumer Durables replacement cycle - which is an echo of last decade’s building boom. It is estimated that some 57 Million water heaters will need replacement in the next 3 years. Florida, Texas, and Arizona, where electric water heaters dominate the market, were the epicenters of the boom. In the new construction market, builders are increasingly marketing “green” features and trutankless fit well along with other energy saving innovations. In commercial markets, projects with a green designation like LEED or EnergyStar recently became the majority. 

Additionally, the Federal Government has mandated that starting in April 2015 standard electric water heaters over 55 gallons may not be sold, effectively forcing the market to use alternative technologies like tankless water heaters.

 

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Investment Analysis

Bollente has entered the market with a disruptive product that has enjoyed significant tail winds thus far. As a result, we believe BOLC is poised to produce exceptional results. Management expects to announce several key partnerships outside of the wholesale channel for current products and launch several additional lines next year. Management has plans to significantly reduce the cost of goods sold and develop other innovations to supplement existing offerings which will be sold through the existing sales channels and reps which to help ensure sustainable growth over the next 3-5 years.

Tankless Industry Overview

The U.S. gas tankless, whole-house, water heater market is dominated by five brands; Noritz, Rinnai, Takagi, Aqua Star by Bosch and Rheem by Paloma. The U.S. electric tankless, whole-house, water heater market is dominated by four brands; Seisco by Microtherm, Inc., Stiebel Eltron, Eemax and Power Star by Bosch. Until just a few years ago, there were only a few tankless water heater manufacturers with a presence in the United States, but that is changing. Now, several Japanese and European manufacturers have begun marketing products in the United States, and since 2003, gas tankless products have experienced dramatic growth. Electric tankless systems have not experienced comparable growth due to several factors, primarily product performance, capacity, product quality and electrical power supply and installation issues.

Manufacturers of tank heaters have a competitive advantage due largely to their product category’s long established use, name recognition, established distribution and brand position in the marketplace. Many plumbers and other building industry professionals were opposed to changing brands or to tankless systems because many tankless water heaters have been poorly designed in the past. As a result there is a perception among some contractors that these water heaters are more complicated and generally less dependable than traditional tank heaters. This perception is often passed along to consumers when making buying decisions or inquiring about switching to a tankless water heater. In recent years however, the industry has experienced a contraction in sales of products and services for new building projects. Consequently, higher ticket, higher margin products, such as tankless and solar water heating systems have become a primary growth driver for many plumbers and companies who had traditionally avoided emerging technologies.

While we believe that our products will have superior performance, such as endless hot water, superior longevity, greater efficiency and lower “life-cycle” costs than traditional tank water heaters, the Company’s success will depend to a large degree on the successful conversion of traditional water heater buyers to tankless water heater buyers. The acquisition price of tankless water heaters (both gas and electric) is greater than traditional tank water heaters, but the overall cost of ownership will be less than that of traditional tank technologies under typical circumstances. Although the public’s awareness of tankless systems has not been strong historically, sales growth in the sector is suggestive of increasing awareness.

Our marketing and promotion plans have been developed to increase the awareness of the Company’s brand as the preferred option to traditional tank systems. Bollente intends to position itself and its brand to capitalize on the paradigm shift to green-conscious living and development.

 

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Target Markets

The United States market for residential tank water heaters in 2010 was approximately 7.65 million units according to data released by the Air-Conditioning, Heating, and Refrigeration Institute (AHRI). Almost 50% of those shipments were electric water heaters, and the company has found in comparing those statistics with government data, that over 90% of tank water heaters shipped in 2010 were intended for “replacement” installations.

Bollente will initially market its products to builders, remodelers and distributors in the southern and western U.S. These areas of the country have been selected because of generally higher ground water temperatures, which improves the effects of the performance and capacity of all brands of tankless water heaters. This area of the country also traditionally has the largest share of population growth and new housing starts, accounting for almost two-thirds of all housing starts in 2010, according to government data. Additionally, the southern U.S., and specifically the southeastern U.S., has the highest usage of electric water heaters.

Overview of Potential Markets and Summary of Marketing Plan

Management intends to focus on the United States residential market initially. For decades Americans have used only tank type water heaters. For most homes, the units hold an average of 40 to 80 gallons of water in a storage tank, are gas or electric fueled and consume excessive energy to keep water hot continuously. In fact, water heaters expend up to 25% of the total energy used by a typical household representing the second largest use of energy in most homes. Depending on household usage, approximately 25 – 50% of the heat created is lost through the walls of the tank and connecting pipes.

There are other problems inherent with traditional tank water heaters:

·	Due to the high temperatures and corrosive aspects of water, a typical water heater has a life span of 10.7 years.
·	Unless replaced beforehand, more than two thirds of water heaters eventually corrode and leak or burst, often resulting in extensive and costly water and mold related damage.
·	Due to the large size and other installation requirements often result in the units being installed in garages and utility rooms on the opposite side of the home from the bathroom fixtures. Because of this, an estimated 10,000 gallons of water per household goes down the drain while users wait on the water to get hot at the faucet.
·	Traditional tank water heaters take up to 6 to 9 square feet of floor space, which can be especially valuable in multi-family or commercial applications.
·	To reduce operating costs, many people adjust the temperature on their water heaters down. Unfortunately, lower temperatures increase the possibility of unhealthy, water born bacteria growth.
·	To increase water heating capacity, many people will adjust the temperature of their water heaters up . In addition to using more energy, this practice can be dangerous by posing a greater risk of scalding.

 

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Tankless water heaters are becoming increasingly popular in America because they:

·	Produce a continuous, unlimited supply of hot water
·	Expend only the energy needed to heat the water used with no “standby” energy loss
·	Can last more than twice as long as tank heaters
·	Are small and require very little space.
·	Are not conducive to bacterial growth
·	Are considered very “green” by green conscious builders and consumers.

Electric tankless water heaters have additional benefits over gas powered models because they can be installed almost anywhere in a home (closets, attics, utility rooms, etc.) where hot water is needed which improves flexibility of floor plan design for builders, architects, and remodelers. In addition, gas tankless water heaters may not be suitable for many applications due to challenges with adequate fuel supply, the need for exhaust vents with specific requirements, and other code-related requirements. In spite of these issues, gas tankless water heaters have enjoyed significant growth in North America because of the efficiency and performance they provide.

Distribution Plan

Initially, we will be distributing our first product line throughout the southern and western U.S. using an existing network of plumbing and electrical wholesalers (distributors), manufacturers’ representatives and dealers. We believe that once the product has been launched, we will be able to partner with major companies in the building and plumbing industries to rapidly expand awareness of Bollente and our products in the water heater market in the U.S and Canada.

Sales will be pursued through the following channels:

1.	Regional and national plumbing and electrical wholesalers (also called “distributors”);
2.	Plumbers and electricians on a direct basis, in those areas where wholesalers have not yet been set up; and,
3.	Builders on a direct basis, in those areas where wholesalers & mechanical contractors have not yet been set up.

We will expand sales of the product further by marketing the product directly to consumers over the internet with a series of aggressive and ongoing marketing initiatives. We intend to market to industry professionals and end-users through more traditional marketing efforts as well, including print advertising, attendance of select national trade shows, and attendance of select regional consumer shows. We also expect Bollente will be successful in providing education, training, and support to our sales and installer networks as part of our distribution and marketing efforts.

We believe our products will be a differentiating factor for industry professionals and builders as they market to their customers. Additionally, our electric tankless products are expected to provide these professionals and their companies with a mechanism to increase revenue and improve gross margin as compared to more traditional water heating products.

 

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Employees

We currently have nine full-time employees, including Robertson James Orr, who is also our sole officer and director, and two part-time employee. We expect to increase the number of employees to expand our sales and technical staff. We are using and will continue to use independent consultants and contractors to perform various professional services. We believe that this use of third-party service providers may enhance our ability to contain operating and general expenses, and capital costs.

Employment Agreements

Effective January 2014, the Company executed a two year employment agreement with the Vice President of Sales.  The employee will receive annual compensation of $125,000 per year.  The employee will earn a bonus of $40,000 when the Company sells and receives payment for 1,500 tankless hot water systems during the twelve months ended January 31, 2015.  The individual will earn a bonus of $40,000 when the Company sells and receives payment for 3,000 tankless hot water systems during the twelve months ended January 31, 2016.  The individual is also eligible for a commission equal to 2% of gross sales of tankless hot water systems. Additionally, pursuant to the agreement, there were 5,000 shares due upon execution of the agreement, 5,000 shares due on July 15, 2014, 5,000 shares due on February 1, 2015, and 5,000 shares due on July 1, 2015.

Effective March 1, 2015, the Company executed a new employment agreement with the President and CEO of the Company.  The officer will receive annual compensation of $75,000 due monthly.  The officer can choose to receive the compensation in cash or in shares of common stock at $1 per share.  Additionally, the Company will issue 60,000 shares of common stock upon execution of the agreement and 30,000 shares of common stock per quarter starting from the three months ended May 31, 2015.

Effective October 1, 2014, the Company executed an employment agreement with the Vice President of Business Development of the Company.  The employee will receive annual compensation of $125,000 due monthly.  The employee can choose to receive the compensation in cash or in shares of common stock at $1 per share.  Additionally, the Company issued 50,000 shares of common stock pursuant to the execution of the agreement.

Consulting Agreements

On September 1, 2014, the Company entered into a Manufacturer Incentive Agreement to sell and distribute trutankless systems in single-family homes, townhomes, and condominiums constructed and sold by Meritage Homes Corporation.  The Company agrees to provide Meritage Home Corporation certain favorable pricing, supply terms, and incentives based on the volume of products purchased by Meritage’s subcontractors and suppliers.

On February 3, 2015, the Company entered into a Consulting and Advisory Agreement where an entity who will provide business development and consulting services.  The Company has agreed to issue 2,000 shares of common stock for their services over a twelve month period.

 

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Available Information

Our periodic reports filed with the SEC, which include Form 10-K, Form 10-Q, Form 8-K and amendments thereto, may be accessed by the public free of charge from the SEC. Electronic copies of these reports can be accessed at the SEC’s website ( http://www.sec.gov ). Copies of these reports may also be obtained, free of charge, upon written request to: Bollente Companies Inc., 8800 N. Gainey Dr., Suite 270, Scottsdale, Arizona 85258, Attn: Corporate Secretary. The public may read or obtain copies of these reports from the SEC at the SEC’s Public Reference Room at 450 Fifth Street N.W., Washington, D.C. 20549 (1-800-SEC-0330).

ITEM 1A.                      RISK FACTORS

We are a development stage company organized in March 2008 and have recently commenced operations, which makes an evaluation of us extremely difficult. At this stage of our business operations, even with our good faith efforts, we may never become profitable or generate any significant amount of revenues, thus potential investors have a high probability of losing their investment.

We were incorporated in March of 2008 as a Nevada corporation. As a result of our start-up operations we have; (i) generated $265,504 in revenues in the year ended December 31, 2015, (ii) accumulated deficits of $17,875,816 from our inception through the period ended December 31, 2015, and (iii) we have incurred losses of $17,875,816 from our inception through the period ended December 31, 2015.  We have been focused on organizational and start-up activities and business plan development. There is nothing at this time on which to base an assumption that our business operations will prove to be successful or that we will ever be able to operate profitably. Our future operating results will depend on many factors, including our ability to raise adequate working capital, demand for our products, the level of our competition and our ability to attract and maintain key management and employees.

If we are unable to attract and retain key personnel, our business could be harmed.

If any of our key employees were to leave, we could face substantial difficulty in hiring qualified successors and could experience a loss in productivity while any successor obtains the necessary training and experience. Our employment relationships are generally at-will. We cannot assure that one or more key employees will not leave in the future. We intend to continue to hire additional highly qualified personnel, but may not be able to attract, assimilate or retain qualified personnel in the future. Any failure to attract, integrate, motivate and retain these employees could harm our business.

We are subject to significant competition from large, well-funded companies.

The industry we compete in is characterized by intense competition and rapid and significant technological advancements. Many companies are working in a number of areas similar to our primary field of interest to develop new products; some of which may be similar and/or competitive to our products.

Most of the companies with which we compete have substantially greater financial, technical, manufacturing, marketing, sales and distribution and other resources than us. If a competitor enters the tankless water heater industry and establishes a greater market share in the direct-selling channel, our business and operating results will be adversely affected.

 

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Our auditors have substantial doubt about our ability to continue as a going concern.  Additionally, our auditor’s report reflects that the ability of the Company to continue as a going concern is dependent upon our ability to raise additional capital from the sale of common stock and, ultimately, the achievement of significant operating revenues.

Our 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. Our auditor’s report reflects that the ability of the Company to continue as a going concern is dependent upon our ability to raise additional capital from the sale of common stock and, ultimately, the achievement of significant operating revenues. If we are unable to continue as a going concern, stockholders will lose their investment.  We will be required to seek additional capital to fund future growth and expansion. No assurance can be given that such financing will be available or, if available, that it will be on commercially favorable terms. Moreover, favorable financing may be dilutive to investors.

We will require additional financing in order to implement our business plan. In the event we are unable to acquire additional financing, we may not be able to implement our business plan resulting in a loss of revenues and ultimately the loss of your investment.

Due to our very recent start-up nature, we will have to incur the costs of product development, import expenses, advertising, in addition to hiring new employees and commencing additional marketing activities for product sales and distribution. To fully implement our business plan we will require substantial additional funding.

We will need to raise additional funds to expand our operations. We plan to raise additional funds through private placements, registered offerings, debt financing or other sources to maintain and expand our operations. Adequate funds for this purpose on terms favorable to us may not be available, and if available, on terms significantly more adverse to us than are manageable. Without new funding, we may be only partially successful or completely unsuccessful in implementing our business plan, and our stockholders may lose part or all of their investment.

Our internal controls may be inadequate, which could cause our financial reporting to be unreliable and lead to misinformation being disseminated to the public.

Our management is responsible for establishing and maintaining adequate internal control over financial reporting. As defined in Exchange Act Rule 13a-15(f), internal control over financial reporting is a process designed by, or under the supervision of, the principal executive and principal financial officer and effected by the board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that: (i) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company, and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.

 

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Mr. Orr may become involved with other businesses and there can be no assurance that he will continue to provide services to us. Mr. Orr’s limited time devotion to the Company could have the effect on our operations of preventing us from being a successful business operation, which ultimately could cause a loss of stockholder investment.

As compared to many other public companies, we do not have the depth of managerial or technical personnel. Mr. Orr is currently involved in other businesses, which have not, and are not expected in the future to interfere with Mr. Orr’s ability to work on behalf of our Company. Mr. Orr may in the future be involved with other businesses and there can be no assurance that he will continue to provide services to us. Mr. Orr will devote only a portion of his time to our activities.

We depend on certain key employees, and believe the loss of any of them would have a material adverse effect on our business.

 

We will be dependent on the continued services of our management team, as well as our outside consultants. While we have no assurance that our current management will produce successful operations, the loss of such personnel could have an adverse effect on meeting our production and financial performance objectives. We have no assurance that we will not lose the services of these or other key personnel and may not be able to timely replace any personnel if we do lose their services.

Our ability to attract qualified sales and marketing personnel is critical to our future success, and any inability to attract such personnel could harm our business.

Our future success may also depend on our ability to attract and retain additional qualified design and sales and marketing personnel. We face competition for these individuals and may not be able to attract or retain these employees, which could have a material adverse effect on our results of operations and financial condition.

RISKS RELATED TO OUR INTELLECTUAL PROPERTY AND TECHNOLOGY

If we fail to secure or protect our intellectual property rights, our products and competitors may be able to use our designs, each of which could harm our reputation, reduce our revenues and increase our costs.

We will rely on intellectual property laws to protect our proprietary rights with respect to our trademarks and pending patent. We are susceptible to injury from patent infringement, which may harm our reputation for producing high-quality products or force us to incur additional expense in enforcing our rights. It is difficult and expensive to detect and prevent patent infringement. Despite our efforts to protect our intellectual property, some may attempt to violate our intellectual property rights by using our trademarks and imitating our products, which could potentially harm our brand, reputation and financial condition.

We may face significant expenses and liability in connection with the protection of our intellectual property rights. Infringement claims and lawsuits likely would be expensive to resolve and would require substantial management time and resources. Any adverse determination in litigation could subject us to the loss of our rights to a particular trademark, which could prevent us from manufacturing, selling or using certain aspects of our products or could subject us to substantial liability, any of which would harm our results of operations. Aside from infringement claims against us, if we fail to secure or protect our intellectual property rights, our competitors may be able to use our designs. If we are unable to successfully protect our intellectual property rights or resolve any conflicts, our results of operations may be harmed.

 

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Our reliance on intellectual property and other proprietary information subjects us to the risk that these key ingredients of our business could be copied by competitors.

Our success depends, in significant part, on the proprietary nature of our technology. If a competitor is able to reproduce or otherwise capitalize on our technology, despite the safeguards we have in place, it may be difficult, expensive or impossible for us to obtain necessary legal protection. In addition to patent protection of intellectual property rights, we consider elements of our product designs and processes to be proprietary and confidential. We rely upon employee, consultant and vendor non-disclosure agreements and contractual provisions and a system of internal safeguards to protect our proprietary information. However, any of our registered or unregistered intellectual property rights may be challenged or exploited by others in the industry, which might harm our operating results.

RISKS RELATING TO OUR COMMON STOCK

Because our common stock could remain under $5.00 per share, it could continue to be deemed a low-priced “Penny” stock, an investment in our common stock should be considered high risk and subject to marketability restrictions.

Since our common stock is currently under $5.00 per share, it is considered a penny stock, as defined in Rule 3a51-1 under the Securities Exchange Act, it will be more difficult for investors to liquidate their investment even if and when a market develops for the common stock. If the trading price of the common stock stays below $5.00 per share, trading in the common stock is subject to the penny stock rules of the Securities Exchange Act specified in rules 15g-1 through 15g-10. Those rules require broker-dealers, before effecting transactions in any penny stock, to:

·	Deliver to the customer, and obtain a written receipt for, a disclosure document;
·	Disclose certain price information about the stock;
·	Disclose the amount of compensation received by the broker-dealer or any associated person of the broker-dealer;
·	Send monthly statements to customers with market and price information about the penny stock; and
·	In some circumstances, approve the purchaser’s account under certain standards and deliver written statements to the customer with information specified in the rules.

Consequently, the penny stock rules may restrict the ability or willingness of broker-dealers to accept the common stock for deposit into an account or, if accepted for deposit, to sell the common stock and these restrictions may affect the ability of holders to sell their common stock in the secondary market and the price at which such holders can sell any such securities. These additional procedures could also limit our ability to raise additional capital in the future.

 

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FINRA sales practice requirements may also limit a stockholder's ability to buy and sell our stock.

In addition to the “penny stock” rules described above, the Financial Industry Regulatory Authority (FINRA) has adopted rules that require that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. 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 limit your ability to buy and sell our stock and have an adverse effect on the market for our shares.

We have one individual performing the functions of all officers and directors. Mr. Orr, our president, has developed our internal control procedures and is responsible for monitoring and ensuring compliance with those procedures. As a result, our internal controls may be inadequate or ineffective, which could cause our financial reporting to be unreliable and lead to misinformation being disseminated to the public. Investors relying upon this misinformation may make an uninformed investment decision.

ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

ITEM 2. PROPERTIES

We currently maintain an executive office 8800 N. Gainey Center Dr. Suite 270 Scottsdale AZ 85253, which consists of approximately 1,577 square feet. Our monthly rent for this office is $4,000. In January 2015, we signed a sublease with Perigon Companies, LLC, a Delaware limited liability company (“Perigon”). The lease term was one year at a rate of $4,000 per month with an option to continue on a month-to-month basis.

Additionally, we maintain an industrial/commercial building located at 15720 N Greenway-Hayden Loop, Unit 2, Scottsdale, AZ 85254, which consists of approximately 1,924 square feet. On January 1, 2015, we signed a new lease for 12 months at a rate of $2,800 per month.

ITEM 3. LEGAL PROCEEDINGS

We are not a party to any material legal proceedings.

 

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PART II

ITEM 5.                      MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS AND SMALL BUSINESS ISSUER PURCHASE OF EQUITY SECURITIES

Market Information

Our common stock is traded in the OTCQB under the symbol “BOLC”. Our common stock has traded sporadically on the OTCQB, which limits our ability to locate accurate high and low bid prices for each quarter within the last two fiscal years. Therefore, the following table lists the available quotations for the high and low bid prices for the fiscal years ended December 31, 2014 and 2015.

The following table sets forth, the average high and low bid prices of our common stock as reported by Yahoo Finance. These quotations reflect inter-dealer prices, without retail mark-up, markdown or commission, and may not necessarily represent actual transactions

			Year Ending December 31, 2015						Year Ending December 31, 2014
			AVERAGE BID PRICES						AVERAGE BID PRICES
			High			Low			High			Low
1 st Quarter		$	2.33		$	1.68		$	4.02		$	2.47
2 nd Quarter		$	2.38		$	1.76		$	3.24		$	1.95
3 rd Quarter		$	2.45		$	1.80		$	3.31		$	2.12
4 th Quarter		$	2.28		$	1.36		$	3.07		$	2.16

Holders of Common Stock

As of May 5, 2016, there were approximately 260 stockholders of record of our common stock. This number does not include shares held by brokerage clearing houses, depositories or others in unregistered form.

Dividends

The payment of dividends is subject to the discretion of our Board of Directors and will depend, among other things, upon our earnings, our capital requirements, our financial condition, and other relevant factors. We have not paid or declared any dividends upon our common stock since our inception and, by reason of our present financial status and our contemplated financial requirements, do not anticipate paying any dividends upon our common stock in the foreseeable future.

We have never declared or paid any cash dividends. We currently do not intend to pay cash dividends in the foreseeable future on the shares of common stock. We intend to reinvest any earnings in the development and expansion of our business. Any cash dividends in the future to common stockholders will be payable when, as and if declared by our Board of Directors, based upon the Board’s assessment of:

·	our financial condition;

 

·

earnings;

 

 

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·	need for funds;

 

·	capital requirements;

 

·	prior claims of preferred stock to the extent issued and outstanding; and

 

·	other factors, including any applicable laws.

 

Therefore, there can be no assurance that any dividends on the common stock will ever be paid.

Recent Sales of Unregistered Securities

On February 2, 2015, the Company issued 230,000 shares of common stock for cash received of $230,000.

On February 2, 2015, the Company issued 184,600 shares of common stock for services totaling $184,600.

On February 2, 2015, the Company issued 30,000 shares of common stock owed to an employee of the Company as part of their employment agreement totaling $30,000.

On March 23, 2015, the Company issued a total of 35,000 shares of common stock for cash received of $35,000.

On March 23, 2015, the Company issued 20,000 shares of common stock for services totaling $20,000.

On March 23, 2015, the Company issued 100,000 shares of common stock owed to employees of the Company as part of their employment agreement totaling $100,000.

On April 2, 2015, the Company issued 175,000 shares of common stock for cash received of $175,000.

On April 2, 2015 the Company issued 15,000 shares of common stock for services totaling $15,000.

On April 2, 2015, the Company issued 10,000 shares of common stock for services totaling $10,000.  The shares were valued according to the fair value of the common stock, based on recent sales in a PPM at $1.00 and not based on the stock price on the market at the time which ranged from $2.53 to $3.71.

On April 30, 2015, the Company issued 451,000 shares of common stock for cash received of $451,000.

On June 18, 2015, the Company issued 10,000 shares of common stock for cash totaling $10,000.

On June 18, 2015, the Company issued 400,000 shares of common stock for cash received of $400,000.

 

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On June 18, 2015, the Company issued 167,400 shares of common stock for services totaling $167,400.  The shares were valued according to the fair value of the common stock, based on recent sales in a PPM at $1.00 and not based on the stock price on the market at the time which ranged from $2.53 to $3.71.

On June 18, 2015, the Company issued 11,300 shares of common stock as a settlement of debt totaling $11,300.  The shares were valued according to the fair value of the common stock, based on recent sales in a PPM at $1.00 and not based on the stock price on the market at the time which ranged from $2.53 to $3.71.

On June 18, 2015, the Company issued 30,000 shares of common stock owed to an officer of the Company as part of their employment agreement totaling $30,000.  The shares were valued according to the fair value of the common stock, based on recent sales in a PPM at $1.00 and not based on the stock price on the market at the time which ranged from $2.53 to $3.71.

On June 30, 2015, the Company issued 12,500 shares of common stock for cash received of $12,500.

On June 30, 2015, the Company issued 120,000 shares of common stock for services totaling $120,000.  The shares were valued according to the fair value of the common stock, based on recent sales in a PPM at $1.00 and not based on the stock price on the market at the time which ranged from $2.53 to $3.71.

On August 19, 2015, the Company issued 136,000 shares of common stock for cash received of $136,000,of which $50,000 of the funds were received as of June 30, 2015 and recorded as stock payable.

On August 19, 2015, the Company issued 30,085 shares of common stock for services totaling $30,085.  The shares were valued according to the fair value of the common stock, based on recent sales in a PPM at $1.00 and not based on the stock price on the market at the time which ranged from $2.53 to $3.71.

On August 19, 2015, the Company issued 10,000 shares of common stock owed to an employee of the Company as part of their employment agreement totaling $10,000.  The shares were valued according to the fair value of the common stock, based on recent sales in a PPM at $1.00 and not based on the stock price on the market at the time which ranged from $2.53 to $3.71.

In October 1, 2015, the Company issued 25,000 shares of common stock for cash totaling $25,000.

On October 1, 2015, the Company issued 100,000 shares of common stock for services totaling $100,000.

On October 1, 2015, the Company issued 30,000 shares of common stock earned by the President of the Company as part of their employment agreement totaling $30,000.

 

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On October 28, 2015, the Company issued 10,000 shares of common stock as commission totaling $10,000.  The shares were valued according to the fair value of the common stock, based on recent sales in a PPM at $1.00 and not based on the stock price on the market at the time which ranged from $2.53 to $3.71.

On October 28, 2015, the Company issued 73,000 shares of common stock for services totaling $73,000.  The shares were valued according to the fair value of the common stock, based on recent sales in a PPM at $1.00 and not based on the stock price on the market at the time which ranged from $2.53 to $3.71.

On November 23, 2015, the Company sold 50,000 shares of common stock to an investor for cash totaling $50,000.  The shares were issued on February 10, 2016.

On November 30, 2015, the Company recorded a stock payable totaling $30,000 for 30,000 shares of common stock earned by the President of the Company as part of their employment agreement.  The shares were valued according to the fair value of the common stock, based on recent sales in a PPM at $1.00 and not based on the stock price on the market at the time which ranged from $2.53 to $3.71.  The shares were issued on February 2, 2016.

On December 3, 2015, the Company sold 10,000 shares of common stock to an investor for cash totaling $10,000.  The shares were issued on February 10, 2016.

On December 31, 2015, the Company recorded a stock payable totaling $10,000 for 10,000 shares of common stock earned by the President of the Company as part of their employment agreement.  The shares were valued according to the fair value of the common stock, based on recent sales in a PPM at $1.00 and not based on the stock price on the market at the time which ranged from $2.53 to $3.71.  As of the date of this filing, the shares have not been issued.

On December 31, 2015, the Company recorded a stock payable totaling $500,000 for 500,000 shares of common stock earned by a consultant.  The shares were valued according to the fair value of the common stock, based on recent sales in a PPM at $1.00 and not based on the stock price on the market at the time which ranged from $2.53 to $3.71.  The shares were issued on February 2, 2016.

We believe that the issuance and sale of the above securities was exempt from the registration and prospectus delivery requirements of the Securities Act of 1933 by virtue of Section 4(2) and Regulation D Rule. The securities were sold directly by us and did not involve a public offering or general solicitation. The recipients of the securities were afforded an opportunity for effective access to files and records of the Registrant that contained the relevant information needed to make their investment decision, including the financial statements and 34 Act reports . We reasonably believed that the recipients, immediately prior to the sale of the securities, were accredited investors and had such knowledge and experience in our financial and business matters that they were capable of evaluating the merits and risks of their investment. The management of the recipients had the opportunity to speak with our management on several occasions prior to their investment decision. There were no commissions paid on the issuance and sale of the securities.

 

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Subsequent Sales & issuances of Unregistered Securities

On February 2, 2016, the Company issued 130,000 shares of common stock for cash received of $130,000.

On February 2, 2016, the Company issued 930,000 shares of common stock for services totaling $930,000.

On February 10, 2016, the Company issued 60,000 shares of common stock for cash received of $60,000.

On February 10, 2016, the Company issued 45,000 shares of common stock for services totaling $45,000.

On February 22, 2016, the Company issued 303,000 shares of common stock for services totaling $303,000.

We believe that the issuance and sale of the securities was exempt from the registration and prospectus delivery requirements of the Securities Act of 1933 by virtue of Section 4(2) and Regulation D Rule. The securities were sold directly by us and did not involve a public offering or general solicitation. The recipients of the securities were afforded an opportunity for effective access to files and records of the Registrant that contained the relevant information needed to make their investment decision, including the financial statements and 34 Act reports . We reasonably believed that the recipients, immediately prior to the sale of the securities, were accredited investors and had such knowledge and experience in our financial and business matters that they were capable of evaluating the merits and risks of their investment. The management of the recipients had the opportunity to speak with our management on several occasions prior to their investment decision. There were no commissions paid on the issuance and sale of the securities.

Issuer Purchases of Equity Securities

The Company did not repurchase any of its equity securities during the fourth quarter ended December 31, 2015.

ITEM 6.                      SELECTED FINANCIAL DATA

This item is not applicable, as we are considered a smaller reporting company.

ITEM 7.                      MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Background

Bollente Companies Inc. was incorporated in the state of Nevada on March 7, 2008. The Company is headquartered in Scottsdale, Arizona and currently operates through its wholly-owned subsidiary, Bollente, Inc., a Nevada corporation incorporated on December 3, 2009. On August 13, 2015, the Company formed a wholly-owned subsidiary, Bollente International, Inc.

 

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Bollente manufactures and sells a high quality, whole-house, electric tankless water heater that is more energy efficient than conventional products. See “Item 1. Business.”

RESULTS OF OPERATIONS

Revenues

In the year ended December 31, 2015 we generated $265,504 in revenues, as compared to $238,912 in revenues in the prior year. The increase in sales was attributable mostly to sales of our trutankless® products and also the sale of Vero products which Vero products were not sold in 2014. Cost of goods sold was $342,999, as compared to $440,330 in the prior year.

To the knowledge of management, the Company is unaware of any trends or uncertainties in the sales or costs of our products and services for the periods discussed.

Expenses

Operating expenses totaled $4,454,110 during the year ended December 31, 2015 as compared to $6,010,406 in the prior year. In the year ended December 31, 2015, our expenses primarily consisted of General and Administrative of $1,369,555, Executive Compensation of $266,500, Research and Development of $318,720, and Professional fees of $2,499,335.

General and administrative fees decreased $187,460, from the year ended December 31, 2014 to the year ended December 31, 2015.  This decrease was primarily due to a decrease in wages and marketing in 2015.

Executive Compensation increased $57,650 from the year ended December 31, 2014 to the year ended December 31, 2015.  Executive Compensation increased due to an increase in cash and stock based compensation to the President of the Company.

Research and development decreased $558,057 from the year ended December 31, 2014 to the year ended December 31, 2015.  This decrease is attributed primarily to the Company spending less towards developing its technology. In 2014, the Company was still spending funds on developing our products.

Professional fees decreased $868,429 from the year ended December 31, 2014 to the year ended December 31, 2015.  Professional fees decreased due to a decrease in consulting fees associated with business development.

Other Income and Expenses

Other income increased $270,787 in the year ended December 31, 2015 from $7,182 for the year ended December 31, 2014. The increase was the result of a forgiveness of debt in 2015.

Interest expense – related party increased $30,309 to $39,394 in the year ended December 31, 2015 from $9,085 for the year ended December 31, 2014. The increase was the result of an increase in notes payable with interest accruals.

Interest expense increased $117 to $322 in the year ended December 31, 2015 from $205 for the year ended December 31, 2014. The increase was the result of an increase in notes payable with interest accruals.

 

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Net Loss

In the year ended December 31, 2015, we generated a net loss of $4,293,361, a decrease of $2,924,578 from $7,217,939 for the year ended December 31, 2014. This decrease was attributable to decreased research and development costs, professional fees, and loss on debt conversion. The loss on debt conversion amount was determined as follows: Amount owed to Perigon totaled $275,000. We issued 1,100,000 shares valued at $1.00 per share based on prior stock issuances. The total value converted was $1,100,000 which left an $825,000 loss on conversion.

In the year ended December 31, 2015, we generated a net loss from continuing operations of $4,293,361, a decrease of $2,745,571 from $7,038,932 for the year ended December 31, 2014. This decrease was attributable to decreased research and development costs, professional fees and loss on debt conversion.

In the year ended December 31, 2015, we generated a net loss from discontinued operations of $0 compared to a net loss from discontinued operations of $179,007 for the year ended December 31, 2014. This decrease was attributable to decreased legal fees.

Going Concern

The financial statements included in this filing have been prepared in conformity with generally accepted accounting principles that contemplate the continuance of the Company as a going concern.  The Company may not have a sufficient amount of cash required to pay all of the costs associated with operating and marketing of its products. Management intends to use borrowings and security sales to mitigate the effects of cash flow deficits; however, no assurance can be given that debt or equity financing, if and when required, will be available. The financial statements do not include any adjustments relating to the recoverability and classification of recorded assets and classification of liabilities that might be necessary should the Company be unable to continue existence.

Liquidity and Capital Resources

As of December 31, 2015, we had $3,618 in cash, $72,533 in accounts receivable, $222,537 in inventory, $205,886 in prepaid expenses and $306,217 in prepaid stock compensation. The following table provides detailed information about our net cash flow for all financial statement periods presented in this Annual Report. To date, we have financed our operations through the issuance of stock and borrowings.

The following table sets forth a summary of our cash flows for the years ended December 31, 2015 and 2014:

		Year ended December 31,
		2015		2014
Net cash used in operating activities – continuing operations		$       (2,523,867)		$      (2,647,194)
Net cash used in operating activities – discontinued operations		-		(85,647)
Net cash used in operating activities		(2,523,867)		(2,732,841)
Net cash used in investing activities – continuing operations		(18,424)		(12,324)
Net cash used in investing activities		(18,424)		(12,324)
Net cash provided by financing activities – continuing operations		2,505,463		2,695,635
Net cash provided by financing activities – discontinued operations		-		86,013
Net cash provided by financing activities		2,505,463		2,781,648
Net decrease in Cash		(36,828)		36,483
Cash, beginning		40,446		4,329
Cash, ending		3,618		40,812
Less: Cash, discontinued operations		-		366
Cash, continuing operations		$                3,618		$                 40,446

 

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Operating activities

Net cash used in operating activities – continuing operations was $2,523,867 for the year ended December 31, 2015, as compared to $2,647,194 used in operating activities for the same period in 2014. The decrease in net cash used in operating activities – continuing operations was primarily due to a decrease in payroll, marketing, research and development and consulting contract cost.

Net cash used in operating activities – discontinued operations was $0 for the year ended December 31, 2015, as compared to $85,647 used in operating activities for the same period in 2014. The decrease in net cash used in operating activities – discontinued operations was primarily due to a decrease in legal fees.

Investing activities

Net cash used in investing activities was $18,424 for the year ended December 31, 2015, as compared to $12,324 used in investing activities for the same period in 2014. The increase in net cash used in investing activities was primarily due to an increase in software, trademarks, and fixed asset purchases.

Financing activities

Net cash provided by financing activities – continuing operations for the year ended December 31, 2015 was $2,505,463, as compared to $2,695,635 for the same period of 2014. The decrease of net cash provided by financing activities – continuing operations was mainly attributable to less equity financing from the sale of common stock and borrowings.

Net cash provided by financing activities – discontinued operations for the year ended December 31, 2015 was $0, as compared to $86,013 for the same period of 2014. The decrease of net cash provided by financing activities – discontinued operations was mainly attributable to less financing from borrowings.

As of December 31, 2015, we continue to use traditional and/or debt financing to provide the capital we need to run the business.

Since inception, we have financed our cash flow requirements through issuance of common stock and debt financing. As we expand our activities, we may, and most likely will, continue to experience net negative cash flows from operations, pending receipt of substantial product sales. Additionally, we anticipate obtaining additional financing to fund operations through common stock offerings, to the extent available, or to obtain additional financing to the extent necessary to augment our working capital. In the future we need to generate sufficient revenues from product sales in order to eliminate or reduce the need to sell additional stock or obtain additional loans. There can be no assurance we will be successful in raising the necessary funds to execute our business plan.

On March 3, 2015, the Company received $200,000 as a loan from a shareholder of the Company. The interest rate is 12% that is to be paid on a monthly basis. The term of the note is for two years beginning March 3, 2015 and ending on March 2, 2017.

 

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During the year ended December 31, 2015, the Company has agreed to allow accredited investors the ability to receive a royalty on products sold in an effort to fund its distribution and marketing advances internationally by purchasing units.  Each unit represents 0.625% royalty interest in the Gross Margin of product sold by Bollente International, Inc., costing $25,000 per unit.  As of December 31, 2015, twenty-five units have been sold totaling $625,000.  This amount is included in additional paid in capital since there is no obligation to repay the funds. As of December 31, 2015, we did not pay any royalties to the unit holders .

We anticipate that we will incur operating losses in the next twelve months. Our lack of operating history makes predictions of future operating results difficult to ascertain.  Our prospects must be considered in light of the risks, expenses and difficulties frequently encountered by companies in their early stage of development. Such risks for us include, but are not limited to, an evolving and unpredictable business model and the management of growth. To address these risks, we must, among other things, obtain a customer base, implement and successfully execute our business and marketing strategy, continually develop our line of products, respond to competitive developments, and attract, retain and motivate qualified personnel. There can be no assurance that we will be successful in addressing such risks, and the failure to do so can have a material adverse effect on our business prospects, financial condition and results of operations.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.

ITEM 7A.                      QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

This item in not applicable as we are currently considered a smaller reporting company.

ITEM 8.                      FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

See Index to Financial Statements and Financial Statement Schedules appearing on page 36 of this Form 10-K.

ITEM 9.                      CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

We have had no disagreements with our independent auditors on accounting or financial disclosures.

 

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ITEM 9A (T)                                           CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Our Principal Executive Officer and Principal Financial Officer, Robertson James Orr, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended) as of the end of the period covered by this Report. Based on his evaluation, Mr. Orr concluded that our disclosure controls and procedures are designed at a reasonable assurance level and are effective to provide reasonable assurance that information we are required to disclose in the reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our chief executive officer and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

Management’s Report on Internal Control Over Financial Reporting

           Our management is responsible for establishing and maintaining adequate internal control, as is defined in the Securities Exchange Act of 1934.  These internal controls are designed to provide reasonable assurance that the reported financial information is presented fairly, that disclosures are adequate and that the judgments inherent in the preparation of financial statements are reasonable.  There are inherent limitations in the effectiveness of any system of internal controls, including the possibility of human error and overriding of controls.  Consequently, an effective internal control system can only provide reasonable, not absolute, assurance with respect to reporting financial information.

Our internal control over financial reporting includes policies and procedures that: (i) pertain to maintaining records that in reasonable detail accurately and fairly reflect our transactions; (ii) provide reasonable assurance that transactions are recorded as necessary for preparation of our financial statements in accordance with generally accepted accounting principles and the receipts and expenditures of company assets are made and in accordance with our management and directors authorization; and (iii) provide reasonable assurance regarding the prevention or timely detection of unauthorized acquisition, use or disposition of assets that could have a material effect on our financial statements.

Management has undertaken an assessment of the effectiveness of our internal control over financial reporting based on the framework and criteria established in the Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”).  Based upon this evaluation, management concluded that our internal control over financial reporting was effective as of December 31, 2015.

This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting.  Management’s report was not subject to attestation by our registered public accounting firm pursuant to the temporary rules of the Securities and Exchange Commission that permit the company to provide only management’s report in this annual report.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting that occurred during our most recent fiscal quarter that have materially affected, or reasonably likely to materially affect, our internal control over financial reporting.

 

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ITEM 9B.                      OTHER INFORMATION

None.

PART III

ITEM 10.                      DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The members of our board of directors serve for one year terms and are elected at the next annual meeting of stockholders, or until their successors have been elected. The officers serve at the pleasure of the board of directors.

Information as to our current directors and executive officers is as follows:

Name	Age	Title	Since
Robertson James Orr	41	Chief Executive Officer, President, Secretary, Treasurer, & Director	May 12, 2010

Duties, Responsibilities and Experience

Robertson James Orr , has been our Chief Executive Officer, President, Treasurer, Secretary, and a Director since May 12, 2010. Mr. Orr attended Arizona State University and graduated with a BA in Business Management.  In 1998, Mr. Orr assisted in the founding of bluemedia, Inc., a successful large format digital printing company based in Tempe, Arizona.  Mr. Orr led bluemedia to profitability 9 years ago while overseeing the company's sales department and business development, and since then the company has continued to grow by more than 28% annually. In 2005, Mr. Orr and his Partners in bluemedia started a non-traditional ad agency called Blind Society, which is responsible for the direct to consumer marketing efforts of companies like AT&T, K-Swiss, and Activision. In addition to his entrepreneurial successes, Mr. Orr has been involved with supporting numerous local charitable causes through his work with the Boys & Girls Clubs of Phoenix, St. Joseph the Worker, the MDA and the ADA. He is also on the Board of Directors for the Tempe Chamber of Commerce and is active in the Phoenix 40.

Indemnification of Directors and Officers

Our Articles of Incorporation and Bylaws both provide for the indemnification of our officers and directors to the fullest extent permitted by Nevada law.

Limitation of Liability of Directors

Pursuant to the Nevada General Corporation Law, our Articles of Incorporation exclude personal liability for our Directors for monetary damages based upon any violation of their fiduciary duties as Directors, except as to liability for any breach of the duty of loyalty, acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, or any transaction from which a Director receives an improper personal benefit. This exclusion of liability does not limit any right which a Director may have to be indemnified and does not affect any Director’s liability under federal or applicable state securities laws. We have agreed to indemnify our directors against expenses, judgments, and amounts paid in settlement in connection with any claim against a Director if he acted in good faith and in a manner he believed to be in our best interests.

 

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Election of Directors and Officers

Directors are elected to serve until the next annual meeting of stockholders and until their successors have been elected and qualified. Officers are appointed to serve until the meeting of the Board of Directors following the next annual meeting of stockholders and until their successors have been elected and qualified.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), requires our executive officers and directors, and persons who beneficially own more than ten percent of our common stock, to file initial reports of ownership and reports of changes in ownership with the SEC.  Executive officers, directors and greater-than-ten-percent beneficial owners are required by SEC regulations to furnish us with copies of all Section 16(a) forms they file. Based upon a review of the copies of such forms furnished to us and written representations from our executive officers and directors, we believe that as of the date of this filing they were current in their filings.

Code of Ethics

A code of ethics relates to written standards that are reasonably designed to deter wrongdoing and to promote:

1.	Honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships;

2.	Full, fair, accurate, timely and understandable disclosure in reports and documents that are filed with, or submitted to, the Commission and in other public communications made by an issuer;

3.	Compliance with applicable governmental laws, rules and regulations;

4.	The prompt internal reporting of violations of the code to an appropriate person or persons identified in the code; and

5.	Accountability for adherence to the code.

We have not adopted a corporate code of ethics that applies to our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions.

Our decision to not adopt such a code of ethics results from our having a small management for the Company.  We believe that the limited interaction which occurs having such a small management structure for the Company eliminates the current need for such a code, in that violations of such a code would be reported to the party generating the violation.

Corporate Governance

We currently do not have standing audit, nominating and compensation committees of the board of directors, or committees performing similar functions. Until formal committees are established, our entire board of directors, perform the same functions as an audit, nominating and compensation committee.

 

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Involvement in Certain Legal Proceedings

To the best of our knowledge, none of our directors or executive officers has, during the past five years:

·	been convicted in a criminal proceeding or been subject to a pending criminal proceeding (excluding traffic violations and other minor offences);

 

·	had any bankruptcy petition filed by or against the business or property of the person, or of any partnership, corporation or business association of which he was a general partner or executive officer, either at the time of the bankruptcy filing or within two years prior to that time;

 

·

been subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction or federal or state authority, permanently or temporarily enjoining, barring, suspending or otherwise limiting, his involvement in any type of business, securities, futures, commodities, investment, banking, savings and loan, or insurance activities, or to be associated with persons engaged in any such activity;

 

·	been found by a court of competent jurisdiction in a civil action or by the SEC or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated;

 

·

been the subject of, or a party to, any federal or state judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended or vacated (not including any settlement of a civil proceeding among private litigants), relating to an alleged violation of any federal or state securities or commodities law or regulation, any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order, or any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or

 

·

been the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined in Section 3(a)(26) of the Exchange Act (15 U.S.C. 78c(a)(26))), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act (7 U.S.C. 1(a)(29))), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member.

 

ITEM 11.                      EXECUTIVE COMPENSATION

Overview of Compensation Program

We currently have not appointed members to serve on the Compensation Committee of the Board of Directors. Until a formal committee is established, our entire Board of Directors has responsibility for establishing, implementing and continually monitoring adherence with the Company’s compensation philosophy. The Board of Directors ensures that the total compensation paid to the executives is fair, reasonable and competitive.

 

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Compensation Philosophy and Objectives

The Board of Directors believes that the most effective executive compensation program is one that is designed to reward the achievement of specific annual, long-term and strategic goals by the Company and that aligns executives’ interests with those of the stockholders by rewarding performance above established goals, with the ultimate objective of improving stockholder value. As a result of the size of the Company and only having one officer, the Board evaluates both performance and compensation on an informal basis. Upon hiring additional executives, the Board intends to establish a Compensation Committee to evaluate both performance and compensation to ensure that the Company maintains its ability to attract and retain superior employees in key positions and that compensation provided to key employees remains competitive relative to the compensation paid to similarly-situated executives of peer companies. To that end, the Board believes executive compensation packages provided by the Company to its executives, including the named executive officers, should include both cash and stock-based compensation that reward performance as measured against established goals.

Role of Executive Officers in Compensation Decisions

The Board of Directors makes all compensation decisions for, and approves recommendations regarding equity awards to, the executive officers and Directors of the Company. Decisions regarding the non-equity compensation of other employees of the Company are made by management.

On March 1, 2015, the Company executed a Personal Service Agreement with Mr. Orr, the President of the Company.  Mr. Orr will receive annual compensation of $75,000 due monthly.  Mr. Orr can choose to receive the compensation in cash or in shares of common stock at $1 per share.  Additionally, the Company will issue 60,000 shares of common stock upon execution of the agreement and 30,000 shares of common stock per quarter starting from the three months ended May 31, 2015.

Summary Compensation Table

The table below summarizes the total compensation paid to or earned by our current Executive Officers for the fiscal years ended December 31, 2015, 2014 and 2013 .

SUMMARY COMPENSATION TABLE
Name and Principal Positions	Year	Salary ($)	Bonus ($)	Stock Awards ($)	Option Awards ($)	Non-Equity Incentive Plan Compen-sation ($)	Non-qualified Deferred Compensation Earnings ($)	All Other Compen-sation ($)	Total ($)
Robertson James Orr (1) ,	2015	76,500	-0-	190,000 (2)	-0-	-0-	-0-	-0-	266,500
President, Secretary,	2014	64,500	-0-	165,000 (3)	-0-	-0-	-0-	-0-	229,500
Treasurer & Director	2013	12,000	-0-	111,600 (4)	-0-	-0-	-0-	-0-	123,600

(1)	Mr. Orr was appointed President, Secretary, Treasurer, and Director of the Company on May 12, 2010.

(2)	Amount represents the fair market value of 190,000 shares of common stock issued for services as an employee.

(3)	Amount represents the fair market value of 165,000 shares of common stock issued for services as an employee.

(4)	Amount represents the fair market value of 45,000 shares of common stock issued for services as an employee.

(5)	Amount represents the fair market value of 95,000 shares of common stock issued for services as an employee.

 

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Termination of Employment

There are no compensatory plans or arrangements, including payments to be received from the Company, with respect to any person which would in any way result in payments to any such person because of his resignation, retirement, or other termination of such person’s employment with the Company or its subsidiaries, or any change in control of the Company, or a change in the person’s responsibilities following a change in control of the Company, except with respect to a breach of contract on the part of the Company.

Option Grants in Last Fiscal Year

During the years ended December 31, 2015 and 2014, we did not grant any options to our officers and directors.

ITEM 12.                      SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The following table sets forth information, to the best of our knowledge, about the beneficial ownership of our common stock on May 6, 2016 relating to the beneficial ownership of our common stock by those persons known to beneficially own more than 5% of our capital stock and by our directors and executive officers.  The percentage of beneficial ownership for the following table is based on 20,818,186 shares of common stock outstanding.

Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission and does not necessarily indicate beneficial ownership for any other purpose. Under these rules, beneficial ownership includes those shares of common stock over which the stockholder has sole or shared voting or investment power. It also includes shares of common stock that the stockholder has a right to acquire within 60 days after May 6, 2016 pursuant to options, warrants, conversion privileges or other right. The percentage ownership of the outstanding common stock, however, is based on the assumption, expressly required by the rules of the Securities and Exchange Commission, that only the person or entity whose ownership is being reported has converted options or warrants into shares of our common stock.

Security Ownership of Management, Directors and Certain Beneficial Owners

Title of Class	Name of Beneficial Owner (1)	Number Of Shares	Percent Beneficially Owned
Common	Robertson James Orr – Sole Officer and Director (2)	776,327	3.7%
Common	Jim Burns & Lynn Burns JT TEN	1,110,000	5.3%
	All Directors, Officers and Principal Stockholders as a Group	1,886,327	9.0%

1.	As used in this table, “beneficial ownership” means the sole or shared power to vote, or to direct the voting of, a security, or the sole or shared investment power with respect to Common Stock (i.e., the power to dispose of, or to direct the disposition of, a security).

2.	Robertson James Orr is a natural person directly holding 100% voting power over the shares. Mr. Orr’s address is located at 312 West Macaw Drive, Chandler, AZ 85255.

3.	Jim & Lynn Burns are natural persons directly holding 100% voting power over the shares. Mr. and Mrs.’s Burns address is located at 146101 W Meadow Ln, Maricopa, AZ 85139

 

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Changes in Control

There are no arrangements, known to the Company, including any pledge by any person of securities of the Company, the operation of which may at a subsequent date result in a change in control of the Company.

ITEM 13.                      CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPNDENCE

Transactions with Related Persons

In January 2014, the Company executed a sublease agreement with Perigon Companies, LLC, a related party.  The lease term was one year at a rate of $4,000 per month.  The Company paid a refundable security deposit of $1,500. The lease is currently month-to-month at the same rate of $4,000 per month.

On March 3, 2015, the Company received $200,000 as a loan from a shareholder of the Company.  The interest rate is 12% that is to be paid on a monthly basis.  The term of the note is for two years beginning March 3, 2015 and ending on March 2, 2017.

Promoters and Certain Control Persons

We did not have any promoters at any time since our inception in March 2008.

Director Independence

We currently do not have any independent directors, as the term “independent” is defined in Section 803A of the NYSE Amex LLC Company Guide. Since the OTCQB does not have rules regarding director independence, the Board makes its determination as to director independence based on the definition of “independence” as defined under the rules of the New York Stock Exchange (“NYSE”) and American Stock Exchange (“Amex”).

ITEM 14.                      PRINCIPAL ACCOUNTING FEES AND SERVICES

AUDIT FEES

Audit and Non-Audit Fees

The aggregate fees billed for professional services rendered by De Joya Griffith & Company, LLC, for the audit of our annual financial statements and review of the financial statements included in our Form 10-Q or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for fiscal years 2014 was $33,800.

In March 2015, we engaged Seale and Beers, CPAs to serve as the Registrant’s independent registered public accountants.  The aggregate fees billed for professional services rendered by Seale and Beers, CPAs for the audit of our annual financial statements for the fiscal year 2015 and 2014 was $30,000 and $15,000, respectively.

 

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(2) AUDIT-RELATED FEES

None.

(3) TAX FEES

See table above.

(4) ALL OTHER FEES

None.

(5) AUDIT COMMITTEE POLICIES AND PROCEDURES

We do not have an audit committee.

(6) If greater than 50 percent, disclose the percentage of hours expended on the principal accountant's engagement to audit the registrant's financial statements for the most recent fiscal year that were attributed to work performed by persons other than the principal accountant's full-time, permanent employees.

Not applicable.

ITEM 15.                      EXHIBITS, FINANCIAL STATEMENT SCHEDULES

We have filed the following documents as part of this Annual Report on Form 10-K:

1.	The financial statements listed in the "Index to Consolidated Financial Statements" on page 34 are filed as part of this report.

2.	Financial statement schedules are omitted because they are not applicable or the required information is shown in the financial statements or notes thereto.

3.	Exhibits included or incorporated herein: See index to Exhibits.

Exhibit Index

Exhibit Number	Exhibit Description
2.1	Acquisition Agreement and Plan of Merger – dated March 3, 2011 (3)
2.2	Addendum No. 1 to Acquisition Agreement and Plan of Merger – Dated April 27, 2011 (4)
3(i)(a)	Articles of Incorporation of Bollente Companies, Inc. (Formerly Alcantara Brands Corporation) (1)
3(i)(b)	Certificate of Amendment – Name Change – Dated March 2, 2011 (2)
3(i)(c)	Certificate of Change – 50:1 Reverse Split – Dated September 23, 2010 (2)
3(ii)(a)	Bylaws of Bollente Companies, Inc. (Formerly Alcantara Brands Corporation) (1)
10.1	Sublease Agreement –Perigon - dated January 1, 2014*
10.2	Sublease Agreement – Templar – dated January 1, 2015*
10.3	Subscription and Royalty Agreement – Bollente International – S. Bressler*
10.4	Subscription and Royalty Agreement – Bollente International – Fouts*
10.5	Subscription and Royalty Agreement – Bollente International – Heroux*
10.6	Subscription and Royalty Agreement – Bollente International – Hooker*
10.7	Subscription and Royalty Agreement – Bollente International – R. Fouts*
10.8	Subscription and Royalty Agreement – Bollente International – Femrite*
10.9	Subscription and Royalty Agreement – Bollente International – Schutz*
10.10	Subscription and Royalty Agreement – Bollente International – Slyter*
10.11	Employment Agreement – RJ dated March 1, 2015
10.12	Promissory Note $200,000 dated March 3, 2015
21.1	Subsidiaries of the Company
31.1	Certification pursuant to Section 302 of the Sarbanes-Oxley Act
32.1	Certification pursuant to 18 U.S.C. Section 350
101.INS	XBRL Instance
101.SCH	XBRL Taxonomy Extension Schema
101.CAL	XBRL Taxonomy Extension Calculation
101.DEF	XBRL Taxonomy Extension Definition
101.LAB	XBRL Taxonomy Extension Label
101.PRE	XBRL Taxonomy Extension Presentation

(1)	Incorporated by reference from the Company’s Registration Statement on Form SB-2 filed on March 19, 2008.

(2)	Incorporated by reference from the Company’s Quarterly Report on Form 10-Q filed on November 24, 2010.

(3)	Incorporated by reference from the Company’s Current Report on Form 8-K filed on March 10, 2011.

(4)	Incorporated by reference from the Company’s Current Report on Form 8-K filed on May 6, 2011.

*Filed herewith.

 

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

BOLLENTE COMPANIES INC.

By:   /s/ Robertson J. Orr                                                                 

Robertson James Orr, President

Date: November 2, 2016

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signature	Title	Date
/s/ Robertson J. Orr	Chairman of the Board of Directors,	November 2, 2016
Robertson James Orr	Chief Executive Officer (Principal Executive Officer)
	and Principal Financial Officer

 

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BOLLENTE COMPANIES INC.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2015 AND 2014

	PAGES
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM	37
CONSOLIDATED BALANCE SHEETS	38
CONSOLIDATED STATEMENTS OF OPERATIONS	39
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY	40
CONSOLIDATED STATEMENTS OF CASH FLOWS	41
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS	42

 

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PCAOB Registered Auditors – www.sealebeers.com

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of

Bollente Companies, Inc.

We have audited the accompanying balance sheets of Bollente Companies, Inc. as of December 31, 2015 and 2014, and the related statements of income, stockholders’ equity (deficit), and cash flows for each of the years in the two-year period ended December 31, 2015.  Bollente Companies, Inc.’s management is responsible for these financial statements. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Bollente Companies, Inc. as of December 31, 2015 and 2014, and the related statements of income, stockholders’ equity (deficit), and cash flows for each of the years in the two-year period ended December 31, 2015 in conformity with accounting principles generally accepted in the United States of America.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern.  As discussed in Note 2 to the financial statements, the Company has minimal revenues, has negative working capital at December 31, 2015, has incurred recurring losses and recurring negative cash flow from operating activities, and has an accumulated deficit which raises substantial doubt about its ability to continue as a going concern.  Management’s plans concerning these matters are also described in Note 2.  The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/ Seale and Beers, CPAs

Seale and Beers, CPAs

Las Vegas, Nevada

May 6, 2016

 

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BOLLENTE COMPANIES, INC.
CONSOLIDATED BALANCE SHEETS
(audited)
		December 31,				December 31,
		2015				2014
ASSETS
Current assets:
Cash		$	3,618			$	40,446
Accounts receivable			72,533				54,477
Inventory			222,537				174,132
Prepaid expenses			205,886				30,399
Prepaid stock compensation			306,217				530,000
Total current assets			810,791				829,454
Fixed assets, net			5,885				8,768
Other assets:
Security deposits			1,500				1,500
Trademarks			8,083				825
Prepaid stock compensation - long term portion			-				16,667
Software			10,000				-
Website			21,160				40,693
Total other assets			40,743				59,685
Total assets		$	857,419			$	897,907
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable		$	620,910			$	338,651
Credit cards			15,971				2,387
Customer deposits			600				600
Accrued salaries - related party			26,040				15,278
Accrued payroll taxes			11,984				12,505
Notes payable - related party			600				128,637
Notes payable – related party, net of debt discount			195,000				-
Line of credit - related party			16,000				-
Accrued interest payable			4				4
Accrued interest payable - related party			4,316				-
Total current liabilities			891,425				498,062
Long-term liabilities:
Notes payable - related party			233,000				-
Total long-term liabilities			233,000				-
Total liabilities			1,124,425				498,062
Stockholders' equity:
Preferred stock, $0.001 par value, 10,000,000 shares
authorized, no shares issued and outstanding
as of December 31, 2015 and December 31, 2014, respectively			-				-
Common stock, $0.001 par value, 100,000,000 shares
authorized, 19,350,186 and 16,934,301 shares issued and outstanding
as of December 31, 2015 and December 31, 2014, respectively			19,351				16,935
Additional paid-in capital			16,763,822				13,725,353
Subscriptions payable			750,000				164,375
Accumulated deficit			(17,800,179	)			(13,506,818	)
Total stockholders' equity			(267,006	)			399,845
Total liabilities and stockholders' equity		$	857,419			$	897,907

BOLLENTE COMPANIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(audited)
		For the year ended
		December 31,
		2015				2014
Revenue		$	265,504			$	238,912
Cost of goods sold			(342,999	)			(440,330	)
Gross profit			(77,495	)			(201,418	)
Operating expenses:
General and administrative			1,369,555				1,557,015
Executive compensation			266,500				208,850
Research and development			318,720				876,777
Professional fees			2,499,335				3,367,764
Total operating expenses			4,454,110				6,010,406
Other income(expenses):
Other income			277,969				7,182
Interest expense - related party			(39,394	)			(9,085	)
Interest expense			(322	)			(205	)
Loss on debt conversion			-				(825,000	)
Other expenses			(9	)			-
Total other income(expenses)			238,244				(827,108	)
Net loss from continuing operations			(4,293,361	)			(7,038,932	)
Net loss from discontinued operations			-				(179,007	)
Net loss			(4,293,361	)			(7,217,939	)
Basic earnings per share
Loss from continuing operations		$	(0.23	)		$	(0.50	)
Loss from discontinued operations			-				(0.01	)
Net loss per common share - basic		$	(0.23	)		$	(0.51	)
Weighted average number of common shares			18,434,686				14,231,198
outstanding - basic

BOLLENTE COMPANIES, INC.
STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
(audited)
																														Deficit
																														Accumulated
																		Additional												During				Total
		Preferred Shares								Common Shares								Paid-In				Subscriptions				Subscriptions				Development				Stockholders'
		Shares				Amount				Shares				Amount				Capital				Receivable				Payable				Stage				Equity (Deficit)
Balance, December 31, 2013			-			$	-				10,242,456			$	10,243			$	7,010,353			$	-			$	94,850			$	(6,478,386	)		$	637,060
Spin-off of Nuvola, Inc.
November 24, 2014																															189,507				189,507
December 31, 2014
Issuance for cash											2,817,999				2,818				2,815,181				-				75,000								2,892,999
December 31, 2014
Issuance for employment agreement											527,000				527				556,323								(14,850	)							542,000
December 31, 2014
Issuance for consulting services											2,231,592				2,232				2,229,360								9,375								2,240,967
December 31, 2014
Issuance for debt conversion											1,115,250				1,115				1,114,135																1,115,250
December 31, 2014
Net loss																															(7,217,939	)			(7,217,939	)
Balance, December 31, 2014			-			$	-				16,934,297			$	16,935			$	13,725,353			$	-			$	164,375			$	(13,506,818	)		$	399,845
December 31, 2015
Issuance for cash											1,474,500				1,475				1,473,026				-				85,000								1,559,500
December 31, 2015
Issuance for employment agreement											200,000				200				199,800								10,000								210,000
December 31, 2015
Issuance for consulting services											720,085				730				719,355								490,625								1,210,710
December 31, 2015
Issuance with note payable											10,000				10				9,990																10,000
December 31, 2015
Issuance for settlement of accounts payable											11,300				11				11,289																11,300
December 31, 2015
Proceeds from royalty payments																			625,000																625,000
December 31, 2015
Net loss																															(4,293,361	)			(4,293,361	)
Balance, December 31, 2015			-			$	-				19,350,182			$	19,351			$	16,763,822			$	-			$	750,000			$	(17,800,179	)		$	(267,006	)

NOTE 3 – INVENTORY

Inventories consist of the following at:

		December 31, 2015				December 31, 2014
Raw materials		$	42,061			$	174,132
Finished goods			180,476				-
Total		$	222,537			$	174,132

NOTE 4 – WEBSITE

Website consists of the following at:

		December 31, 2015				December 31, 2014
Website		$	58,598			$	58,598
Less: Accumulated amortization			(37,438	)			(17,905	)
Website, net		$	21,160			$	40,693

NOTE 11 – SUBSEQUENT EVENTS

On February 2, 2016, the Company issued 130,000 shares of common stock for cash received of $130,000.

On February 2, 2016, the Company issued 930,000 shares of common stock for services totaling $930,000.

On February 10, 2016, the Company issued 60,000 shares of common stock for cash received of $60,000.

On February 10, 2016, the Company issued 45,000 shares of common stock for services totaling $45,000.

On February 22, 2016, the Company issued 303,000 shares of common stock for services totaling $303,000.

 

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