|
ITEM 9.01
|
FINANCIAL STATEMENTS AND EXHIBITS.
|
(a) Financial statements:
Filed herewith are the following financial
statements of OMNI Shrimp audited financial statements for the period from September 22, 2015 (inception) to December 31,
2015, and unaudited financial statements for the period January 1, 2016 to June 23, 2016 (Effective Date of Exchange Agreement).
[(b) Pro forma financial information:
Filed herewith is the unaudited pro forma
condensed financial information of NaturalNano, Inc. for the period of January 1, 2016 through June 23, 2016.
(c) Shell company transactions:
Reference is made to the disclosure set
forth under Items 2.01 and 5.06 of this report, which disclosure is incorporated herein by reference.
(d)
Exhibits
Pursuant to the requirements of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
|
NATURALNANO INC.
|
|
|
|
Dated: November
14,
2016
|
By:
|
/s/ Colm Wrynn
|
|
Name:
|
Colm Wrynn
|
|
Title:
|
Chief Executive Officer
|
OMNI SHRIMP, INC.
Index to the Consolidated Financial Statements
Scrudato & Co., PA
CERTIFIED PUBLIC ACCOUNTING FIRM
Report of Independent Registered Public
Accounting Firm
Board of Directors and Stockholders
Omni Shrimp, Inc.
We have audited the accompanying balance
sheets of Omni Shrimp, Inc. (“the Company”) as of December 31, 2015 and the related statements of operations, stockholder's
deficit, and cash flows for the period September 22, 2015(inception) through December 31, 2015. These financial statements are
the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements
based on our audit.
We conducted our audit 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 controls 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 audit provides 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 Omni Shrimp, Inc.as of December 31, 2015
and the results of its operations and its cash flows for the period September 22, 2015(inception) through December 31, 2015, in
conformity with accounting principles generally accepted in the United States.
The accompanying financial statements have
been prepared assuming that the Company will continue as a going concern. As discussed in Note 1, the Company has limited operating
history and has incurred losses since inception and has limited working capital. These factors raise substantial doubt about the
Company's ability to continue as a going concern. Management's plans in regard to these matters are also discussed in Note 1. The
financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ Scrudato & Co., PA
Califon, New Jersey
August 30, 2016
|
7 Valley View Drive Califon, New Jersey 07830
|
|
Registered Public Accounting Company Oversight Board Firm
|
Omni Shrimp, Inc.
Balance Sheet
|
|
December 31,
|
|
|
|
2015
|
|
|
|
(Audited)
|
|
Assets
|
|
|
|
|
|
|
|
|
|
Total Assets
|
|
$
|
-
|
|
|
|
|
|
|
Liabilities and Stockholders' (Deficit)
|
|
|
|
|
Total Liabilities
|
|
$
|
-
|
|
|
|
|
|
|
Stockholders' Equity
|
|
|
|
|
Common stock, 300 shares authorized; 300 shares issued and outstanding, $1 par value
|
|
|
300
|
|
Additional paid-in capital
|
|
|
977
|
|
Accumulated Deficfit
|
|
|
(1,277
|
)
|
Total Stockholders' Equity
|
|
|
-
|
|
|
|
|
|
|
Total liabilities and stockholders' (deficit)
|
|
$
|
0
|
|
See accompanying notes to the financial
statements
Omni Shrimp, Inc.
Statements of Operations
(Audited)
|
|
From September
22, 2015 (Date of
Inception) to
December 31, 2015
|
|
|
|
|
|
Revenues
|
|
$
|
-
|
|
|
|
|
|
|
Operating Expenses
|
|
|
-
|
|
Incorporation and other start-up expenses
|
|
|
1,277
|
|
|
|
|
|
|
Other Income
|
|
|
-
|
|
|
|
|
|
|
Net Income (Loss)
|
|
$
|
(1,277
|
)
|
|
|
|
|
|
Net loss per common share - basic and diluted
|
|
$
|
(4.26
|
)
|
|
|
|
|
|
Weighted average number of common shares outstanding during the period/year - basic
|
|
|
300
|
|
See accompanying notes to the financial
statements
Omni Shrimp, Inc.
Statement of Stockholder's Equity
From the Period of Inception to December
31, 2015
(Audited)
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
Common Stock, $1 Par Value
|
|
|
Additional Paid-In
|
|
|
Accumulated
|
|
|
Stockholders'
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Deficit
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of shares to founders
|
|
|
300
|
|
|
$
|
300
|
|
|
$
|
977
|
|
|
|
|
|
|
$
|
1,277
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(1,277
|
)
|
|
$
|
(1,277
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance- December 31, 2015
|
|
|
300
|
|
|
|
300
|
|
|
$
|
977
|
|
|
$
|
(1,277
|
)
|
|
$
|
-
|
|
Omni Shrimp, Inc.
Statements of Cash Flows
(Audited)
|
|
From period of
inception to
December 31,
2015
|
|
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
Net Income
|
|
$
|
(1,277
|
)
|
|
|
|
|
|
Net cash provided by (used in) operating activities
|
|
|
(1,277
|
)
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
Net cash used in investing activities
|
|
|
-
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
Proceeds from issuance of common stock
|
|
|
1,277
|
|
Net cash provided by financing activities
|
|
|
1,277
|
|
|
|
|
|
|
Net (Decrease) in Cash
|
|
|
-
|
|
|
|
|
|
|
Cash - Beginning of Period/Year
|
|
|
-
|
|
|
|
|
|
|
Cash - End of Period/Year
|
|
$
|
-
|
|
|
|
|
|
|
SUPPLEMENTARY CASH FLOW INFORMATION:
|
|
|
|
|
Cash paid during the period/year for:
|
|
|
|
|
Interest
|
|
$
|
-
|
|
Income Taxes
|
|
$
|
-
|
|
See accompanying notes to the financial
statements
OMNI SHRIMP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
Note 1. Nature of Operations and Summary
of Significant Accounting Policies
Background
Omni Shrimp, Inc. ("Omni" or
the "Company") was organized on September 22, 2015 with executive offices located in Madeira Beach, Florida on the Gulf
of Mexico. Omni is a fast growing wholesaler of locally caught wild American shrimp, predominantly the highly popular Key West
pink variety. Customers are large distributors in the US, who then resell the product to grocery store chains, restaurants and
other retail stores in the Florida, Boston and New York markets.
Material Definitive
Agreement
On June 23, 2016 (the "Effective Date"),
all of the shareholders of Omni it entered into a Share Exchange Agreement (the "Exchange Agreement") with NaturalNano,
Inc. (OTC PK: NNAN) , pursuant to which the shareholders exchanged with the Company all of the outstanding shares of stock of Omni
and Omni thereupon became a wholly owned subsidiary of NNAN. In consideration for the exchange of those OMNI shares, the Company
issued 28,500 shares of a newly created Series E Preferred Stock of NNAN (the "Series E Preferred Stock").
Going Concern
The accompanying condensed consolidated
financial statements have been prepared assuming the Company will continue as a going concern, which contemplates, among other
things, the realization of assets and satisfaction of liabilities in the normal course of business. The Company has earned no revenue
since inception, and supports its continued operations through contributions by its founding principals. As of December 31, 2015,
the company had an accumulated deficit of $1,277. These matters, among others, raise substantial doubt about the Company's ability
to continue as a going concern.
While the Company has recently commenced
its operations and revenue generating activities, the Company's cash position may not be sufficient enough to support the Company's
daily operations. Management intends to raise additional funds by way of a public or private offering of either debt, equity preferred
stock or cash flow from operations. Management believes that the actions presently being taken to further implement its business
plan and generate revenues provide the opportunity for the Company to continue as a going concern. While the Company believes in
the viability of its strategy to generate revenues and in its ability to raise additional funds, there can be no assurances to
that effect. The ability of the Company to continue as a going concern is dependent upon the Company's ability to further implement
its business plan and generate revenues.
The financial statements do not include
any adjustments that would be necessary if the Company is unable to continue as a going concern
Basis of Presentation
The accompanying consolidated balance sheet
as of December 31, 2015, which was derived from audited financial statements, and the unaudited interim consolidated financial
statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("U.S.
GAAP") for interim financial information.
In the opinion of management, the information
furnished in these interim financial statements reflect all adjustments necessary for a fair statement of the financial position
and results of operations and cash flows as of and for the year ended December 31, 2015. All such adjustments are of a normal recurring
nature. The financial statements do not include some information and notes necessary to conform to annual reporting requirements.
Year End
The Company’s fiscal year is a calendar
year end.
Use of Estimates and Assumptions
and Critical Accounting Estimates and Assumptions
The preparation of financial statements
in conformity with accounting principles generally accepted in the United States of America requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities
at the date(s) of the financial statements and the reported amounts of revenues and expenses during the reporting period(s).
Critical accounting estimates are estimates
for which (a) the nature of the estimate is material due to the levels of subjectivity and judgment necessary to account for highly
uncertain matters or the susceptibility of such matters to change and (b) the impact of the estimate on financial condition or
operating performance is material. The Company’s critical accounting estimate(s) and assumption(s) affecting the financial
statements were:
|
(i)
|
Assumption as a going concern
: Management assumes that the Company will continue as a going concern, which contemplates continuity of operations, realization of assets, and liquidation of liabilities in the normal course of business.
|
|
(ii)
|
Valuation allowance for deferred tax assets
: Management assumes that the realization of the Company’s net deferred tax assets resulting from its net operating loss (“NOL”) carry–forwards for Federal income tax purposes that may be offset against future taxable income was not considered more likely than not and accordingly, the potential tax benefits of the net loss carry-forwards are offset by a full valuation allowance. Management made this assumption based on (a) the Company has incurred recurring losses, (b) general economic conditions, and (c) its ability to raise additional funds to support its daily operations by way of a public or private offering, among other factors.
|
Those significant accounting estimates
or assumptions bear the risk of change due to the fact that there are uncertainties attached to those estimates or assumptions,
and certain estimates or assumptions are difficult to measure or value.
Management bases its estimates on historical
experience and on various assumptions that are believed to be reasonable in relation to the financial statements taken as a whole
under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities
that are not readily apparent from other sources.
Management regularly evaluates the key
factors and assumptions used to develop the estimates utilizing currently available information, changes in facts and circumstances,
historical experience and reasonable assumptions. After such evaluations, if deemed appropriate, those estimates are adjusted accordingly.
Actual results could differ from those
estimates.
Cash and Cash Equivalents
:
For
financial statement presentation purposes, the Company considers those short-term, highly liquid investments with original maturities
of three months or less to be cash or cash equivalents. There were no cash equivalents as of December 31, 2015.
Allowance for Doubtful Accounts:
The collectability of our accounts receivable is evaluated through review of outstanding invoices and ongoing credit evaluations
of our customers’ financial condition. In cases where we are aware of circumstances that may impair a specific customer’s
ability to meet its financial obligations subsequent to the original sale, we will record an allowance against amounts due, and
thereby reduce the net recognized accounts receivable to the amount we reasonably believe will be collected. We also maintain an
allowance based on our historical collections experience. When we determine that collection is not likely, we write off accounts
receivable against the allowance for doubtful accounts
Inventories
Inventories are stated at the lower of
cost or market. All of our other inventories are valued using the first-in, first-out (“FIFO”) method. The Company
evaluates inventory quarterly for reserves for obsolescence.
The Company uses the First-In First Out
method of accounting for its inventory cost-flow assumption.
There was no inventory on hand at December
31, 2015
Property, Plant and Equipment
Property, plant, and equipment are stated
at acquisition cost, plus capitalized interest on borrowings during the actual construction period of major capital projects. At
this time, the Company has not Property Plant and Equipment.
Start-Up Costs:
In accordance
with ASC 720, “
Start-up Costs”,
the company expenses all costs incurred in connection with the start-up and
organization of the company.
Valuation of Long-Lived Assets
:
We
review the recoverability of our long-lived assets including land, equipment, goodwill and investments, when events or changes
in circumstances occur that indicate that the carrying value of the asset may not be recoverable. The assessment of possible impairment
is based on our ability to recover the carrying value of the asset from the expected future pre-tax cash flows (undiscounted and
without interest charges) of the related operations. If these cash flows are less than the carrying value of such asset, an impairment
loss is recognized for the difference between estimated fair value and carrying value. Our primary measure of fair value is based
on discounted cash flows. The measurement of impairment requires management to make estimates of these cash flows related to long-lived
assets, as well as other fair value determinations. No impairment was recognized during the year ended December 31, 2015.
Revenue Recognition
: The
Company recognizes revenue during the period in which fish are delivered to the customer. Sale proceeds received in the current
period, for which delivery has not occurred, are recorded as deferred revenue until the fish are delivered to the customer.
Fair Value of Financial Instruments:
FASB
ASC 825, "Financial Instruments," requires entities to disclose the fair value of financial instruments, both assets
and liabilities recognized and not recognized on the balance sheet, for which it is practicable to estimate fair value. FASB ASC
825 defines fair value of a financial instrument as the amount at which the instrument could be exchanged in a current transaction
between willing parties. At March 31, 2016 and 2015, the carrying value of certain financial instruments (cash and cash equivalents,
accounts payable and accrued expenses.) approximates fair value due to the short-term nature of the instruments or interest rates,
which are comparable with current rates.
Fair Value Measurements:
The
Company measures fair value under a framework that utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques
used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical
assets or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements). The three levels
of inputs which prioritize the inputs used in measuring fair value are:
Level 1
: Inputs to the valuation
methodology are unadjusted quoted prices for identical assets or liabilities in active markets that the Company has the ability
to access.
Level 2
: Inputs to the valuation
methodology include:
|
·
|
Quoted prices for similar assets or liabilities in active markets;
|
|
·
|
Quoted prices for identical or similar assets or liabilities in inactive markets;
|
|
·
|
Inputs other than quoted prices that are observable for the asset or liability;
|
|
·
|
Inputs that are derived principally from or corroborated by observable market data by correlation or other means.
|
If the asset or liability has a specified
(contractual) term, the level 2 input must be observable for substantially the full term of the asset or liability.
Level 3
: Inputs to the valuation
methodology are unobservable and significant to the fair value measurement.
The asset's or liability's fair value measurement
level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.
Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs.
When the Company changes its valuation
inputs for measuring financial assets and liabilities at fair value, either due to changes in current market conditions or other
factors, it may need to transfer those assets or liabilities to another level in the hierarchy based on the new inputs used. The
Company recognizes these transfers at the end of the reporting period that the transfers occur. For the year ended December 31,
2015, there were no transfers of financial assets or financial liabilities between the hierarchy levels.
There were no assets and liabilities remeasured
at fair value on a recurring basis as of December 31, 2015:
Revenue Recognition
: The
Company recognizes revenue during the period in which fish are delivered to the customer. Sale proceeds received in the current
period, for which delivery has not occurred, are recorded as deferred revenue until the fish are delivered to the customer.
Income Taxes
The Company has elected by unanimous consent
of its shareholders to be taxed under the provisions of subchapter S of the Internal Revenue Code. Under those provisions,
the Company not pay federal or state corporate income taxes on its taxable income. Instead, the shareholders of the
Company were liable for individual federal income taxes on their respective shares of the Company”s taxable income.
Therefore, provisions for federal and state
income taxes are not calculated at the Corporate level.
Earnings per Common Share
:
We
compute net (loss) per share in accordance with FASB ASC 260,
Earning per Share
. FASB ASC 260 requires presentation
of both basic and diluted earnings per share (EPS) on the face of the income statement. Basic EPS is computed by dividing net income
(loss) available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the
period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period.
Recent Accounting Pronouncement:
The Company has evaluated new relevant accounting for possible impact on our condensed consolidated financial statements and deemed
their impact to be immaterial or non-applicable to the Company.
Note 2. Relationships with Affiliates
Madeira Beach Seafood, Inc. (“MBS”),
which has lent the company approximately $134,000 (see Note 4. Subsequent Events Footnote) is owned by Colm Wrynn, the Company’s
President and Chief Executive Officer, Linda Giampietro and Daniel Stelcer. Mr. Wrynn, Ms. Giampietro and Mr. Stelcer are also
co-owners of Omni.
The Company's President and Chief Executive
Officer does not receive a management fee or other compensation in connection with his services to the Company. The Company reimburses
its President and Chief Executive Officer for all direct and indirect costs of services provided and other expenses necessary or
appropriate to the conduct of our business.
Note 3.
Stockholders' Equity
Common Stock
We are currently authorized to issue up
to 300 shares of $ 0.0001 par value common stock. All issued shares of common stock are entitled to vote on a 1 share/1 vote basis.
Note 4. Subsequent Events
Issuance of Debt
On February 12, 2016, the Company issued
a demand note to MBS for $85,000 and received that amount in cash. The note bears interest at 5.25% and is unsecured.
On April 7, 2016, the Company issued a
demand note to MBS for $48,743 and received that amount in cash. The note bears interest at 5.25% and is unsecured.
Note 5. Commitments and Contingencies
Material Definitive Agreement
On June 23, 2016 (the "Effective Date"),
all of the shareholders of Omni entered into a Share Exchange Agreement (the "Exchange Agreement") with NaturalNano,
Inc. (OTC PK: NNAN) , pursuant to which the shareholders exchanged with the Company all of the outstanding shares of stock of Omni
and Omni thereupon became a wholly owned subsidiary of NNAN. In consideration for the exchange of those OMNI shares, the Company
issued 28,500 shares of a newly created Series E Preferred Stock of NNAN(the "Series E Preferred Stock").
OMNI SHRIMP, INC.
Index to the Consolidated Financial Statements
Scrudato & Co., PA
CERTIFIED PUBLIC ACCOUNTING FIRM
Report of Independent Registered Public
Accounting Firm
Board of Directors and Stockholders
Omni Shrimp, Inc.
We have audited the accompanying balance
sheets of Omni Shrimp, Inc. (“the Company”) as of June 23, 2016 and the related statements of operations, stockholder's
deficit, and cash flows for the period January 1, 2016 through June 23, 2016. These financial statements are the responsibility
of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audit 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 controls 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 audit provides 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 Omni Shrimp, Inc.as of June 23, 2016 and
the results of its operations and its cash flows for the period January 1, 2016 through June 23, 2016, in conformity with accounting
principles generally accepted in the United States.
The accompanying financial statements have
been prepared assuming that the Company will continue as a going concern. As discussed in Note 1, the Company has limited operating
history and has incurred losses since inception and has limited working capital. These factors raise substantial doubt about the
Company's ability to continue as a going concern. Management's plans in regard to these matters are also discussed in Note 1. The
financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ Scrudato & Co., PA
Califon, New Jersey
August 30, 2016
|
7 Valley View Drive Califon, New Jersey 07830
|
|
Registered Public Accounting Company Oversight Board Firm
|
Omni Shrimp, Inc.
Balance Sheets
(Audited)
|
|
June 23, 2016
(Date of
Acquisition)
|
|
|
December 31, 2015
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
Current Assets
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
85,795
|
|
|
$
|
-
|
|
Accounts Receivable
|
|
|
219,603
|
|
|
|
-
|
|
Inventory
|
|
|
74,141
|
|
|
|
-
|
|
Prepaid and Other
|
|
|
2,867
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Total Assets
|
|
$
|
382,406
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders' Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Liabilities
|
|
|
|
|
|
|
|
|
Accounts Payable
|
|
$
|
142,835
|
|
|
$
|
-
|
|
Accrued interest payable
|
|
|
2,154
|
|
|
|
-
|
|
Accrued tax liability
|
|
|
-
|
|
|
|
-
|
|
Notes Payable Current
|
|
|
133,743
|
|
|
|
-
|
|
Total Liabilities
|
|
|
278,732
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Stockholders' Equity
|
|
|
|
|
|
|
|
|
Common stock, 300 shares authorized; 300 shares issued and outstanding, $1 par value
|
|
|
300
|
|
|
|
300
|
|
Additional Paid-In capital
|
|
|
977
|
|
|
|
977
|
|
Retained Earnings
|
|
|
102,397
|
|
|
|
(1,277
|
)
|
Total Stockholders' Equity
|
|
|
103,674
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders' (deficit)
|
|
$
|
382,406
|
|
|
$
|
-
|
|
See accompanying notes to the financial
statements
Omni Shrimp, Inc.
Statements of Operations
(Audited)
|
|
From January 1,
2016 through
June 23, 2016
(Date of
acquisition)
|
|
Reveneus
|
|
|
|
|
Sales
|
|
$
|
1,199,948
|
|
Cost of Goods Sold
|
|
|
(1,043,928
|
)
|
Gross Profit
|
|
|
156,020
|
|
|
|
|
|
|
Operating Expenses
|
|
|
|
|
Brokers Fees
|
|
|
22,697
|
|
Freight and Storage
|
|
|
15,208
|
|
Selling expenses
|
|
|
9,054
|
|
General and Administrative
|
|
|
3,234
|
|
Total Operating Expenses
|
|
|
50,193
|
|
|
|
|
|
|
Earnings before Interest and Taxes
|
|
|
105,827
|
|
|
|
|
|
|
Interest Expense
|
|
|
2,154
|
|
|
|
|
|
|
Earnings before taxes
|
|
$
|
103,674
|
|
|
|
|
|
|
Provision for Income Taxes
|
|
|
0
|
|
|
|
|
|
|
Net Income
|
|
$
|
103,674
|
|
|
|
|
|
|
Net loss per common share - basic and diluted
|
|
$
|
345.58
|
|
|
|
|
|
|
Weighted average number of common shares outstanding during the period/year - basic
|
|
|
300
|
|
See accompanying notes to the financial
statements
Omni Shrimp, Inc.
Statement of Stockholder's Equity
From the Period of Inception to June 23,
2016
(Audited)
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
Common Stock, $1 Par Value
|
|
|
Additional Paid-In
|
|
|
|
|
|
Stockholders'
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Retained Earnings
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of shares to founders
|
|
|
300
|
|
|
$
|
300
|
|
|
$
|
977
|
|
|
$
|
-
|
|
|
$
|
1,277
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(1,277
|
)
|
|
|
(1,277
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance- December 31, 2015
|
|
|
300
|
|
|
|
300
|
|
|
|
977
|
|
|
|
(1,277
|
)
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
$
|
103,674
|
|
|
|
103,674
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at June 23, 2016
|
|
|
300
|
|
|
$
|
300
|
|
|
$
|
977
|
|
|
$
|
102,397
|
|
|
$
|
103,674
|
|
Omni Shrimp, Inc.
Statements of Cash Flows
(Audited)
|
|
From January 1 to
June 23, 2016
|
|
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
Net Income
|
|
$
|
103,674
|
|
Change in Operating Liabilities:
|
|
|
|
|
Accounts Receivable
|
|
|
(219,603
|
)
|
Inventory
|
|
|
(74,141
|
)
|
Prepaid and Other
|
|
|
(2,867
|
)
|
Accounts Payable
|
|
|
142,835
|
|
Accrued interest payable
|
|
|
2,154
|
|
Accrued tax liability
|
|
|
0
|
|
|
|
|
|
|
Net cash provided by (used in) operating activities
|
|
|
(47,948
|
)
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
Net cash used in investing activities
|
|
|
-
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
Proceeds from issuance of notes payable
|
|
|
133,743
|
|
|
|
|
|
|
Net cash provided by financing activities
|
|
|
133,743
|
|
|
|
|
|
|
Net (Decrease) in Cash
|
|
|
85,795
|
|
|
|
|
|
|
Cash - Beginning of Period/Year
|
|
|
-
|
|
|
|
|
|
|
Cash - End of Period/Year
|
|
$
|
85,795
|
|
|
|
|
|
|
SUPPLEMENTARY CASH FLOW INFORMATION:
|
|
|
|
|
Cash paid during the period/year for:
|
|
|
|
|
Interest
|
|
$
|
-
|
|
Income Taxes
|
|
$
|
-
|
|
See accompanying notes to the financial
statements
OMNI SHRIMP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
Note 1. Nature of Operations and Summary
of Significant Accounting Policies
Background
Omni Shrimp, Inc. ("Omni" or
the "Company" or “we”) was organized on September 22, 2015 with executive offices located in Madeira Beach,
Florida on the Gulf of Mexico. Omni is a wholesaler of locally caught wild American shrimp, predominantly the highly popular Key
West pink variety. Customers are large distributors in the US, who then resell the product to grocery store chains, restaurants
and other retail stores in the Florida, Boston and New York markets.
Omni does not own vessels nor have employees
who are involved with the catching, transporting or processing of shrimp. Omni’s business model is as follows:
|
·
|
We purchase shrimp from incoming vessels
|
|
·
|
Through brokers, we arrange for sales to distributors.
|
|
·
|
We refrigerate as inventory that we cannot immediately sell
|
|
·
|
We process at a facility in Louisiana if purchasers require certain needs (e.g.- shrimp are to be headless)
|
|
·
|
We send directly to customers the remainder
|
Material Definitive Agreement
On June 23, 2016 (the "Effective Date"),
all of the shareholders of Omni entered into a Share Exchange Agreement (the "Exchange Agreement") with NaturalNano,
Inc. (OTC PK: NNAN) , pursuant to which the shareholders exchanged with the Company all of the outstanding shares of stock of Omni
and Omni thereupon became a wholly owned subsidiary of NNAN. In consideration for the exchange of those OMNI shares, the Company
issued 28,500 shares of a newly created Series E Preferred Stock of NNAN(the "Series E Preferred Stock").
The transaction closed on June 23, 2016.
Going Concern
The accompanying condensed consolidated
financial statements have been prepared assuming the Company will continue as a going concern, which contemplates, among other
things, the realization of assets and satisfaction of liabilities in the normal course of business. The Company has earned no revenue
since inception, and supports its continued operations through contributions by its founding principals. As of December 31, 2016,
the company had an accumulated deficit of $1,277. These matters, among others, raise substantial doubt about the Company's ability
to continue as a going concern.
While the Company is just beginning its
operations and revenue generating activities, the Company's cash position may not be significant enough to support the Company's
daily operations. Management intends to raise additional funds by way of a public or private offering of debt, equity preferred
stock or cash flow from operations. . Management believes that the actions presently being taken to further implement its business
plan and generate revenues provide the opportunity for the Company to continue as a going concern. While the Company believes in
the viability of its strategy to generate revenues and in its ability to raise additional funds, there can be no assurances to
that effect. The ability of the Company to continue as a going concern is dependent upon the Company's ability to further implement
its business plan and generate revenues.
The financial statements do not include
any adjustments that might be necessary if the Company is unable to continue as a going concern
Basis of Presentation
The accompanying consolidated balance sheets
as of June 23, 2016 and December 31, 2015, which was derived from audited financial statements, and the unaudited interim consolidated
financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America
("U.S. GAAP") for interim financial information.
In the opinion of management, the information
furnished in these interim financial statements reflect all adjustments necessary for a fair statement of the financial position
and results of operations and cash flows as of and for the period from January 1, 2016 through the Effective Date. All such adjustments
are of a normal recurring nature. The financial statements do not include some information and notes necessary to conform to annual
reporting requirements.
Year End
The Company’s fiscal year is a calendar
year end.
Use of Estimates and Assumptions
and Critical Accounting Estimates and Assumptions
The preparation of financial statements
in conformity with accounting principles generally accepted in the United States of America requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities
at the date(s) of the financial statements and the reported amounts of revenues and expenses during the reporting period(s).
Critical accounting estimates are estimates
for which (a) the nature of the estimate is material due to the levels of subjectivity and judgment necessary to account for highly
uncertain matters or the susceptibility of such matters to change and (b) the impact of the estimate on financial condition or
operating performance is material. The Company’s critical accounting estimate(s) and assumption(s) affecting the financial
statements were:
|
(iii)
|
Assumption as a going concern
: Management assumes that the Company will continue as a going concern, which contemplates continuity of operations, realization of assets, and liquidation of liabilities in the normal course of business.
|
|
(iv)
|
Valuation allowance for deferred tax assets
: Management assumes that the realization of the Company’s net deferred tax assets resulting from its net operating loss (“NOL”) carry–forwards for Federal income tax purposes that may be offset against future taxable income was not considered more likely than not and accordingly, the potential tax benefits of the net loss carry-forwards are offset by a full valuation allowance. Management made this assumption based on (a) the Company has incurred recurring losses, (b) general economic conditions, and (c) its ability to raise additional funds to support its daily operations by way of a public or private offering, among other factors.
|
Those significant accounting estimates
or assumptions bear the risk of change due to the fact that there are uncertainties attached to those estimates or assumptions,
and certain estimates or assumptions are difficult to measure or value.
Management bases its estimates on historical
experience and on various assumptions that are believed to be reasonable in relation to the financial statements taken as a whole
under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities
that are not readily apparent from other sources.
Management regularly evaluates the key
factors and assumptions used to develop the estimates utilizing currently available information, changes in facts and circumstances,
historical experience and reasonable assumptions. After such evaluations, if deemed appropriate, those estimates are adjusted accordingly.
Actual results could differ from those
estimates.
Cash and Cash Equivalents
:
For
financial statement presentation purposes, the Company considers those short-term, highly liquid investments with original maturities
of three months or less to be cash or cash equivalents. There were no cash equivalents as of December 31, 2015.
Allowance for Doubtful Accounts:
The collectability of our accounts receivable is evaluated through review of outstanding invoices and ongoing credit evaluations
of our customers’ financial condition. In cases where we are aware of circumstances that may impair a specific customer’s
ability to meet its financial obligations subsequent to the original sale, we will record an allowance against amounts due, and
thereby reduce the net recognized accounts receivable to the amount we reasonably believe will be collected. We also maintain an
allowance based on our historical collections experience. When we determine that collection is not likely, we write off accounts
receivable against the allowance for doubtful accounts
Inventories
Inventories are stated at the lower of cost or market. All of
our other inventories are valued using the first-in, first-out (“FIFO”) method. The Company evaluates inventory quarterly
for reserves for obsolescence.
The Company uses the First-In First Out method of accounting
for its inventory cost-flow assumption.
There was no inventory on hand at December 31, 2015
Property, Plant and Equipment
Property, plant, and equipment are stated
at acquisition cost, plus capitalized interest on borrowings during the actual construction period of major capital projects. At
this time, the Company has not Property Plant and Equipment.
Start-Up Costs:
In accordance
with ASC 720, “
Start-up Costs”,
the company expenses all costs incurred in connection with the start-up and
organization of the company.
Valuation of Long-Lived Assets
:
We
review the recoverability of our long-lived assets including land, equipment, goodwill and investments, when events or changes
in circumstances occur that indicate that the carrying value of the asset may not be recoverable. The assessment of possible impairment
is based on our ability to recover the carrying value of the asset from the expected future pre-tax cash flows (undiscounted and
without interest charges) of the related operations. If these cash flows are less than the carrying value of such asset, an impairment
loss is recognized for the difference between estimated fair value and carrying value. Our primary measure of fair value is based
on discounted cash flows. The measurement of impairment requires management to make estimates of these cash flows related to long-lived
assets, as well as other fair value determinations. No impairment was recognized during the three month ended March 31, 2016 and
2015.
Revenue Recognition
: The
Company recognizes revenue during the period in which fish are delivered to the customer. Sale proceeds received in the current
period, for which delivery has not occurred, are recorded as deferred revenue until the fish are delivered to the customer.
Income Taxes
The Company has elected by unanimous consent
of its shareholders to be taxed under the provisions of subchapter S of the Internal Revenue Code. Under those provisions,
the Company not pay federal or state corporate income taxes on its taxable income. Instead, the shareholders of the
Company were liable for individual federal income taxes on their respective shares of the Company”s taxable income.
Therefore, provisions for federal and state
income taxes are not calculated at the Corporate level.
Fair Value of Financial Instruments:
FASB
ASC 825, "Financial Instruments," requires entities to disclose the fair value of financial instruments, both assets
and liabilities recognized and not recognized on the balance sheet, for which it is practicable to estimate fair value. FASB ASC
825 defines fair value of a financial instrument as the amount at which the instrument could be exchanged in a current transaction
between willing parties. As of June 23, 2016 and December 31, 2015, the carrying value of certain financial instruments (cash and
cash equivalents, accounts payable and accrued expenses.) approximates fair value due to the short-term nature of the instruments
or interest rates, which are comparable with current rates.
Fair Value Measurements:
The
Company measures fair value under a framework that utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques
used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical
assets or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements). The three levels
of inputs which prioritize the inputs used in measuring fair value are:
Level 1
: Inputs to the valuation
methodology are unadjusted quoted prices for identical assets or liabilities in active markets that the Company has the ability
to access.
Level 2
: Inputs to the valuation
methodology include:
|
·
|
Quoted prices for similar assets or liabilities in active markets;
|
|
·
|
Quoted prices for identical or similar assets or liabilities in inactive markets;
|
|
·
|
Inputs other than quoted prices that are observable for the asset or liability;
|
|
·
|
Inputs that are derived principally from or corroborated by observable market data by correlation or other means.
|
If the asset or liability has a specified
(contractual) term, the level 2 input must be observable for substantially the full term of the asset or liability.
Level 3
: Inputs to the valuation
methodology are unobservable and significant to the fair value measurement.
The asset's or liability's fair value measurement
level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.
Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs.
When the Company changes its valuation
inputs for measuring financial assets and liabilities at fair value, either due to changes in current market conditions or other
factors, it may need to transfer those assets or liabilities to another level in the hierarchy based on the new inputs used. The
Company recognizes these transfers at the end of the reporting period that the transfers occur. For the period from January 1,
2016 through June 23, 2016, there were no transfers of financial assets or financial liabilities between the hierarchy levels.
There were no assets and liabilities remeasured
at fair value on a recurring basis as of June 23, 2016:
Earnings per Common Share
:
We
compute net (loss) per share in accordance with FASB ASC 260,
Earning per Share
. FASB ASC 260 requires presentation
of both basic and diluted earnings per share (EPS) on the face of the income statement. Basic EPS is computed by dividing net income
(loss) available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the
period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period.
Recent Accounting Pronouncement:
The Company has evaluated new relevant accounting for possible impact on our condensed consolidated financial statements and deemed
their impact to be immaterial or non-applicable to the Company.
Note 2. Going Concern
The accompanying condensed consolidated
financial statements have been prepared assuming the Company will continue as a going concern, which contemplates, among other
things, the realization of assets and satisfaction of liabilities in the normal course of business. The Company does not have a
long period of continued operations and has supported its operations to date through loans from entity with shared ownership..
These matters, among others, raise substantial doubt about the Company's ability to continue as a going concern.
Given the nascent nature of the Company’s
operations, we believe it is difficult to forecast demands for cash at this time, The Company's cash position may not be significant
enough to support the Company's daily operations. If necessary, management plans to raise additional capital through the issuance
of common stock, issuance of debt or through any other means management feels is appropriate. management believes that the actions
presently being taken to further implement its business plan and generate revenues provide the opportunity for the Company to continue
as a going concern. While the Company believes in the viability of its strategy to generate revenues and in its ability to raise
additional funds, there can be no assurances to that effect. The ability of the Company to continue as a going concern is dependent
upon the Company's ability to further implement its business plan and generate revenues.
The financial statements do not include
any adjustments that might be necessary if the Company is unable to continue as a going concern
Note 3. Accounts Receivable
Accounts Receivable totaled $219,603 as
of June 23, 2016. The Company has no set up any reserve against accounts receivable at this time. Accounts receivable represent
sales of shrimp not yet paid for. Sales terms vary with each contract but payment is on average received in 30 days
Note 4. Inventory
Inventory represents the cost of shrimp
caught but not yet sold. Shrimp may be retained for up two years in a refrigerated environment. Thusly, spoilage is not an issue.
Note 5. Notes Payable
Notes payable totaled $ 133,743 at June
23, 2016. Details are as follows:
Date Issued
|
|
Amount
|
|
|
Interest Rate
|
|
|
Holder
|
|
|
|
|
|
|
|
|
|
February 12, 2016
|
|
$
|
85,000
|
|
|
|
5.25
|
%
|
|
Madeira Beach Seafood, Inc.
|
|
|
|
|
|
|
|
|
|
|
|
April 7, 2016
|
|
|
48,743
|
|
|
|
5.25
|
%
|
|
Madeira Beach Seafood, Inc.
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
133,743
|
|
|
|
|
|
|
|
Note 6. Income taxes
The Company has elected by unanimous consent
of its shareholders to be taxed under the provisions of subchapter S of the Internal Revenue Code. Under those provisions,
the Company not pay federal or state corporate income taxes on its taxable income. Instead, the shareholders of the
Company were liable for individual federal income taxes on their respective shares of the Company”s taxable income.
Therefore, provisions for federal and state
income taxes are not calculated at the Corporate level.
Note 7.
Stockholders' Equity
Common Stock
We are currently authorized to issue up
to 300 shares of $1 par value common stock. All issued shares of common stock are entitled to vote on a 1 share/1 vote basis.
Note 8. Commitments and Contingencies
Material Definitive Agreement
On June 23, 2016 (the "Effective Date"),
all of the shareholders of Omni entered into a Share Exchange Agreement (the "Exchange Agreement") with NaturalNano,
Inc. (OTC PK: NNAN) , pursuant to which the shareholders exchanged with the Company all of the outstanding shares of stock of Omni
and Omni thereupon became a wholly owned subsidiary of NNAN. In consideration for the exchange of those OMNI shares, the Company
issued 28,500 shares of a newly created Series E Preferred Stock of NNAN(the "Series E Preferred Stock").
The transaction closed on June 23, 2016.
Note 9. Relationships with Affiliates
Madeira Beach Seafood, Inc. (“MBS”), which has lent
the company approximately $134,000 (see Note 5. Notes payable footnote) is owned by Colm Wrynn, the Company’s President and
Chief Executive Officer, Linda Giampietro and Daniel Stelcer. Mr. Wrynn, Ms. Giampietro and Mr. Stelcer are also co-owners of Omni.
The Company's President and Chief Executive
Officer does not receive a management fee or other compensation in connection with his services to the Company. The Company reimburses
its President and Chief Executive Officer for all direct and indirect costs of services provided and other expenses necessary or
appropriate to the conduct of our business.
Note 10. Subsequent Events
There were no events, besides the Exchange
Agreement, as noted in Note 8. Commitments and Contingencies, that are required to be disclosed.
MANAGEMENT’S DISCUSSION AND ANALYSIS
AND RESULTS OF OPERATIONS
Omni Shrimp, Inc.
Unaudited Pro Forma Combined Financial
Information
On June 23, 2016 (“Date of Acquisition”),
NaturalNano, Inc. (“Nano” or the “Company”) entered into a Share Exchange Agreement (the "Exchange
Agreement") with all of the shareholders of Omni Shrimp, Inc., a Florida corporation ("Omni"), pursuant to which
the shareholders exchanged with the Company all of the outstanding shares of stock of Omni and Omni thereupon became a wholly owned
subsidiary of the Company. In consideration for the exchange of those OMNI shares, the Company issued 28,500 shares of
a newly created Series E Preferred Stock of the Company (the "Series E Preferred Stock").
As a result of their ownership of the Series
E Preferred Stock, the Omni shareholders acquired the right to vote 95% of the voting control of the Company. The Series E Preferred
Stock is also convertible into common stock which, in the aggregate, would represent up to 95% of the outstanding common stock
after the conversion. In addition, on the Effective Date, the holders of all of the Company's outstanding Series B and Series D
Preferred Stock.
The Merger is being accounted for as a reverse-merger and recapitalization.
The Company is the acquirer for financial reporting purposes, and Omni is the acquired company. Consequently, the assets, liabilities
and operations that will be reflected in the historical financial statements prior to the Merger will be those of the Company and
will be recorded at the historical cost basis of the Company, and the consolidated financial statements after completion of the
Merger will include the assets, liabilities and results of operations of the Company up to the day prior to the closing of the
Merger and the assets, liabilities and results of operations of the combined company from and after the closing date of the Merger.
The annexed unaudited pro forma combined financial information is based on individual historical financial statements of the Company
and Omni prepared under U.S. GAAP as adjusted to give effect to the Merger.
The historical financial statements have been adjusted in the
pro forma combined financial statements to give effect to events that are (1) directly attributable to the Merger, (2) factually
supportable, and (3) with respect to the statement of operations, expected to have a continuing impact on the combined entities.
The unaudited pro forma combined statements of operations eliminate any non-recurring charges directly related to the Merger that
the combined entities incurred upon completion of the Merger.
The unaudited pro forma combined statements of operations combine
the Company’s historical statements of operations for the year ended December 31, 2015 and for the period January 1,
2016 through the Date of Acquisition with Omni's historical statements of operations for the year ended December 31, 2015 as well
as from January 1, 2016 through the date of acquisition, giving effect to the events that are directly attributable to the Merger,
as if the Merger were consummated at the beginning of the year ended December 31, 2015, and that are expected to have a continuing
impact on the combined company. The difference in fiscal periods between the Company and Omni does not result in a material misstatement
in the combined pro-forma financial statements.
The unaudited pro forma combined financial information does
not purport to represent what the combined company’s results of operations or financial position would actually have been
had the Merger occurred on the dates described above or to project the combined company’s results of operations or financial
position for any future date or period.
The unaudited pro forma combined financial information should
be read together with (1) the Company's audited consolidated financial statements for the years ended December 31, 2015
and 2014, and (2) the Company's unaudited condensed consolidated financial statements for the three month periods ended March
31, 2016 and 2015.
NaturalNano, Inc.
Pro-Forma Condensed Balance Sheet Unaudited
December 31, 2015
|
|
NaturalNano,
Inc.
|
|
|
Omni
Shrimp, Inc.
|
|
|
Pro-forma
Adjustments
|
|
|
Pro-forma
Merger
|
|
|
Pro-forma
Merger
Adjustments
|
|
|
Pro-Forma
Offering
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT ASSETS:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
4,743
|
|
|
|
|
2
|
|
|
(4,743
|
)
|
|
|
-
|
|
|
|
|
|
|
|
-
|
|
Accounts Receivable
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
|
|
|
|
|
|
-
|
|
Inventory
|
|
|
98,200
|
|
|
|
|
2
|
|
|
(98,200
|
)
|
|
|
-
|
|
|
|
|
|
|
|
-
|
|
Prepaid and Other
|
|
|
7,040
|
|
|
|
|
2
|
|
|
(7,040
|
)
|
|
|
-
|
|
|
|
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Current Assets
|
|
|
109,983
|
|
|
|
-
|
|
|
|
(109,983
|
)
|
|
|
-
|
|
|
|
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NON-CURRENT ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Non-current assets
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets
|
|
$
|
109,983
|
|
|
|
-
|
|
|
|
(109,983
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' DEFICIT
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT LIABILITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes Payable
|
|
$
|
1,929,941
|
|
|
|
-
|
|
|
|
|
|
|
|
1,929,941
|
|
|
|
-
|
|
|
|
1,929,941
|
|
Accounts Payable
|
|
|
476,127
|
|
|
|
|
2
|
|
|
(476,127
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Accrued Expenses
|
|
|
101,544
|
|
|
|
|
2
|
|
|
(101,544
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Accrued Interest
|
|
|
506,598
|
|
|
|
-
|
|
|
|
|
|
|
|
506,598
|
|
|
|
-
|
|
|
|
506,598
|
|
Accrued Payroll
|
|
|
1,151,448
|
|
|
|
|
2
|
|
|
(1,151,448
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Registration Rights Liability
|
|
|
12,324
|
|
|
|
|
2
|
|
|
(12,324
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Derivative liability
|
|
|
687,014
|
|
|
|
|
2
|
|
|
(687,014
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Current Liabilities
|
|
|
4,864,996
|
|
|
|
-
|
|
|
|
(2,428,457
|
)
|
|
|
2,436,539
|
|
|
|
-
|
|
|
|
2,436,539
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LONG-TERM LIABILITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Long-Term Liabilities
|
|
|
-
|
|
|
|
-
|
|
|
|
0
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities
|
|
|
4,864,996
|
|
|
|
-
|
|
|
|
(2,428,457
|
)
|
|
|
2,436,539
|
|
|
|
-
|
|
|
|
2,436,539
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred Stock Series B- $.001 par value, 10
million shares authorized, 5,000 shares issued and outstanding
|
|
|
1,199
|
|
|
|
|
2
|
|
|
(1,199
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred Stock Series E- $.001 par value, 300
shares issued and authorized
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3
|
|
|
29
|
|
|
|
29
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS' EQUITY (DEFICIT):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock at $0.001 par value: 800,000,000
shares authorized; 2,293,502 shares issued and outstanding
|
|
|
2,294
|
|
|
|
300
|
|
|
|
(2,294
|
)
|
|
|
300
|
|
|
|
|
|
|
|
300
|
|
Series D- issued and outstanding
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional paid-in capital
|
|
|
21,953,148
|
|
|
|
977
|
|
|
|
(21,953,148
|
)
|
|
|
977
|
|
|
|
102,368
|
|
|
|
103,345
|
|
Retained Earnings (Accumulated
Deficit)
|
|
|
(26,711,654
|
)
|
|
|
(1,277)
|
5
|
|
|
24,275,115
|
|
|
|
(2,437,811)
|
4
|
|
|
(102,397
|
)
|
|
|
(2,540,208
|
)
|
Total Stockholders' Equity
(Deficit)
|
|
|
(4,755,013
|
)
|
|
|
-
|
|
|
|
2,318,474
|
|
|
|
(2,436,534
|
)
|
|
|
0
|
|
|
|
(2,436,534
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities and
Stockholders' Deficit
|
|
$
|
109,983
|
|
|
|
0
|
|
|
|
(109,983
|
)
|
|
|
5
|
|
|
|
-
|
|
|
|
5
|
|
NaturalNano, Inc.
Pro Frorma Condendsed Statement of Operations
(Unaudited)
December 31, 2015
|
|
NaturalNano,
Inc.
|
|
|
Omni Shrimp,
Inc.
|
|
|
Pro Forma
Adjustments
|
|
|
Pro Forma Merger
|
|
|
Merger
Adjustments
|
|
|
Pro Forma Offering
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
368,066
|
|
|
$
|
|
1
|
|
|
(368,066
|
)
|
|
$
|
-
|
|
|
|
|
|
|
$
|
-
|
|
Cost of Goods Sold
|
|
|
(157,134
|
)
|
|
|
|
1
|
|
|
157,134
|
|
|
|
-
|
|
|
|
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Profit
|
|
|
210,932
|
|
|
|
-
|
|
|
|
(210,932
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING EXPENSES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and Administrative Expense
|
|
|
518,548
|
|
|
|
1,277
|
1
|
|
|
(518,548
|
)
|
|
|
1,277
|
|
|
|
|
|
|
|
1,277
|
|
Research and Development
|
|
|
4,584
|
|
|
|
-
|
1
|
|
|
(4,584
|
)
|
|
|
-
|
|
|
|
|
|
|
|
-
|
|
Stock based compensation
attributable to warrant grants
|
|
|
102,782
|
|
|
|
-
|
1
|
|
|
(102,782
|
)
|
|
|
-
|
|
|
|
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
625,914
|
|
|
|
1,277
|
|
|
|
(625,914
|
)
|
|
|
1,277
|
|
|
|
-
|
|
|
|
1,277
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAIN (LOSS) FROM OPERATIONS
|
|
|
(414,982
|
)
|
|
|
(1,277
|
)
|
|
|
414,982
|
|
|
|
(1,277
|
)
|
|
|
-
|
|
|
|
(1,277
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER INCOME (EXPENSE):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss on derivative liability
|
|
|
(164,480
|
)
|
|
|
-
|
1
|
|
|
164,480
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
(266,661
|
)
|
|
|
-
|
|
|
|
|
|
|
|
(266,661
|
)
|
|
|
|
|
|
|
(266,661
|
)
|
Loss on Exchange for share rights
|
|
|
(304,727
|
)
|
|
|
-
|
1
|
|
|
304,727
|
|
|
|
-
|
|
|
|
|
|
|
|
-
|
|
Gain on forgiveness, conversions and modifications
of debt
|
|
|
9,800
|
|
|
|
-
|
1
|
|
|
(9,800
|
)
|
|
|
-
|
|
|
|
|
|
|
|
-
|
|
Other Income
|
|
|
50,000
|
|
|
|
-
|
1
|
|
|
(50,000
|
)
|
|
|
-
|
|
|
|
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense),
net
|
|
|
(676,068
|
)
|
|
|
-
|
|
|
|
409,407
|
|
|
|
(266,661
|
)
|
|
|
-
|
|
|
|
(266,661
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before income tax provision
|
|
|
(1,091,050
|
)
|
|
|
(1,277
|
)
|
|
|
824,389
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax provision
|
|
|
-
|
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income
|
|
|
(1,091,050
|
)
|
|
|
(1,277
|
)
|
|
|
824,389
|
|
|
|
(267,938
|
)
|
|
|
-
|
|
|
|
(267,938
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- Basic and diluted
|
|
|
2,102,391
|
|
|
|
300
|
|
|
|
|
|
|
|
2,102,391
|
|
|
|
|
|
|
|
2,102,391
|
|
Weighted average Earnings per share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- Basic and diluted
|
|
$
|
(0.52
|
)
|
|
$
|
(4.26
|
)
|
|
|
|
|
|
$
|
(0.13
|
)
|
|
|
|
|
|
$
|
(0.13
|
)
|
Omni Shrimp, Inc.
Pro-Forma Assumptions-Unaudited
December 31, 2015
1) To eliminate the following Statement of Operation items for NaturalNano, Inc.
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
368,066
|
|
Cost of Goods Sold
|
|
|
157,134
|
|
General and Administrative Expense
|
|
|
518,548
|
|
Research and Development
|
|
|
4,584
|
|
Stock based compensation attributable to warrant grants
|
|
|
102,782
|
|
Net loss on derivative liability
|
|
|
(164,480
|
)
|
Loss on exchange for share rights
|
|
|
(304,727
|
)
|
Gain on forgiveness, conversions and modifications of debt
|
|
|
9,800
|
|
Other income
|
|
|
50,000
|
|
|
|
|
|
|
2) To eliminate the following Balance Sheet items for NaturalNano, Inc.
|
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
4,743
|
|
Inventory
|
|
|
98,200
|
|
Prepaid and Other
|
|
|
7,040
|
|
Accounts payable
|
|
|
476,127
|
|
Accrued expenses
|
|
|
101,544
|
|
Accrued Payroll
|
|
|
1,151,448
|
|
Registration rights liability
|
|
|
12,324
|
|
Derivative liability
|
|
|
687,014
|
|
Other income
|
|
|
50,000
|
|
Preferred stock Series B
|
|
|
1,199
|
|
|
|
|
|
|
3) Issuance of Series E Preferred stock for assets of Omni Shrimp, Inc.
|
|
$
|
29
|
|
|
|
|
|
|
4) Elimination of Additional Paid in capital accounts of Omni Shrimp
|
|
$
|
102,397
|
|
|
|
|
|
|
5) Elimination of retained earnings of
NaturalNano, Inc. adjusted for notes payable and accrued interest assumed
|
|
$
|
24,275,115
|
|
NaturalNano, Inc.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
December
31, 2015
1.
|
PRINCIPAL BUSINESS ACTIVITY AND SIGNIFICANT ACCOUNTING POLICIES
|
Basis
of Consolidation
The consolidated financial statements include
the accounts of NaturalNano, Inc. (“NaturalNano” or the “Company”), a Nevada corporation, and its wholly
owned subsidiary NaturalNano Research, Inc. (“NN Research”) a Delaware corporation. All significant inter-company accounts
and transactions have been eliminated in consolidation.
Description of the Business
Liquidity and Going Concern
Going Concern - The accompanying condensed
consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and
the satisfaction of liabilities in the normal course of business. The Company generated a net loss for the year ended December
31, 2015 of approximately $268,000 and had a stockholders’ deficiency of approximately $2,400,000. Since inception the Company’s
growth has been funded through a combination of convertible and non-convertible debt from private investors and from cash advances
from its former parent Technology Innovations, LLC. These factors, among others, may indicate that the Company will be unable to
continue as a going concern for a reasonable period of time. The Company’s continuation as a going concern is dependent upon
its ability to generate sufficient cash flow to meet its obligations, to obtain additional financing, renegotiate the terms of
existing financing obligations and ultimately to attain successful operations. The ability to successfully achieve those items
is uncertain. The financial statements do not include any adjustments that might result from the uncertainty.
As of December 31, 2015, the Company continued
to require waivers for debt covenant violations and extensions of maturity dates. Refer to Note 2 for lender waivers and maturity
extensions received from the lenders.
The Company’s management and Board
of Directors continue to actively assess the Company's operating structure with an objective to reduce ongoing expenses, increase
sources of recurring revenue as well as seeking additional debt or equity financing. The Company will continually evaluate
funding options including additional offerings of its securities to private and institutional investors and other credit facilities
as they become available. There can be no assurance as to the availability or terms upon which such financing alternatives might
be available.
The Company has experienced recurring losses
from operations since its inception and continues to have a working capital deficiency and limited opportunities for additional
capital infusion. The Company has experienced recurring defaults relating to the various provisions under its current debt
obligations and is expected to require future forbearance and waivers relating to such provisions in the future. These negative
financial conditions combined with delays experienced in product introduction and customer acceptance raises substantial doubt
of the Company’s ability to continue as a going concern.
Reclassifications
Certain prior year amounts have been reclassified
to conform to the current year presentation.
Concentration of Credit Risk
The Company maintains cash in bank deposit
accounts which could, at times, exceed federally insured limits. The Company has not experienced any losses on these accounts.
Accounts Receivable
The Company grants credit to substantially
all of its customers and carries its accounts receivable at original invoice amount less an allowance for doubtful accounts. On
a periodic basis, the Company evaluates its accounts receivable and establishes an allowance for doubtful accounts based on history
of past write-offs, collections, and current credit conditions. As of December 31, 2015 and 2014 no allowance for doubtful
accounts was considered necessary.
Inventory
Inventory is stated at the lower of cost
or market value. When halloysite nanotubes or Pleximer held in inventory are used, the carrying value of any such inventory used
(i) for research and development is expensed in the period that it is used for the development of proprietary applications and
processes and (ii) in cost of goods sold will be charged as customer shipments are made. Inventory for overhead costs are applied
during production and included in cost of goods sold. As of December 31, 2015 and 2014, the reserve for excess inventory was approximately
$83,100 and zero, respectively.
Property and Equipment
Property and equipment are recorded at
cost. Expenditures for major additions and improvements are capitalized and minor replacements, maintenance, and repairs are charged
to expense as incurred. When property and equipment are retired or otherwise disposed of, the cost and accumulated depreciation
are removed from the accounts and any resulting gain or loss is included in the results of operations for the respective period.
Depreciation is provided over the estimated useful lives of the related assets using the straight-line method. No depreciation
expense was recorded during the year ended December 31, 2014.
Accrued Payroll
The Company accrues for earned and unused
vacation benefits and deferred compensation costs for amounts contractually owed to employees.
Fair Value of Financial Instruments
Fair value is defined as the price that
would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the
measurement date. The Fair Value Measurement Topic of the Financial Accounting Standards Board (“FASB”) Accounting
Standards Codification (“ASC”) establishes a three-tier fair value hierarchy which prioritizes the inputs used in measuring
fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or
liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). These tiers include:
·
|
Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities.
|
|
·
|
Level 2 inputs are quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument.
|
·
|
Level 3 inputs are unobservable inputs based on the Company’s own assumptions used to measure assets and liabilities at fair value.
|
A financial asset or liability’s
classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement.
The carrying amounts reported in the balance sheet of cash, accounts receivable, prepaid, accounts payable and accrued expenses
approximate fair value because of the immediate or short-term maturity of these financial instruments. The fair value of notes
payable approximates their carrying value as the terms of this debt reflects market conditions. The Company’s derivative
liability was determined utilizing Level 3 inputs.
Derivative Financial Instruments
The Company does not use derivative instruments
to hedge exposures to cash flow, market or foreign currency risks. The Company evaluates all of its financial instruments to determine
if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments
that are accounted for as liabilities, the derivative instrument is initially recorded at its fair market value and then is revalued
at each reporting date, with changes in fair value reported in the consolidated statement of operations. There were no derivative
financial instruments at December 31, 2015 and Decenber 31, 2014
Income Taxes
The Company accounts for income taxes in
accordance with FASB ASC 740 which requires recognition of estimated income taxes payable or refundable on income tax returns for
the current year and for the estimated future tax effect attributable to temporary differences and carry-forwards. Measurement
of deferred income items is based on enacted tax laws including tax rates, with the measurement of deferred income tax assets being
reduced by available tax benefits not expected to be realized. The Company recognizes penalties and accrued interest related
to unrecognized tax benefits in income tax expense.
Revenue Recognition
Revenue is recognized upon shipment of
ViralProtec orders and upon delivery of Pleximer and sample products. The Company earns and recognizes such revenue when the shipment
of the sample products has occurred, title transfers, no further performance obligation exists, and when collection is reasonably
assured.
Research and Development
Research and development costs are expensed
in the period the expenditures are incurred. Capital assets acquired in support of research and development are capitalized and
depreciated over their estimated useful life and related depreciation expense is included in research and development expense.
Income (Loss) Per Share
Basic income (loss) per common share is
computed by dividing net income or loss by the weighted-average number of shares of common stock outstanding during the period.
Diluted income or loss per common share gives effect to dilutive convertible preferred stock, convertible debt, options and warrants
outstanding during the period. Shares to be issued upon the exercise of these instruments have not been included in the computation
of diluted loss per share for the year ended December 31, 2015 as their effect is anti-dilutive based on the net loss incurred.
Estimates
The preparation of consolidated financial
statements in conformity with accounting principles generally accepted in the United States requires us to make estimates and assumptions
that affect the amounts reported and disclosed in the financial statements and the accompanying notes. Actual results could differ
materially from these estimates. On an ongoing basis, we evaluate such estimates. We base our estimates on historical experience
and on various other assumptions that are believed to be reasonable, the results of which form the basis for making judgments about
the carrying values of assets and liabilities.
Recent Accounting Pronouncements
In November 2015, the FASB issued ASU-2015-17
Balance Sheet Classification of Deferred Taxes (Income Taxes topic 740). The Board issued this update as part of its Simplification
Initiative. The objective of the Simplification Initiative is to identify, evaluate, and improve areas of generally accepted accounting
principles (GAAP) for which cost and complexity can be reduced while maintaining or improving the usefulness of the information
provided to users of financial statements. To simplify the presentation of deferred income taxes, this guidance requires that deferred
tax liabilities and assets be classified as noncurrent in a classified statement of financial position. The guidance applies to
all entities that present a classified statement of financial position. The current requirement that deferred tax liabilities and
assets of a tax-paying component of an entity be offset and presented as a single amount is not affected by the amendments in this
Update. This update will be effective for public business entities for annual periods, including interim periods within those annual
periods, beginning after December 15, 2016. We are currently evaluating the impact of the adoption of ASU 2015-17 on our consolidated
financial statements.
In May 2014 the FASB issued ASU 2014-09
Revenue from Contracts with Customers (Topic 606): The standard is effective for annual periods beginning after December 15, 2017,
and interim periods therein, using either of the following transition methods: (i) a full retrospective approach reflecting the
application of the standard in each prior reporting period with the option to elect certain practical expedients, or (ii) a retrospective
approach with the cumulative effect recognized at the date of adoption (which includes additional footnote disclosures). This update
supersedes nearly all existing revenue recognition guidance under U.S. GAAP. The core principle of ASU 2014-09 is to recognize
revenues when promised goods or services are transferred to customers in an amount that reflects the consideration to which an
entity expects to be entitled for those goods or services. ASU 2014-09 defines a five step process to achieve this core principle
and, in doing so, more judgment and estimates may be required within the revenue recognition process than are required under existing
U.S. GAAP. We are currently evaluating the impact of the adoption of this new guidance.
In July 2015, the FASB issued ASU-2015-11
Simplifying the Measurement of Inventory (Inventory topic 330) The Board issued this update as part of its Simplification Initiative.
Under this guidance an entity should measure inventory at the lower of cost and net realizable value. Net realizable value is the
estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation.
This update will be effective for public business entities for annual periods, including interim periods within those annual periods,
beginning after December 15, 2016. We are currently evaluating the impact of the adoption of this new guidance.
In January 2015 the FASB issued ASU 2015-1,
Income Statement-Extraordinary and Unusual Items (Subtopic 225-20): Simplifying Income Statement Presentation by Eliminating the
Concept of Extraordinary Items This ASU eliminates from GAAP the concept of extraordinary items. ASU 2015-1 is effective for the
annual period ending after December 15, 2015. Early adoption is permitted provided that the guidance is applied from the beginning
of the fiscal year of adoption. We are currently evaluating the impact of the adoption of this new guidance.
On February 25, 2016, the Financial Accounting
Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) No. 2016-02, “Leases,”
a comprehensive new lease standard which will supersede previous lease guidance. The standard requires a lessee to recognize in
its balance sheet assets and liabilities related to long-term leases that were classified as operating leases under previous guidance.
An asset will be recognized related to the right to use the underlying asset and a liability will be recognized related to the
obligation to make lease payments over the term of the lease. The standard also requires expanded disclosures surrounding leases.
The standard is effective for fiscal periods beginning after December 15, 2018, and requires modified retrospective adoption, with
early adoption permitted. The Company is evaluating the impact of the adoption of this standard on our consolidated financial statements
and related disclosures.
On March 30, 2016, the FASB issued ASU
No. 2016-09, “Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting,”
which amends the current stock compensation guidance. The amendments simplify the accounting for the taxes related to stock based
compensation, including adjustments to how excess tax benefits and a company's payments for tax withholdings should be classified.
The standard is effective for fiscal periods beginning after December 15, 2016, with early adoption permitted. The Company is evaluating
the impact of the adoption of this standard on our consolidated financial statements and related disclosures.
In April, 2016, the FASB issued ASU No. 2016-10,
“Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing” to clarify two
aspects of Topic 606: (i) identifying performance obligations and (ii) the licensing implementation guidance, while retaining the
related principles for those areas. The Company is evaluating the impact of the adoption of this standard on our consolidated financial
statements and related disclosures.
Management does not believe that any recently
issued, but not yet effective, accounting standards if currently adopted, would have a material effect on the accompanying financial
statements.
Notes payable as of December 31, 2015
consisted of the following:
|
|
2015
|
|
Notes Payable
|
|
|
|
|
Senior Secured Convertible Notes
|
|
$
|
441,988
|
|
Senior Secured Promissory Notes
|
|
|
398,938
|
|
2014-2015 Convertible Promissory Notes
|
|
|
745,015
|
|
Convertible Promissory Notes
|
|
|
344,000
|
|
Total
|
|
$
|
1,929,941
|
|
Senior Secured Convertible Notes and
Senior Secured Promissory Notes
As of December 31, 2015 and 2014, Notes
payable on the balance sheets includes $840,926 for senior secured convertible notes and non-convertible senior secured promissory
notes. The Senior Secured Promissory Notes are secured by, among other things, (i) the continuing security interest
in certain assets of the Company pursuant to the terms of the Initial Notes dated March 7, 2007, (ii) the Pledge Agreement, as
defined in the Initial Notes, and (iii) the Patent Security Agreement, dated as of March 6, 2007. The conversion rate for principal
and accrued interest on Senior Secured Convertible Notes is 75% of the lowest volume weighted average price (VWAP) of the Company’s
common stock for the 1, 5 or 10 days immediately prior to the conversion. The Company has defaulted on certain provisions of the
notes. The Company has obtained a waiver of default on the outstanding principal through November 30, 2016. As a condition of this
forbearance the interest rate on these notes has been increased to 18%.
2014 and 2015 Convertible Promissory
Notes
During 2015, the Company entered into two
Senior Secured Convertible Promissory Notes aggregating $61,000. During 2015, the Company issued 200,000 common shares in satisfaction
of $10,000 of outstanding principal. The issuance of these shares reflects a debt conversion price of $0.05 per share.
The 2015 Senior Secured Promissory
Notes are secured by, among other things, (i) the continuing security interest in certain assets of the Company pursuant to the
terms of the Initial Notes dated March 7, 2007, (ii) the Pledge Agreement, as defined in the Initial Notes, and (iii) the Patent
Security Agreement, dated as of March 6, 2007. The proceeds from the 2014-2015 Senior Secured Promissory Notes are available for
general working capital purposes and cannot be used to redeem or make any payment on account of any securities due to the Lenders. The
Company has obtained a waiver of default on the outstanding principal through November 30, 2016. As a condition of this forbearance
the interest rate on certain of these notes has been increased to 18 %.
In 2015, the Company granted certain warrants
with an exercise prices less than the conversion price defined in the 2015 debt agreements. As a result, the conversion price
of the 2015 Convertible Promissory Notes have been adjusted Based on the Company’s issuance of warrants described above,
the conversion price on these debt obligations were modified to $0.05 per share. On January 5, 2016 the conversion price on the
debt was adjusted to $0.02 per share upon the issuance of 450,000 warrants exercisable at $0.02 per share.
During 2014 the Company entered into various
Senior Secured Convertible Promissory Notes aggregating $694,020. The 2014 Senior Secured Promissory Notes are secured by,
among other things, (i) the continuing security interest in certain assets of the Company pursuant to the terms of the Initial
Notes dated March 7, 2007, (ii) the Pledge Agreement, as defined in the Initial Notes, and (iii) the Patent Security Agreement,
dated as of March 6, 2007. These notes are convertible into shares of the Company’s common stock at a conversion price of
$0.30 per share and are subject to adjustment in the event of lower price issuances, subject to customary exceptions. The Company
may prepay any amount due under the notes prior to the maturity date. The notes are subject to certain events of default which
would cause all amounts due to become immediately payable. The Company is prohibited from effecting the conversion of the notes
to the extent that as a result of such conversion, the note holders would beneficially own more than 4.99% of the issued and outstanding
shares of the Company’s common stock. The proceeds from the 2014 Senior Secured Promissory Notes are available for general
working capital purposes and cannot be used to redeem or make any payment on account of any securities due to the Lenders. The
Company has obtained a waiver of default on the outstanding principal through November 30, 2016 and bear an interest rate of 18%
per annum as a condition of forbearance.
2015 Exchange of Cape One Master Fund
II LLP shares for Convertible Promissory Notes
On December 15, 2015, the Company’s
board of directors determined that it was in the best interest of the corporation to exchange 6,666,667 reserved shares of the
Company’s common stock, held by Cape One Master Fund II LLP (as described below), for four convertible promissory notes totaling
$344,000 with an interest rate of 8% per annum due June 30, 2017. These promissory notes are convertible to common stock at the
rate of $0.05 per share. In the event that the Company shall, at any time, issue any additional shares of common stock or equivalents
at a price per share less than the $0.05 conversion price then the conversion price for these convertible promissory notes shall
be reduced. The Company recognized a loss on the exchange of the rights to reserved commons shares upon the issuance of these convertible
promissory notes of approximately $305,000 in 2015. On January 5, 2016 the conversion price on the debt was adjusted to $0.02 per
share upon the issuance of 450,000 warrants exercisable at $0.02 per share.
2014 Subordinated Secured Convertible
Note and Exchange and Right to Shares Agreement - Cape One Master Fund II LP
On July 23, 2014, the Company and Cape
One Master Fund II LLP agreed to exchange the Subordinated Secured Convertible Note and related accrued and unpaid interest totaling
a combined $379,624 in exchange for 6,666,667 reserved shares of the Company’s common stock. The Company and Cape One agreed
that a beneficial ownership limitation of 4.99% shall be maintained at all times as to the number of the shares of the common stock
outstanding immediately after giving effect to the issuance of the common stock issuable under this agreement. Cape One also agreed
to a Lockup provision in the agreement that specifies that Cape One will not sell, transfer or hypothecate any of the reserved
shares until Alpha Capital Anstalt has received $3,500,000 from the proceeds of sales of shares obtained upon conversion of notes
issued by the Company and held by Alpha as of the date of this agreement. Upon expiration of the Lockup period, Cape One shall
be allowed to sell the lesser of (i) 5% of the daily trading volume of the Company’s common stock or, (ii) 10% of the reserved
shares in any calendar month. The Company estimated the total enterprise value based upon a combination of the trending of the
firm value from December 2006 to December 2014, market comparables and the market value of the Company’s stock considering
company specific factors including the changes in forward estimated revenues and market factors. Once the enterprise value was
determined an option pricing model was used to allocate the enterprise value to these 6,666,667 rights and other securities in
the Company’s capital structure. The fair value of these 6,666,667 share rights was estimated at $54,289 and the Company
recognized a gain on extinguishment of debt of $325,335 during the quarter ended September 30, 2014 based on the excess of the
value of the instruments settled over the estimated fair market value of the underlying share rights.
Payoff Agreement with Platinum Long
Term Growth IV, LLC and Merit Consulting LLC
On June 26, 2014, the Company entered into
a Payoff Agreement with two of its lenders (collectively referred to as “the holders”) where the holders agreed to
surrender their outstanding promissory notes and debentures in the aggregate principal amount of $3,256,399 plus all accrued and
unpaid interest amounting to $592,414 in consideration for an aggregate payment of $300,000. As further consideration, one of the
lenders agreed to return its 2,587,674 shares of Series C Preferred Stock for cancellation. The Company reversed $70,165 in registration
rights liabilities in connection with this Payoff Agreement. Effective upon the consummation of this Payoff Agreement, the Company
had no further obligation to the holders pursuant to the terms of the preferred stock and the notes as defined in the Payoff Agreement.
As a result of this Payoff Agreement, the Company recognized a gain on extinguishment of debt during the second quarter of 2014
in the amount of $3,747,273.
Bitcoin Promissory Notes
The Company established its subsidiary,
Bitcoin Bidder, Inc. in June, 2014 for the sole purpose of bidding on bitcoins which had been seized by the FBI and were
sold at auction June 27, 2014. In connection with this, the Company issued notes aggregating $2,150,000 under a Securities
Purchase Agreement. Bitcoin Bidder, Inc. was not successful at the auction and $1,950,000 in borrowings was repaid to the
lenders on June 30, 2014. The remaining $200,000 was repaid to the lenders in July, 2014 without any penalty or interest charges
to NaturalNano. The Company dissolved Bitcoin Bidder, Inc. in 2014.
3. INCOME TAXES
The Company had not commenced operations during the fiscal year
ended December 31, 2015 an d had incurred no income tax expense at either the Federal or State level. which the Company is subject.
4. STOCKHOLDERS DEFICIENCY
As of December 31, 2015 the Company was
authorized to issue up to 300 shares of common stock.
Common Stock Issuances
During 2015, the Company issued 300 common
shares to the Founders of the Company.
5. COMMITMENTS AND LEASE OBLIGATIONS
Lease obligations
We lease our executive officer from Madeira
Beach Seafood, Inc, an affiliated entity Our rent obligation for the twelve months ending December 31, 2016 will be $6,000. We
paid no rent during the calendar year ended December 31, 2015
6. SUBSEQUENT EVENTS
Material Definitive Agreement
On June 23, 2016 (the "Effective Date"),
all of the shareholders of Omni entered into a Share Exchange Agreement (the "Exchange Agreement") with NaturalNano,
Inc. (OTC PK: NNAN) , pursuant to which the shareholders exchanged with the Company all of the outstanding shares of stock of Omni
and Omni thereupon became a wholly owned subsidiary of NNAN. In consideration for the exchange of those OMNI shares, the Company
issued 28,500 shares of a newly created Series E Preferred Stock of NNAN(the "Series E Preferred Stock").
The transaction closed on June 23, 2016.
Management’s Discussion and Analysis
of Financial Condition and Results of Operations
Note Regarding Forward-Looking Statements
This annual report on Form 10-K and other
reports that we file with the SEC contain statements that are considered forward-looking statements that involve risks and uncertainties.
These include statements about our expectations, plans, objectives, assumptions or future events. In some cases, you can identify
forward-looking statements by terminology such as “anticipate,” “estimate,” “plans,” “potential,”
“projects,” “continuing,” “ongoing,” “expects,” “management believes,”
“we believe,” “we intend” and similar expressions. Such forward looking statements include statements addressing
operating performance, events or developments that the Company expects or anticipates will occur in the future, including statements
relating to revenue realization, revenue growth, earnings, earnings per share, or similar projections. These statements estimates
involve estimates, assumptions and uncertainties that could cause actual results to differ materially from those expressed for
the reasons described in this report. You should not place undue reliance on these forward-looking statements.
You should be aware that our actual results
could differ materially from those contained in the forward-looking statements due to a number of factors such as:
·
|
the ability to raise capital to fund our operations until we generate adequate cash flow internally;
|
·
|
the terms and timing of product sales and licensing agreements;
|
·
|
our ability to enter into strategic partnering and joint development agreements;
|
·
|
our ability to competitively market our controlled release and filled tube products;
|
·
|
the successful implementation of research and development programs;
|
·
|
our ability to attract and retain key personnel ;
|
·
|
general market conditions.
|
Our actual results may differ materially
from management’s expectations. The following discussion and analysis should be read in conjunction with our financial statements
included herewith. This discussion should not be construed to imply that the results discussed herein will necessarily continue
in the future, or that any conclusion reached herein will necessarily be indicative of actual operating performance in the future.
Such discussion represents only the best present assessment of our management.
The forward-looking statements speak only
as of the date on which they are made, and except to the extent required by federal securities laws, we undertake no obligation
to update any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to
reflect the occurrence of unanticipated events. In addition, we cannot assess the impact of each factor on our business or the
extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any
forward-looking statements.
General
Background
NaturalNano, Inc. (the "Company")
has executive offices located in Madeira Beach, Florida on the Gulf of Mexico. Omni is a fast growing wholesaler of locally caught
wild American shrimp, predominantly the highly popular Key West pink variety. Customers are large distributors in the US, who then
resell the product to grocery store chains, restaurants and other retail stores in the Florida, Boston and New York markets.
Liquidity
Going Concern
- The accompanying
consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and
the satisfaction of liabilities in the normal course of business. The Company generated a net loss for the year ended December
31, 2015 of approximately $268,000, had negative working capital of approximately $2,436,000 and a stockholders’ deficiency
of approximately $2,436,000 at December 31, 2015. Since inception the Company’s growth has been funded through a combination
of convertible and non-convertible debt from private investors and from cash advances from its former parent Technology Innovations,
LLC. These factors, among others, may indicate that the Company will be unable to continue as a going concern for a reasonable
period of time. The Company’s continuation as a going concern is dependent upon its ability to generate sufficient cash flow
to meet its obligations, to obtain additional financing, renegotiate the terms of existing financing obligations and ultimately
to attain successful operations. The ability to successfully achieve those items is uncertain. The financial statements do not
include any adjustments that might result from the uncertainty.
As of December 31, 2015, the Company continued
to require waivers for debt covenant violations and extensions of maturity dates. Refer to Note 2 for lender waivers and maturity
extensions received from the lenders.
The Company’s management and Board
of Directors continue to actively assess the Company's operating structure with an objective to reduce ongoing expenses, increase
sources of recurring revenue as well as seeking additional debt or equity financing. The Company will continually evaluate
funding options including additional offerings of its securities to private and institutional investors and other credit facilities
as they become available. There can be no assurance as to the availability or terms upon which such financing alternatives might
be available.
The Company has experienced recurring losses
from operations since its inception and continues to have a working capital deficiency and limited opportunities for additional
capital infusion. The Company has experienced recurring defaults relating to the various provisions under its current debt
obligations and is expected to require future forbearance and waivers relating to such provisions in the future. These negative
financial conditions combined with delays experienced in product introduction and customer acceptance raises substantial doubt
of the Company’s ability to continue as a going concern.
Comparison of Liquidity and Capital
Resources for the years ended December 31, 2015 and 2014
Results of Statement of Operations
for the year ended December 31, 2015
Revenue and Gross Profit
During the years ended December 31, 2015,
the Company recorded no revenue. Operations did not commence until Fiscal 2016.
Operating Expenses
Operating expenses were minimal in 2015 and consisted principally
of the cost to incorporate the Company on September 22, 2015.
Interest (Expense)
Interest expense includes the interest
on the senior and subordinated convertible and non-convertible promissory notes. The Company incurred $266,661 in interest expense
in 2015
NaturalNano, Inc.
Pro-Forma Condensed Balance Sheet Unaudited
June 23, 2016
|
|
NaturalNano,
Inc.
|
|
|
Omni
Shrimp, Inc.
|
|
|
Pro-forma
Merger
|
|
|
Pro-forma
Merger
Adjustments
|
|
|
Pro-Forma
Offering
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT ASSETS:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
(151
|
)
|
|
$
|
85,795
|
|
|
$
|
85,644
|
2
|
|
$
|
151
|
|
|
$
|
85,795
|
|
Accounts Receivable
|
|
|
-
|
|
|
|
219,603
|
|
|
|
219,603
|
|
|
|
|
|
|
|
219,603
|
|
Inventory
|
|
|
120,858
|
|
|
|
74,141
|
|
|
|
194,999
|
2
|
|
|
(120,858
|
)
|
|
|
74,141
|
|
Prepaid and Other
|
|
|
7,040
|
|
|
|
2,867
|
|
|
|
9,907
|
2
|
|
|
(7,040
|
)
|
|
|
2,867
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Current Assets
|
|
|
127,747
|
|
|
|
382,406
|
|
|
|
510,153
|
|
|
|
(127,747
|
)
|
|
|
382,406
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NON-CURRENT ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Non-current assets
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets
|
|
$
|
127,747
|
|
|
$
|
382,406
|
|
|
$
|
510,153
|
|
|
$
|
(127,747
|
)
|
|
$
|
382,406
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' DEFICIT
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT LIABILITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes Payable
|
|
$
|
1,654,353
|
|
|
$
|
133,743
|
|
|
$
|
1,788,096
|
|
|
$
|
0
|
|
|
$
|
1,788,096
|
|
Accounts Payable
|
|
|
487,204
|
|
|
|
142,835
|
|
|
|
630,039
|
2
|
|
|
(487,204
|
)
|
|
|
142,835
|
|
Accrued Expenses
|
|
|
109,573
|
|
|
|
-
|
|
|
|
109,573
|
2
|
|
|
(109,573
|
)
|
|
|
-
|
|
Accrued Interest
|
|
|
463,864
|
|
|
|
2,154
|
|
|
|
466,018
|
|
|
|
|
|
|
|
466,018
|
|
Accrued Taxes
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Accrued Payroll
|
|
|
1,108,448
|
|
|
|
-
|
|
|
|
1,108,448
|
2
|
|
|
(1,108,448
|
)
|
|
|
-
|
|
Registration Rights Liability
|
|
|
12,324
|
|
|
|
-
|
|
|
|
12,324
|
2
|
|
|
(12,324
|
)
|
|
|
-
|
|
Derivative liability
|
|
|
618,833
|
|
|
|
-
|
|
|
|
618,833
|
2
|
|
|
(618,833
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Current Liabilities
|
|
|
4,454,598
|
|
|
|
278,732
|
|
|
|
4,733,331
|
|
|
|
(2,336,382
|
)
|
|
|
2,396,949
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LONG-TERM LIABILITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Long-Term Liabilities
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities
|
|
|
4,454,598
|
|
|
|
278,732
|
|
|
|
4,733,331
|
|
|
|
(2,336,382
|
)
|
|
|
2,396,949
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred Stock Series E- $.001 par value, 300
shares issued and authorized
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS' EQUITY (DEFICIT):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock at $0.001 par value: 800,000,000
shares authorized; 2,911,658 shares issued and outstanding
|
|
|
2,912
|
|
|
|
300
|
|
|
|
3,212
|
|
|
|
(2,912
|
)
|
|
|
300
|
|
Additional paid-in capital
|
|
|
21,979,242
|
|
|
|
977
|
|
|
|
21,980,219
|
|
|
|
(21,979,242
|
)
|
|
|
977
|
|
Retained Earnings (Accumulated
Deficit)
|
|
|
(26,309,006
|
)
|
|
|
102,397
|
4
|
|
|
(26,206,609
|
)3
|
|
|
24,190,789
|
|
|
|
(2,015,820
|
)
|
Total Stockholders' Equity
(Deficit)
|
|
|
(4,326,852
|
)
|
|
|
103,674
|
|
|
|
(4,223,178
|
)
|
|
|
2,208,635
|
|
|
|
(2,014,543
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities and
Stockholders' Deficit
|
|
$
|
127,747
|
|
|
$
|
382,406
|
|
|
$
|
510,153
|
|
|
$
|
(127,747
|
)
|
|
$
|
382,406
|
|
NaturalNano, Inc.
Pro Forma Condendsed Statement of Operations
(Unaudited)
For the Period from January 1, 2016 through June 23, 2016
|
|
NaturalNano,
Inc.
|
|
|
Omni Shrimp,
Inc.
|
|
|
Pro Forma Merger
|
|
|
Merger
Adjustments
|
|
|
Pro Forma
Offering
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
150,811
|
|
|
$
|
1,199,948
|
|
|
$
|
1,350,759
|
1
|
|
|
(150,811
|
)
|
|
$
|
1,199,948
|
|
Cost of Goods Sold
|
|
|
(4,656
|
)
|
|
|
(1,043,928
|
)
|
|
|
(1,048,584
|
)1
|
|
|
4,656
|
|
|
|
(1,043,928
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Profit
|
|
|
146,155
|
|
|
|
156,020
|
|
|
|
302,175
|
|
|
|
(146,155
|
)
|
|
|
156,020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING EXPENSES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and Administrative Expense
|
|
|
132,282
|
|
|
|
50,193
|
|
|
|
182,475
|
1
|
|
|
(132,282
|
)
|
|
|
50,193
|
|
Stock based compensation
attributable to warrant grants
|
|
|
61,486
|
|
|
|
-
|
|
|
|
61,486
|
1
|
|
|
(61,486
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
193,768
|
|
|
|
50,193
|
|
|
|
243,961
|
|
|
|
(193,768
|
)
|
|
|
50,193
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAIN (LOSS) FROM OPERATIONS
|
|
|
(47,613
|
)
|
|
|
105,827
|
|
|
|
58,215
|
|
|
|
47,613
|
|
|
|
105,827
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER INCOME (EXPENSE):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
(156,066
|
)
|
|
|
(2,154
|
)
|
|
|
(158,220
|
)
|
|
|
|
|
|
|
(158,220
|
)
|
Gain on forgiveness, conversions and modifications
of debt
|
|
|
502,305
|
|
|
|
|
|
|
|
502,305
|
4
|
|
|
(502,305
|
)
|
|
|
-
|
|
Gain on Disposition of Legacy Business
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
-
|
|
Gain (loss) on
change in derivative liability
|
|
|
67,827
|
|
|
|
|
|
|
|
67,827
|
5
|
|
|
(67,827
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense),
net
|
|
|
414,067
|
|
|
|
(2,154
|
)
|
|
|
411,913
|
|
|
|
(570,132
|
)
|
|
|
(158,220
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before income tax provision
|
|
|
(461,680
|
)
|
|
|
103,674
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax provision
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income
|
|
|
366,454
|
|
|
|
103,674
|
|
|
|
470,128
|
|
|
|
(522,519
|
)
|
|
|
(52,391
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- Basic and diluted
|
|
|
2,792,843
|
|
|
|
300
|
|
|
|
2,792,843
|
|
|
|
|
|
|
|
2,792,843
|
|
Weighted average Earnings per share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- Basic and diluted
|
|
$
|
0.13
|
|
|
$
|
345.58
|
|
|
$
|
0.17
|
|
|
|
|
|
|
$
|
(0.02
|
)
|
Omni Shrimp, Inc.
Pro-Forma Assumptions-Unaudited
June 23, 2016
1) To eliminate the following Statement of Operation items for NaturalNano, Inc.
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
150,811
|
|
Cost of Goods Sold
|
|
|
4,656
|
|
General and Administrative Expense
|
|
|
132,282
|
|
Stock based compensation attributable to warrant grants
|
|
|
61,486
|
|
Gain on forgiveness, conversions and modifications of debt
|
|
|
502,305
|
|
Gain on change in derivative liability
|
|
|
67,827
|
|
|
|
|
|
|
2) To eliminate the following Balance Sheet items for NaturalNano, Inc.
|
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
(151
|
)
|
Inventory
|
|
|
120,858
|
|
Prepaid and Other
|
|
|
7,040
|
|
Accounts payable
|
|
|
487,204
|
|
Accrued expenses
|
|
|
109,573
|
|
Accrued Payroll
|
|
|
1,108,448
|
|
Registration rights liability
|
|
|
12,324
|
|
Derivative liability
|
|
|
618,833
|
|
|
|
|
|
|
3) Elimination of Additional Paid in capital accounts
of Omni Shrimp
|
|
$
|
102,397
|
|
|
|
|
|
|
4) Elimination of retained earnings of NaturalNano,
Inc. adjusted for
notes payable and accrued interest assumed
|
|
$
|
26,606,609
|
|
1.
|
PRINCIPAL BUSINESS ACTIVITY AND SIGNIFICANT ACCOUNTING POLICIES
|
Interim Financial Statements
The condensed consolidated financial statements
as of June 23, 2016 and for the period from January 1, 2016 to June 23, 2016 are unaudited. However, in the opinion of management
of the Company, these condensed consolidated financial statements reflect all material adjustments, consisting solely of normal
recurring adjustments, necessary to present fairly the consolidated financial position and results of operations for such interim
periods. The results of operations for the interim periods presented are not necessarily indicative of the results to be obtained
for a full year. The accompanying condensed consolidated financial statements have been prepared in accordance with U.S. generally
accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Rule 8-03 of Regulation
S-X for smaller reporting companies. Accordingly, these condensed consolidated financial statements do not include all
of the information required by U.S. generally accepted accounting principles for complete financial statements. These
unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements
and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2015.
Liquidity and Going Concern
Going Concern - The accompanying condensed
consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and
the satisfaction of liabilities in the normal course of business.. Since inception the Company’s growth has been funded through
a combination of convertible and non-convertible debt from private investors and from cash advances from its former parent Technology
Innovations, LLC. These factors, among others, may indicate that the Company will be unable to continue as a going concern for
a reasonable period of time. The Company’s continuation as a going concern is dependent upon its ability to generate sufficient
cash flow to meet its obligations, to obtain additional financing, renegotiate the terms of existing financing obligations and
ultimately to attain successful operations. The ability to successfully achieve those items is uncertain. The financial statements
do not include any adjustments that might result from the uncertainty.
As of June 23, 2016, the Company continued
to require waivers for debt covenant violations and extensions of maturity dates. Refer to Note 2 for lender waivers and maturity
extensions received from the lenders.
Basis of Consolidation
The condensed consolidated financial statements
include the accounts of NaturalNano, Inc. (“NaturalNano” or the “Company”), a Nevada corporation, and its
wholly owned subsidiaries NaturalNano Research, Inc. (“NN Research”) a Delaware corporation. All significant inter-company
accounts and transactions have been eliminated in consolidation.
Description of the Business
New
lines of Business
Shrimp
Omni Shrimp
On June 23, 2016, the Company announced
the acquisition of all the outstanding shares of, Omni Shrimp (“Omni”) a Florida corporation, located in Madeira Beach,
Florida on the Gulf of Mexico. Omni is a seller of wild American shrimp. Omni wholesales its locally caught shrimp, predominantly
the highly popular Key West pink variety, to large distributors in the United States, who then resell the product to grocery store
chains, restaurants and other retail stores in the Florida, Boston and New York markets. See Note 7. Subsequent Events for more
detail.
Omni believes that it differentiates itself
from its competitors not only by the quality of its product but its relationships with distributors allowing it to get its product
to market as quickly as possible in order to guarantee freshness and taste.
Existing lines of Business
Following the acquisition discussed above,
On June 23, 2016, the following businesses were transferred to the former Management of the Company. See Note 8 to the Consolidated
Financial statements below.
Nanotechnology
The Company, located in Rochester, New
York, is engaged in the development and commercialization of material science technologies with an emphasis on additives to polymers
and other industrial and consumer products by taking advantage of technology advances developed in-house. The Company’s current
activities are directed toward research, development, production and marketing of its proprietary technologies relating to the
treatment and separation of nanotubes from halloysite clay and the development of related commercial applications for cosmetics,
health and beauty products and polymers, plastics and composites.
ViralProtec
In the fourth quarter of 2014, the Company
announced the new business line, ViralProtec, (www.viralprotec.com) a division of NaturalNano. ViralProtec, is a reseller for healthcare
personal protective equipment (PPE) and ancillary supplies. Our mission is to provide personal protective equipment for caregivers for
infectious patient care that meet or exceed CDC and WHO guidelines. ViralProtec was created in response of the public concern
and publicity surrounding the risk to caregivers and other responders created by the Ebola virus. The Company will maintain inventory
on hand for customers to order complete protection kits from a single source instead multiple sources.
Significant Accounting Policies
Estimates
The preparation of consolidated financial
statements in conformity with accounting principles generally accepted in the United States requires us to make estimates and assumptions
that affect the amounts reported and disclosed in the financial statements and the accompanying notes. Actual results could differ
materially from these estimates. On an ongoing basis, we evaluate such estimates. We base our estimates on historical experience
and on various other assumptions that are believed to be reasonable, the results of which form the basis for making judgments about
the carrying values of assets and liabilities.
Fair Value of Financial Instruments
Fair value is defined as the price that
would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the
measurement date. The Fair Value Measurement Topic of the Financial Accounting Standards Board (“FASB”) Accounting
Standards Codification (“ASC”) establishes a three-tier fair value hierarchy which prioritizes the inputs used in measuring
fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or
liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). These tiers include:
·
|
Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities.
|
·
|
Level 2 inputs are quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument.
|
·
|
Level 3 inputs are unobservable inputs based on the Company’s own assumptions used to measure assets and liabilities at fair value.
|
A financial asset or liability’s
classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement.
The carrying amounts reported in the balance sheet of cash, accounts receivable, inventory, prepaid assets, accounts payable and
accrued expenses approximate fair value because of the immediate or short-term maturity of these financial instruments. The fair
value of notes payable approximates their carrying value as the terms of this debt reflects market conditions. The Company’s
derivative liability was determined utilizing Level 3 inputs.
Derivative Financial Instruments
The Company does not use derivative instruments
to hedge exposures to cash flow, market or foreign currency risks. The Company evaluates all of its financial instruments to determine
if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments
that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and then is revalued at
each reporting date, with changes in fair value reported in the consolidated statement of operations. For stock based derivative
financial instruments, the Company estimated the total enterprise value based upon trending the firm value from December 2006 to
March 2016 considering company specific factors including the changes in forward estimated revenues and market factors, market
multiples for comparable companies, and the Company’s market share price, all equally weighted. Once the enterprise
value was determined an option pricing model was used to allocate the enterprise value to the individual derivative securities
in the Company’s capital structure. The classification of derivative instruments, including whether such instruments
should be recorded as liabilities or equity, is evaluated at the end of each reporting period. Derivative instrument liabilities
are classified in the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument
could be required within twelve months of the balance sheet date.
Reclassifications
Certain prior year amounts have been reclassified
to conform to the current year presentation.
Income Taxes
The Company accounts for income taxes in
accordance with FASB ASC 740 which requires recognition of estimated income taxes payable or refundable on income tax returns for
the current year and for the estimated future tax effect attributable to temporary differences and carry-forwards. Measurement
of deferred income tax items is based on enacted tax laws including tax rates, with the measurement of deferred income tax assets
being reduced by available tax benefits not expected to be realized. The Company recognizes penalties and accrued interest
related to unrecognized tax benefits in income tax expense. Income tax expense was $0 for theperiod ending June 23, 2016
Loss Per Share
Loss per common share is computed by dividing
net income or loss by the weighted-average number of shares of common stock outstanding during the period. Diluted income or loss
per common share gives effect to dilutive convertible preferred stock, convertible debt, options and warrants outstanding during
the period. Shares to be issued upon the exercise of these instruments have not been included in the computation of diluted loss
per share as their effect is anti-dilutive based on the net loss incurred.
As of March 31, 2016 and 2015 there were
39,567,578 and 9,130,044 shares, respectively, underlying preferred stock, convertible debt, outstanding options and warrants that
could potentially dilute future earnings. In addition to these potentially dilutive shares as of March 31, 2015 were an additional
6,666,667 reserved shares underlying the July 23, 2014 Exchange and Right to Shares Agreement with Cape One Master Fund II LLP
further described in Note 2 below.
These potentially dilutive shares have
been limited by certain debt and equity agreements with lenders. These agreements provide limitations on the conversion of the
dilutive instruments such that the number of shares of Common Stock that may be acquired by the holder upon conversion of such
instruments shall be limited to ensure that following such conversion the total number of shares of Common Stock then beneficially
owned by the holder does not exceed 4.99% of the total number of issued and outstanding shares of Common Stock. The Company does
not have sufficient authorized shares to satisfy conversion of all the potentially dilutive instruments.
Recent Accounting Pronouncements
In July 2015, the Financial Accounting
Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2015-011 to Topic 330, Inventory. This
ASU requires entities using inventory costing methods other than last-in-first-out and retail inventory method to value their inventory
at the lower of cost and net realizable value. This ASU is effective for fiscal years beginning after December 15, 2016 and is
to be applied prospectively. Early adoption of this ASU is permitted. The Company does not expect adoption of this ASU to have
a material impact on its Consolidated Financial Statements.
Notes payable consisted of the following:
Notes Payable
|
|
June 23,
2016
|
|
|
December 31,
2015
|
|
Senior Secured Convertible Notes
|
|
$
|
289,115
|
|
|
$
|
441,988
|
|
Senior Secured Promissory Notes
|
|
|
398,938
|
|
|
|
398,938
|
|
2014-2015 Convertible Promissory Notes
|
|
|
594,515
|
|
|
|
745,015
|
|
Convertible Promissory Notes
|
|
|
344,000
|
|
|
|
344,000
|
|
Total Notes Payable Outstanding
|
|
|
1,626,468
|
|
|
|
1,929,941
|
|
Lines of credit
|
|
|
161,528
|
|
|
|
|
|
|
|
|
1,788,096
|
|
|
|
1,929,941
|
|
Senior Secured Convertible Notes and
Senior Secured Promissory Notes
As of March 31, 2016 and December 31, 2015
Notes payable on the balance sheets includes $840,926 for senior secured convertible and non-convertible senior secured promissory
notes. The conversion rate for principal and accrued interest on Senior Secured Convertible Notes is 75% of the lowest
volume weighted average price (VWAP) of the Company’s common stock for the 1, 5 or 10 days immediately prior to the conversion.
As further described below, the Company has defaulted on certain provisions of the notes. The Company has obtained a waiver of
default on the outstanding principal. As a condition of this forbearance the interest rate on certain of these notes has been increased
to 18%.
Pursuant to the Forbearance agreement,
$152,873 of this debt was forgiven at the Closing on June 23, 2016.
2014-2015 Convertible Promissory Notes
During nine months ended March 31, 2016,
the Company entered into two Senior Secured Convertible Promissory Notes aggregating $61,000. The 2014-2015 Senior Secured Promissory
Notes are secured by, among other things, (i) the continuing security interest in certain assets of the Company pursuant to the
terms of the Initial Notes dated March 7, 2007, (ii) the Pledge Agreement, as defined in the Initial Notes, and (iii) the Patent
Security Agreement, dated as of March 6, 2007. The proceeds from the 2014-2015 Senior Secured Promissory Notes are available for
general working capital purposes and cannot be used to redeem or make any payment on account of any securities due to the Lenders. The
Company has obtained a waiver of default on the outstanding principal through November 30, 2015. As a condition of this forbearance
the interest rate on certain of these notes has been increased to 18%. On March 10, 2016, an investor converted $5,500 of principal
into 110,000 shares.
On February 15, 2015, the Company granted
300,000 warrants to the Company’s board members with an exercise price of $0.10 per share and on May 30, 2015, the Company
granted 375,000 warrants to the Company’s board members and one consultant with an exercise price of $0.05 per share. The
2014-2015 Convertible Promissory Notes were convertible into shares at $0.30 per share subject to adjustment in the event of lower
price issuances, subject to customary exceptions. Based on the Company’s issuance of warrants described above, the conversion
price on these debt obligations were modified to $0.05 per share.
Pursuant to the Forbearance agreement,
$145,000 of this debt was forgiven on June 23, 2016.
Subordinated Secured Convertible Note
and Exchange and Right to Shares Agreement - Cape One Master Fund II LP
On July 23, 2014, the Company and Cape
One Master Fund II LLP agreed to exchange the Subordinated Secured Convertible Note and related accrued and unpaid interest totaling
a combined $379,624 in exchange for 6,666,667 reserved shares of the Company’s common stock. The Company and Cape One agreed
that a beneficial ownership limitation of 4.99% shall be maintained at all times as to the number of the shares of the common stock
outstanding immediately after giving effect to the issuance of the common stock issuable under this agreement. Cape One also agreed
to a Lockup provision in the agreement that specifies that Cape One will not sell, transfer or hypothecate any of the reserved
shares until Alpha Capital Anstalt has received $3,500,000 from the proceeds of sales of shares obtained upon conversion of notes
issued by the Company and held by Alpha as of the date of this agreement. Upon expiration of the Lockup period, Cape One shall
be allowed to sell the lesser of (i) 5% of the daily trading volume of the Company’s common stock or, (ii) 10% of the reserved
shares in any calendar month.
2015 Exchange of Cape One Master Fund
II LLP shares for Convertible Promissory Notes
On December 15, 2015, the Company’s
board of directors determined that it was in the best interest of the corporation to exchange 6,666,667 reserved shares of the
Company’s common stock, held by Cape One Master Fund II LLP (as described below), for four convertible promissory notes totaling
$344,000 with an interest rate of 8% per annum due June 30, 2017. These promissory notes are convertible to common stock at the
rate of $0.05 per share. In the event that the Company shall, at any time, issue any additional shares of common stock or equivalents
at a price per share less than the $0.05 conversion price then the conversion price for these convertible promissory notes shall
be reduced. The Company recognized a loss on the exchange of the rights to reserved commons shares upon the issuance of these convertible
promissory notes of approximately $305,000 in 2015. On January 5, 2016 the conversion price on the debt was adjusted to $0.02 per
share upon the issuance of 450,000 warrants exercisable at $0.02 per share.
Bridge Loans
Bridge loans are short term notes taken on demand. $133,743
was at Omni as follows:
Date Issued
|
|
Amount
|
|
|
Interest Rate
|
|
|
Holder
|
|
|
|
|
|
|
|
|
|
February 12, 2016
|
|
$
|
85,000
|
|
|
|
5.25
|
%
|
|
Madeira Beach Seafood, Inc.
|
|
|
|
|
|
|
|
|
|
|
|
April 7, 2016
|
|
|
48,743
|
|
|
|
5.25
|
%
|
|
Madeira Beach Seafood, Inc.
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
133,743
|
|
|
|
|
|
|
|
Approximately $27,000 in demand loans were issued at NaturalNano,
Inc.
Subsequent to the
Acquisition of Omni and the disposition of the Nanotechnology and Viral Protec businesses, the Company operates in only segment,
Shrimp. Thusly, there is no need to present segment data.
As of June 23, 2016 the Company was authorized
to issue up to 800,000,000 shares of common stock and 10,000,000 shares of preferred stock.
Authorized Common Stock:
In 2013
the Company received a unanimous written consent in lieu of a meeting from the members of the Board of Directors and a written
consent from the Series D stockholder to amend its articles of incorporation to increase the Company’s authorized common
shares to 800,000,000 common shares. As of June 23, 2016 there were approximately 250 million shares underlying preferred stock,
convertible debt, outstanding options and warrants that could potentially dilute future earnings. The company does not have sufficient
authorized shares to facilitate conversion of all the potentially dilutive instrument.
Preferred Stock Issuances
The Series E Convertible Preferred Stock
is convertible into 95% of the Company’s common stock and votes on an as-converted basis. The Series E designation
limits the holders’ rights to convert its Convertible Preferred Stock, and the aggregate voting powers, to no more than 4.99%
of the votes attributable to the total outstanding common shares. As a result of the Company not having sufficient authorized
shares to satisfy the conversion of all outstanding convertible debt, share rights, convertible preferred stock, warrants and options,
the Series B preferred shares have been moved into temporary equity classification on the balance sheet.
Preferred Stock Cancellations
As a part of the Forbearance Agreement,
5,000 shares of Series B Preferred stock and 100 shares of Series D Preferred stock were also cancelled.
Warrants Grants
The Company has issued warrants to purchase
shares of its common stock to certain consultants and debt holders. As of June 23, 2016 and December 31, 2015 there were common
stock warrants outstanding to purchase an aggregate of 2,917,941 and 1,217,941 shares of common stock, respectively, pursuant to
the warrant grant agreements.
On February 15, 2015, the Company granted
a total of 300,000 warrants to the Company’s board members. These warrants, included in the summary below, grant the right
to purchase one share of common stock at an exercise price of $0.10 per share. The warrants were fully vested as of the grant date
and contain a cashless exercise provision. The fair value of the warrants on the date of grant was determined using the Black-Scholes
model and was measured on the date of grant at $61,106. An expected volatility assumption of 140% was used based on
the volatility of the Company’s stock price utilizing a look-back basis and the risk-free interest rate of 1.62% which was
derived from the U.S. treasury yields on the date of grant. The market price of the Company’s common stock on
the grant date was $0.22 per share. The expiration date used in the valuation model aligns with the warrant life of
five years as indicated in the agreements. The dividend yield was assumed to be zero.
On January 6, 2016, the Company granted
a total of 450,000 warrants to the Company’s board members and one consultant. These warrants, included in the summary below,
grant the right to purchase one share of common stock at an exercise price of $0.02 per share. The warrants were fully vested as
of the grant date and contain a cashless exercise provision. The fair value of the warrants on the date of grant was determined
using the Black-Scholes model and was measured on the date of grant at $25,292. An expected volatility assumption of
140% was used based on the volatility of the Company’s stock price utilizing a look-back basis and the risk-free interest
rate of 1.00% which was derived from the U.S. treasury yields on the date of grant. The market price of the Company’s
common stock on the grant date was $0.06 per share. The expiration date used in the valuation model aligns with the
warrant life of five years as indicated in the agreements. The dividend yield was assumed to be zero
A summary of the outstanding warrants is presented below:
|
|
Shares
|
|
|
Weighted
Average
Exercise
Price
|
|
|
Weighted
Average
Remaining
Life-years
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at January 1, 2016
|
|
|
1,217,941
|
|
|
$
|
.35
|
|
|
|
4.07
|
|
Issued
|
|
|
2,000,000
|
|
|
$
|
.05
|
|
|
|
5.98
|
|
Exercised
|
|
|
(300,000
|
)
|
|
$
|
.05
|
|
|
|
4.75
|
|
Warrants outstanding at June 23, 2016
|
|
|
2,917,941
|
|
|
$
|
.17
|
|
|
|
4.75
|
|
A summary of the status of the outstanding incentive stock plans
is presented below:
|
|
Shares
|
|
|
Weighted
Average
Exercise Price
|
|
|
Weighted
Average
Remaining
Life-years
|
|
|
|
|
|
|
|
|
|
|
|
Options outstanding at January 1, 2016
|
|
|
1,099
|
|
|
$
|
2,008
|
|
|
|
1.32
|
|
Options outstanding at June 23, 2016
|
|
|
1,099
|
|
|
$
|
2,008
|
|
|
|
1.07
|
|
Options exercisable at June 23, 2016
|
|
|
1,099
|
|
|
$
|
2,008
|
|
|
|
1.07
|
|
All compensation costs for the above options
have been previously recognized in operations. As of March 31, 2016, the aggregate intrinsic value of the stock options outstanding
and exercisable was $0. There were no option grants made in the three month periods ended March 31, 2016 and 2015.
Change in Independent Registered
Public Accounting Firm
On August 3, 2016,
the Board of Directors of the Company notified Freed Maxick CPAs, P.C (“Freed Maxick”) that it had determined to dismiss
them as the Company’s independent registered public accounting firm, effective as of August 3, 2016. Also on August 3, 2016,
the Board determined to engage Scrudato & Co., PA as its new independent registered public accounting firm to replace Freed
Maxick. Please see our form 8-K filed on August 3, 2016 for more detail.
Issuance of Common shares and Conversion
of debt
On July 6, 2016, the Company issued 142,811
shares due to the conversion of $1,000 of notes payable plus $785 of accrued interest.
Issuance of Debt
On August 8, 2016, the Company borrowed $20,000 from a
third party. The convertible promissory note bears interest at 10% per annum and matures on August 1, 2017. The third party
has the option to convert all or a portion of the note plus accrued interest into common stock at a conversion price equal to 50%
of the lowest closing bid price for the twenty days prior to the conversion.
New Lease
Commencing August 1, 2016, the Company
entered into a lease for a period of twelve months for its Madeira Beach location. The monthly rent will be $1,500.