The following unaudited interim financial statements of Evergreen-Agra, Inc. (sometimes referred to as “we”, “us” or “our Company”) are included in this quarterly report on Form 10-Q:
The accompanying notes are an integral part of these consolidated financial statements.
The accompanying notes are an integral part of these consolidated financial statements.
The accompanying notes are an integral part of these consolidated financial statements.
The accompanying notes are an integral part of these consolidated financial statements.
Notes to Consolidated Financial Statements
For the Three and Nine Months Ended September 30, 2016 and 2015
(Unaudited)
NOTE 1. NATURE OF OPERATIONS
Description of Business and History
Evergreen-Agra Inc. (hereinafter referred to as the “Company”) was incorporated on June 13, 2008 by filing Articles of Incorporation under the Nevada Secretary of State. The Company was incorporated under the name AMF Capital Group, Inc. In June 2009, the Company changed its name to Blackrock Resources, Inc. In January 2010, the Company changed its name to Artepharm Global Corp. Effective July 20, 2011, the Company changed its name to Sharprock Resources Inc. Effective October 23, 2013 the Company changed its name to Evergreen-Agra, Inc. During the Company’s quarter ended September 30, 2011, the Company shifted its focus from mineral exploration to organic veterinary medical products. In the quarter ended December 31, 2013, the Company shifted its focus to medical marijuana coincident with its acquisition of Evergreen Systems effective November 19, 2013.
On November 19, 2013, pursuant to a letter of intent dated September 10, 2013, the Company issued 20,000,000 post-split shares of its common stock to Rene Hamouth in exchange for 100% ownership of Evergreen Systems (“ES”). Except for conducting research on the medical marijuana industry, ES had no assets, liabilities, or business operations prior to the acquisition. At closing, the Company also issued 19,600,000 post-split shares of its common stock to Harpreet Sangha (then director and former chief executive officer of the Company from September 19, 2009 to September 1, 2013) for future services to be rendered and 1,000,000 post-split shares of its common stock to Richard Specht (secretary and director of the Company from September 1, 2013 to November 21, 2014) for services rendered. ES became a wholly owned subsidiary of the Company.
The acquisition resulted in a change of control of the Company on November 19, 2013. The accompanying consolidated financial statements reflect the assets, liabilities and operations of Evergreen Systems from its inception on August 15, 2013 to November 19, 2013 and are consolidated with Evergreen-Agra, Inc. thereafter.
Reverse Stock Split
Effective October 23, 2013, the Company completed a 1 for 100 reverse stock split of its common stock resulting in the reduction of the issued and outstanding shares of common stock from 82,280,000 shares to 822,800 shares at October 23, 2013. The accompanying consolidated financial statements retroactively reflect this reverse stock split.
NOTE 2. GOING CONCERN UNCERTAINTY
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and the liquidation of liabilities in the normal course of business. At September 30, 2016, the Company had negative working capital of $1,093,434. Further, the Company has had no revenues from inception on August 15, 2013. These factors raise substantial doubt about the Company's ability to continue as a going concern. The financial statements do not include any adjustments that might result from this uncertainty.
The future of the Company is dependent upon its ability to obtain financing and upon future profitable operations. Management has plans to seek additional capital through a private placement of its common stock. The financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts of and classification of liabilities that might be necessary in the event the Company cannot continue in existence.
NOTE 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Interim Financial Information
The accompanying unaudited consolidated financial statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission. Accordingly, they may not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. In the opinion of management, the unaudited financial statements reflect all adjustments, which include only normal recurring adjustments, necessary for a fair presentation. Operating results for the three-month and nine-month period ended September 30, 2016 may not necessarily be indicative of the results that may be expected for the year ending December 31, 2016. The notes to the consolidated financial statements should be read in conjunction with the notes to the consolidated financial statements contained in the Company’s Form 10-K for the year ended December 31, 2015.
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of Evergreen-Agra, Inc. (from November 19, 2013 to September 30, 2016) and its wholly owned subsidiary ES (from inception on August 15, 2013 to September 30, 2016). All significant intercompany balances and transactions have been eliminated in consolidation.
Basis of Presentation
The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and are expressed in U.S. dollars.
Use of Estimates
In preparing the consolidated financial statements in conformity with U.S. GAAP, management makes estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the dates of the consolidated financial statements, as well as the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.
Cash and Cash Equivalents
The Company considers all highly liquid instruments with original maturities of three months or less when acquired, to be cash equivalents. We had no cash equivalents at December 31, 2015 and September 30, 2016.
Equipment
Equipment is stated at historical cost less accumulated depreciation. Depreciation is provided using the straight-line method over the estimated useful lives of the assets, generally ranging from three to five years.
Stock-Based Compensation
Stock-based compensation is accounted for at estimated fair value in accordance with Accounting Standards Codification 718, “Compensation – Stock Compensation.”
Income Taxes
The Company accounts for income taxes under the provisions issued by the FASB which requires recognition of deferred tax liabilities and assets for the expected future tax consequences of events that have been included in the consolidated financial statements or tax returns. Under this method, deferred tax liabilities and assets are determined based on the difference between the financial statements and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. The Company computes tax assets benefits for net operating losses carried forward. The potential benefit of net operating losses has not been recognized in these consolidated financial statements because the Company cannot be assured it is more likely than not it will utilize the net operating losses carried forward in future years.
Income (Loss) Per Common Share
The Company reports net income (loss) per share in accordance with provisions of the FASB. The provisions require dual presentation of basic and diluted income (loss) per share. Basic net income (loss) per share excludes the impact of common stock equivalents. Diluted net income (loss) per share utilizes the average market price per share when applying the treasury stock method in determining common stock equivalents. For the periods presented, there were no common stock equivalents outstanding.
Fair Value of Financial Instruments
Pursuant to ASC No. 820, “Fair Value Measurements and Disclosures”, the Company is required to estimate the fair value of all financial instruments included on its balance sheet as of December 31, 2015 and September 30, 2016. The Company’s financial instruments consist of cash and accounts payable. The Company considers the carrying value of such amounts in the financial statements to approximate their fair value due to the short-term nature of these financial instruments.
Recent Accounting Pronouncements
Certain accounting pronouncements have been issued by the FASB and other standard setting organizations which are not yet effective and therefore have not yet been adopted by the Company. The impact on the Company’s financial position and results of operations from adoption of these standards is not expected to be material.
NOTE 4. ACQUISITION OF EVERGREEN SYSTEMS
Effective November 19, 2013, the Company acquired 100% ownership of Evergreen Systems (“ES”) in exchange for 20,000,000 newly issued shares of the Company’s common stock (See Note 1). The transaction has been accounted for as a “reverse acquisition” in the accompanying consolidated financial statements. The financial position and results of operations of the Company prior to November 19, 2013 have been excluded from the accompanying consolidated financial statements.
The estimated fair values of the identifiable net assets of the Company at November 19, 2013 (effective date of the reverse acquisition) consisted of:
Cash and cash equivalents
|
|
$
|
4
|
|
Prepaid expense
|
|
|
82
|
|
Equipment, net
|
|
|
2,466
|
|
Total Assets
|
|
|
2,552
|
|
|
|
|
|
|
Accounts payable
|
|
|
590,852
|
|
Accounts payable - related parties
|
|
|
587,073
|
|
Total liabilities
|
|
|
1,177,925
|
|
|
|
|
|
|
Identifiable Net Assets
|
|
$
|
(1,175,373
|
)
|
NOTE 5. ACCOUNTS PAYABLE
Accounts payable at September 30, 2016 and December 31, 2015 consists of:
|
|
September 30,
2016
|
|
|
December 31,
2015
|
|
Former law firms
|
|
$
|
481,193
|
|
|
$
|
475,048
|
|
Former audit firms
|
|
|
7,625
|
|
|
|
7,625
|
|
Other service providers
|
|
|
89,603
|
|
|
|
65,165
|
|
Total
|
|
$
|
578,421
|
|
|
$
|
547,838
|
|
At September 30, 2016, $148,718 of the total $578,421 accounts payable is denominated in Canadian Dollars. These accounts payable were translated to United States Dollars using the September 30, 2016 exchange rate of $0.76249.
At December 31, 2015, $139,315 of the total $547,838 accounts payable is denominated in Canadian Dollars. These accounts payable were translated to United States Dollars using the December 31, 2015 exchange rate of $0.7215.
The above accounts payable represent amounts primarily recorded in the records of Evergreen-Agra, Inc. (formerly Sharprock Resources, Inc.) prior to the reverse acquisition of Evergreen Systems on November 19, 2013. Current management of the Company disputes these recorded liabilities.
NOTE 6. ACCOUNTS PAYABLE – RELATED PARTIES
Accounts payable – related parties at September 30, 2016 and December 31, 2015 consists of:
|
|
September 30,
2016
|
|
|
December 31,
2015
|
|
|
|
|
|
|
|
|
Harpreet Sangha, chief executive office of the Company from September 19, 2009 to September 1, 2013 and director of the Company from September 19, 2009 to May 4, 2014
|
|
$
|
52,692
|
|
|
$
|
50,264
|
|
|
|
|
|
|
|
|
|
|
Herminder Rai, chief financial officer of the Company from April 12, 2012 to September 21, 2013 and director of the Company from May 8, 2012 to March 11, 2014
|
|
|
58,807
|
|
|
|
55,732
|
|
|
|
|
|
|
|
|
|
|
Sam Sangha, brother of Harpreet Sangha
|
|
|
118,700
|
|
|
|
112,321
|
|
|
|
|
|
|
|
|
|
|
Rene Hamouth, chief executive officer of the Company from September 1, 2013 to July 17, 2014, director of the Company from September 1, 2013, and Chairman of the board of directors of the Company from July 17, 2014
|
|
|
44,724
|
|
|
|
530
|
|
|
|
|
|
|
|
|
|
|
Craig Alford, director of the Company from October 14, 2011 to September 1, 2013
|
|
|
240,172
|
|
|
|
227,262
|
|
Total
|
|
$
|
515,095
|
|
|
$
|
446,109
|
|
At September 30, 2016, $461,816 of the total $515,095 accounts payable – related parties is denominated in Canadian Dollars. These accounts payable were translated to United States Dollars using the September 30, 2016 exchange rate of $0.76249.
At December 31, 2015, $436,992 of the total $446,109 accounts payable – related parties is denominated in Canadian Dollars. These accounts payable were translated to United States Dollars using the December 31, 2015 exchange rate of $0.7215.
The above accounts payable represent amounts primarily recorded in the records of Evergreen-Agra, Inc. (formerly Sharprock Resources, Inc.) prior to the reverse acquisition of Evergreen Systems on November 19, 2013. Current management of the Company disputes these recorded liabilities.
NOTE 7. COMMON STOCK ISSUANCES
Issuances in 2015
On March 2, 2015, the Company issued 500,000 shares of its common stock to David Duroure, chief executive officer and director of the Company from November 13, 2014 to December 5, 2014, in connection with the November 13, 2014 acquisition of Strategic Plans Pharma LLC (“SPP”), an entity which planned to provide educational programs for military veterans. In December 2014, the Company terminated its involvement with SPP. The $220,000 estimated fair value of the 500,000 shares of Company common stock has been charged to “Stock-based costs relating to terminated acquisitions” in the statement of operations for the three months ended December 31, 2014.
On June 30, 2015, the Company issued 100,000 shares of its common stock to Bram Solloway for consulting services. The $44,000 estimated fair value of the 100,000 shares of Company common stock has been charged to “Stock-based compensation” in the statement of operations for the three months ended June 30, 2015.
On July 2, 2015, the 19,600,000 shares of Company common stock issued to Harpreet Sangha on November 19, 2013 were returned to the Company transfer agent and cancelled due to the resignation of Harpreet Sangha as Chairman of the Board and as a director on May 4, 2014.
Issuances in 2016
On February 25, 2016, the Company issued 17,339,889 shares of its common stock to Matthew Rhoden pursuant to an Executive Agreement between the Company, Matt Rhoden (the “Executive”) and Rene Hamouth (the “Principal Shareholder”) dated January 4, 2016. The agreement provides for the employment of the Executive as Chief Executive Officer of the Company for a period of 5 years, unless sooner terminated by the Board of Directors. The agreement also provides for the Executive and Principal Stockholder to vote together on all matters presented to the shareholders for vote and for each to grant the other a right of first refusal on shares owned by each during the term of the agreement. The $866,994 estimated fair value of the 17,339,889 shares of Company common stock has been charged to “Stock-based compensation” in the statement of operations for the three months ended March 31, 2016.
NOTE 8. INCOME TAXES
The Company has generated taxable losses for the periods presented. Accordingly, no provisions for income taxes have been recorded.
The Company’s effective tax rate differs from the United States Federal income tax rate as follows:
|
|
Three Months Ended
September 30,
|
|
|
Nine Months Ended
September 30,
|
|
|
|
2016
|
|
|
2015
|
|
|
2016
|
|
|
2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate Federal income tax at 35%
|
|
$
|
167
|
|
|
$
|
17,166
|
|
|
$
|
(338,507
|
)
|
|
$
|
13,327
|
|
Non-deductible stock-based compensation
|
|
|
-
|
|
|
|
-
|
|
|
|
303,448
|
|
|
|
15,400
|
|
Non-deductible (non-taxable) foreign exchange (gain) loss
|
|
|
(2,723
|
)
|
|
|
(17,387
|
)
|
|
|
11,486
|
|
|
|
(33,027
|
)
|
Change in valuation allowance
|
|
|
2,556
|
|
|
|
221
|
|
|
|
23,573
|
|
|
|
4,300
|
|
Provision for Income Taxes
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
At September 30, 2016, the Company has net operating loss carryforwards which expire from 2028 to 2036. The deferred tax asset relating to these net operating loss carryforwards has been fully reserved for at September 30, 2016 and December 31, 2015 since management’s assessment has not yet determined it to be more likely than not that the net operating loss carryforwards will be realized.
Current United States income tax laws limit the amount of loss available to be offset against future taxable income when a substantial change in ownership occurs. Therefore, the amount available to offset future taxable income may be limited.