UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2016
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from ________ to ________.
Commission File Number: 000-55743
ATACAMA RESOURCES INTERNATIONAL, INC.
(Exact name of Registrant as specified in its charter)
|
|
| |
|
Florida
|
|
46-3105245
|
|
(State or other jurisdiction of incorporation or organization)
|
|
(I.R.S. Employer Identification Number)
|
|
|
| |
|
10820 68
th
Place
|
|
|
|
Kenosha, WI 53142
|
|
(613) 868-6157
|
|
(Address of Principal Executive Offices)
|
|
(Registrant's telephone number)
|
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Common Stock, $0.0001 par value
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes [ ] No [X]
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act.
Yes [ ] No [X]
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes [X] No [ ]
1
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 229.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes [ ] No [X]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer, or a smaller reporting registrant.
(Check one):
|
|
| |
|
Large accelerated filer [ ]
|
|
Accelerated filer [ ]
|
|
Non-accelerated filer [ ]
|
|
Smaller reporting company [x]
|
Indicate by check mark whether the registrant is a shell registrant (as defined in Rule 12b-2 of the Exchange Act).
Yes [ ] No [X]
State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter.
The market value of the registrant’s voting $.0001 par value common stock held by non-affiliates of the registrant at June 30, 2016 was approximately $6,957,318
Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date.
The number of shares outstanding of the registrant’s only class of common stock, as of April 17, 2017 was 141,900,818 shares of its $.0001 par value common stock.
DOCUMENTS INCORPORATED BY REFERENCE
None.
2
Atacama Resources International, Inc.
Form 10-K
For the Fiscal Year Ended December 31, 2016
Table of Contents
|
|
| |
|
|
|
Page
|
|
PART I
|
|
|
|
Item 1. Business
|
|
5
|
|
Item 1A. Risk Factors
|
|
7
|
|
Item 2. Properties
|
|
7
|
|
Item 3. Legal Proceedings
|
|
8
|
|
Item 4. Mine Safety Disclosures
|
|
8
|
|
|
|
|
|
PART II
|
|
|
|
Item 5. Market for Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities
|
|
9
|
|
Item 6. Selected Financial Data
|
|
11
|
|
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
|
|
11
|
|
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
|
|
16
|
|
Item 8. Financial Statements and Supplementary Data
|
|
17
|
|
Item 9. Changes In and Disagreements with Accountants on Accounting and Financial Disclosures
|
|
38
|
|
Item 9A. Controls and Procedures
|
|
38
|
|
Item 9B. Other Information
|
|
39
|
|
|
|
|
|
PART III
|
|
|
|
Item 10. Directors, Executive Officers and Corporate Governance
|
|
40
|
|
Item 11. Executive Compensation
|
|
43
|
|
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
|
|
44
|
|
Item 13. Certain Relationships and Related Transactions, and Director Independence
|
|
46
|
|
Item 14. Principal Accountant Fees and Services
|
|
47
|
|
|
|
|
|
PART IV
|
|
|
|
Item 15. Exhibits, Financial Statement Schedules
|
|
49
|
|
Signatures
|
|
51
|
3
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION
This annual report on Form 10-K of Atacama Resources International, Inc. for the year ended December 31, 2016 contains certain forward looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which are intended to be covered by the safe harbors created thereby. To the extent that such statements are not recitations of historical fact, such statements constitute forward looking statements which, by definition involve risks and uncertainties. In particular, statements under the Sections; Description of Business, Management’s Discussion and Analysis of Financial Condition and Results of Operations contain forward looking statements. Where in any forward looking statements, the Company expresses an expectation or belief as to future results or events, such expectation or belief is expressed in good faith and believed to have a reasonable basis, but there can be no assurance that the statement of expectation or belief will result or be achieved or accomplished.
The following are factors that could cause actual results or events to differ materially from those anticipated, and include but are not limited to: general economic, financial and business conditions; changes in and compliance with governmental regulations; changes in tax laws; and the cost and effects of legal proceedings.
You should not rely on forward looking statements in this annual report. This annual report contains forward looking statements that involve risks and uncertainties. We use words such as “anticipates,” “believes,” “plans,” “expects,” “future,” “intends,” and similar expressions to identify these forward-looking statements. Prospective investors should not place undue reliance on these forward looking statements, which apply only as of the date of this annual report. Our actual results could differ materially from those anticipated in these forward-looking statements.
4
PART I
Item 1: Business
Atacama Resources International, Inc., (hereinafter “the Company”) is a company incorporated in the State of Florida in June 2013. We were formed as a consultant to the Mining industry. The Mining industry is subject to constant change due to market trends, thereby making it extremely competitive. However, the Company made the decision in 2015 to further enter the mining industry by staking claims and working acquired mining properties. The Company has also made the management decision to acquire other high tech products and companies as appropriate to enhance the value of the company. Accordingly, the Company is now an emerging diversified US public company. This includes holding and working precious metal properties in the Kirkland Lake region in Ontario, Canada. The company also offers executive advisory relating to growing microcap companies through the going public process. Lastly, the company acquired Good2Drive, Inc., a newly formed US corporation that developed and owns a smartphone App called Good2Drive for both Apple and Android smartphones that measures the driver’s cognitive ability to drive vehicles safely on the nation’s highways and byways.
Overview, Mining – the Company’ mining interests include forty two claims in a 1680 acre mine in the high mineral content Kirkland Lake area of Ontario. This mine is less than two miles from the Kirkland Lake Gold, Inc. mining operation that has a long and successful history of recovering high concentrations of gold. The Company’s mine is easily accessible from TransCanada Highway 11, a major north-south highway in Ontario. The mine is also near a train line and airstrips. The nearby towns of Swastika and Kirkland Lakes will provide abundant opportunities for employees for the mine. The mine has been leased through 2032 and the taxes are current. The focus of the exploration will be for copper/gold and graphite. However zinc, platinum and palladium have been found on the property and will be mined if proven commercially viable. Geophysical testing has determined the preferred survey grid, two holes have been drilled, several hundred core samples have been taken and the samples are being assayed at this time.
Overview, Good2Drive, Inc. - The Good2Drive app is hosted on both Apple and Android smartphone and consists of a 30-45 second test developed by a Stanford professor that measures alertness in terms of short term memory and reaction time and notifies the responsible party that the user has taken the test, and whether he/she fails or passes. Our first priority and initial product offering is focusing on young drivers and parents working together to make driving the family vehicles much safer and commercial drivers and employers working together to make the nation’s highways safer for all drivers. The result is to save thousands of lives on the road in the United States, Canada and other countries around the world.
5
It is important to describe the science of the pioneering Good2Drive alertness test. If Good2Drive can replace the breathalyzer for alcohol while adding conclusive criteria regarding marijuana and other impairment issues, the impact on our nation’s roads will be immeasurable. With several states now having legal marijuana and more states to follow, marijuana will become a more serious issue in regard to driver impairment. When we add to that the millions of people using prescription and illegal drugs that clearly diminish the person’s ability to avoid accidents in emergency situations and we have to conclude that roads will become unsafe at an alarming rate. Lastly, the issue of driver fatigue for commercial drivers who are on the road too long and the issue of any driver who suffers from lack of sleep and we have a common denominator. These people can be a danger in any driving situation and a way must be found to find these people before they are involved in a vehicular accident. Scientific studies have been published for thirty years that indicate a positive correlation between alertness, short term memory and reaction time to outside stimulus. More recent studies have determined that any specific condition, whether caused by elevated alcohol levels in the blood stream, the use of marijuana and other drugs or simply the lack of sleep and fatigue will affect short term memory and reaction time. This vastly reduced reaction time will virtually always increase the risk of having an accident while on the road. This is the basis for the Company’s Good2Drive test.
Overview, Consulting – the Company is focused on both mining operations in Canada and managing and selling Good2Drive in both the United States and Canada. However, the consulting activities will be maintained as required to satisfy the needs of potential clients. These activities may include:
-
International and domestic corporate development strategies; Strategic and financial partnering;
-
Mergers and acquisitions;
ARII has been doing business since inception, June 2013. Originally formed to do any and all legal business, the intent of the corporation was to specialize in corporate development and growth management consultation. However, in 2015 the focus of the company changed to actually managing mining operations and acquiring, managing and selling smartphone Apps. We are not a “blank check company” as such term is defined in Securities and Exchange Commission Rule 419. We are a company with minimal revenues and limited operations but both the mining operation and revenue prospects for Good2Drive in 2016 are significant. The Company does now and will continue to include advisory services but the corporate focus is on managing successful gold mining operations and creating and selling smartphone Apps. The Company is always looking at potential acquisitions and any acquisitions that the Company may make in the future would be of companies similar in nature to our own, operating in similar or complementary industry segments or geographic location to enhance the Company with new growth opportunities and a competitive advantage.
6
We believe that our conduct to date evidences significant, bona fide business operations and a scenario that is wholly inapposite to any attempt to create the mere appearance of a specific business plan and effort to avoid the application of Rule 419.
Our general business strategy is to market our services to markets primarily in mining friendly regions of the United States of America. Our strategically located business development efforts are well positioned to benefit from the continuing need for our services, sales of smartphone Apps and managing mining operations. We recognize that current market conditions are extremely challenging. Accordingly, we have adapted our business plan and strategy with the goal of protecting liquidity, enhancing our balance sheet and positioning ourselves for future growth when market conditions improve. In connection with this strategy, we have adopted a conservative approach and our principal business strategy is to utilize our sales expertise to:
-
Sell consulting services throughout selected regions of the United States, Canada, and Chile;
-
provide consistently reliable high-quality service;
-
aggressively manage operating costs to maintain and improve operating margins;
-
expand business by improving, enhancing and expanding sales, gaining new customers;
-
pursue complementary “bolt on” growth opportunities having acceptable risks and returns; and
-
generate consistent revenue, operating margins, earnings and cash flows.
Item 1A. Risk Factors
Because we are a smaller reporting company, we are not required to provide the information required by this item.
Item 1B. Unresolved Staff Comments
NONE
Item 2. Properties
We do not own any real property. Our principal business office is located at 1200 South Pine Island Road, Plantation, Florida 33324. The owners of our offices do not presently receive any remuneration for the use of the offices. We do not believe that we will need to obtain additional office space at any time in the foreseeable future, approximately 6 months, until our business plan is more fully implemented. As a result of our method of operations and business plan, we do not currently require personnel other than Mr. Grant, CEO, Mr. Finch, COO and Mr. Webb, CFO to conduct our business. In the future, we anticipate requiring additional office space and additional personnel; however, it is unknown at this time how much space or how many individuals will be required.
7
Item 3. Legal Proceedings
We are not currently a party to any legal proceedings nor are any contemplated by us at this time.
Item 4. Mine Safety Disclosures
Not applicable
8
PART II
Item 5. Market For Registrant’s Common Equity, Related Stockholder Matters and Small Business Issuer Purchases of Equity Securities
Item 5(a)
a) Market Information. The Company began trading publicly on the OTC Markets on March 4, 2016. We trade under the symbol “ACRL”.
The following table sets forth the range of high and low bid quotations for our common stock. The quotations represent inter-dealer prices without retail markup, markdown or commission, and may not necessarily represent actual transactions.
|
|
|
|
| |
|
Quarter Ended
|
|
High Bid
|
|
Low Bid
|
|
3/31/16
|
|
0.01
|
|
0.01
|
|
6/30/16
|
|
0.1
|
|
0.01
|
|
9/30/16
|
|
0.1
|
|
0.09
|
|
12/31/16
|
|
0.5
|
|
0.06
|
|
|
|
|
|
|
|
3/31/15
|
|
-
|
|
-
|
|
6/30/15
|
|
-
|
|
-
|
|
9/30/15
|
|
-
|
|
-
|
|
12/31/15
|
|
-
|
|
-
|
b) Holders. At April 17, 2017, there were approximately 214 shareholders of the registrant.
c) Dividends. Since inception we have not paid any dividends on our common stock. We currently do not anticipate paying any cash dividends in the foreseeable future on our common stock. Although we intend to retain our earnings, if any, to finance the exploration and growth of our business, our Board of Directors will have the discretion to declare and pay dividends in the future. Payment of dividends in the future will depend upon our earnings, capital requirements, and other factors, that our Board of Directors may deem relevant.
d) Securities authorized for issuance under equity compensation plans. Not applicable.
e) Performance graph. Not applicable.
9
f) Sale of unregistered securities.
On October 18, 2016, the Company issued 101,744 shares at $0.09 per share to Kort Clair Smith for $9,990, a non-related party; 50,927 shares $.09 per share to Chris Turner for 4,583, a non-related party; and 66,665 shares at $0.09 per share to Donald H Swartz for $6,000 USD; a non-related party.
On October 26, 2016, the Company issued 66,665 shares at $0.09 per share to Elsien Wildeboer for $6,000; a non-related party.
On October 31, 2016, the Company issued 66,665 shares at $0.09 per share to Brian Elliot for $6,000; a non-related party.
On November 1, 2016, the company issued 5,000,000 shares a $0.09 per share to Cougar Pipelines Inspection and Consulting Ltd, a non-related party, in lieu of debt payment; and 70,000 shares at $0.09 per share to Robert and Lynda Fisher for $6,300; a non-related party.
On November 8, 2016, the company issued 24,866 shares at $0.09 per share to James Claggett for $2,238; a non-related party.
On November 8, 2016, the company issued 24,866 shares at $0.09 per share to James Claggett for $2,238; a non-related party.
On November 24, 2016, the company issued 83,350 shares at$0.06 per share to Steven Labchuk for $5,000: a non-related party; and 83,350 shares at$0.06 per share to Sarah Labchuk, for $5,000; a non-related party.
On November 25, 2016, the company issued 166,700 shares at $0.06 per share to Donald H Swartz for $10,000; a non-related party.
On December 2, 2016, the company issued 79,809 shares at $0.06 per share to Loretta Best, a non-related party, in lieu of debt payment; 271,598 shares at $0.06 per share to Allan Flash, a non-related party, in lieu of debt payment; and 30,000 shares at $0.06.per share to Steven Labchuk for $1,800, a non-related party.
On December 19, 2016, the company issued 200,000 shares at $0.06 per share to Mary Carole Provett for $12,200; a non-related party; and 400,000 shares at $0.05 per share to William W Provett for $24,400: a non-related party.
On November 14, 2016, the company issued 6,000,000 shares at $0.06 per share to Antevorta Capital Partners Ltd; a non-related party, in lieu of debt payment.
10
There were 139,900,818 shares of common stock issued and outstanding at December 31, 2016.
All of the above securities were issued pursuant to an exemption from registration under Section 4(2) of the Securities Act of 1933 to sophisticated investors.
Item 5(b) Use of Proceeds. Not applicable.
Item 5(c) Purchases of Equity Securities by the issuer and affiliated purchasers.
During 2016 and 2015, we repurchased no common shares.
Item 6. Selected Financial Data.
We qualify as a smaller reporting company, as defined by Rule 229.10(f)(1) and are not required to provide the information required by this Item.
Item 7. Management’s Discussions and Analysis of Financial Condition and Results of Operations.
Special Note Regarding Forward Looking Statements.
This Annual report on Form 10-Q of Atacama Resources International, Inc. for the period ended December 31, 2016 contains certain forward looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which are intended to be covered by the safe harbors created thereby. To the extent that such statements are not recitations of historical fact, such statements constitute forward looking statements which, by definition involve risks and uncertainties. In particular, statements under the Sections; Description of Business, Management’s Discussion and Analysis of Financial Condition and Results of Operations contain forward looking statements. Where in any forward looking statements, the Company expresses an expectation or belief as to future results or events, such expectation or belief is expressed in good faith and believed to have a reasonable basis, but there can be no assurance that the statement of expectation or belief will result or be achieved or accomplished.
The following are factors that could cause actual results or events to differ materially from those anticipated, and include but are not limited to: general economic, financial and business conditions; changes in and compliance with governmental regulations; changes in tax laws; and the cost and effects of legal proceedings.
11
You should not rely on forward looking statements in this quarterly report. This Annual report contains forward looking statements that involve risks and uncertainties. We use words such as “anticipates,” “believes,” “plans,” “expects,” “future,” “intends,” and similar expressions to identify these forward-looking statements. Prospective investors should not place undue reliance on these forward looking statements, which apply only as of the date of this Annual report. Our actual results could differ materially from those anticipated in these forward-looking statements.
Our Business Overview
ARII is an operating company that provides consulting services to companies and individuals participating in the mining industry, manages actual mining operations and owns and sells smartphone Apps. We have conducted our mining operations in the Kirkland Lake region of Ontario, Canada,
Plan of Operation
Our plan of operation for the next twelve months is to expand our client base to the extent that we pursue the corporate advisory market in the mining sector and continue to acquire mining claims, run geophysical testing, core drilling, analysis and assays to determine proven reserves appropriate steps to take in actual mining processes. We will also develop international marketing and sales strategies for our Good2Drive App. As we continue to grow, we will need to raise additional funds. We do anticipate obtaining additional financing to fund operations through common stock offerings, to the extent available, or to obtain additional financing to the extent necessary to augment our working capital. We do not have need for the purchase of any property or equipment at this time. ARII will not have any significant changes in the current number of employees.
Our plan of operation for the next twelve months is to raise capital to continue to expand our operations. We would most likely rely upon the transaction exemptions from registration provided by Regulation D, Rule 506 or conduct another private offering under Section 4(a)(2) of the Securities Act of 1933.
In order to continue as a going concern, we will need, among other things, additional capital resources. Management’s plan to obtain such resources include, obtaining capital from management and significant stockholders sufficient to meet its minimal operating expenses. However, management cannot provide any assurance that we will be successful in accomplishing any of its plans.
12
Implications of Being an Emerging Growth Company
We qualify as an emerging growth company as that term is used in the JOBS Act. An emerging growth company may take advantage of specified reduced reporting and other burdens that are otherwise applicable generally to public companies. These provisions include:
-
A requirement to have only two years of audited financial statements and only two years of related MD&A;
-
Exemption from the auditor attestation requirement in the assessment of the emerging growth company’s internal control over financial reporting under Section 404 of the Sarbanes-Oxley Act of 2002;
-
Reduced disclosure about the emerging growth company’s executive compensation arrangements; and
-
No non-binding advisory votes on executive compensation or golden parachute arrangements.
We have already taken advantage of these reduced reporting burdens in this Form 10-Q, which are also available to us as a smaller reporting company as defined under Rule 12b-2 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
In addition, Section 107 of the JOBS Act also provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act of 1933, as amended (the “Securities Act”) for complying with new or revised accounting standards. We are choosing to utilize the extended transition period for complying with new or revised accounting standards under Section 102(b)(2) of the JOBS Act. This election allows our Company to delay the adoption of new or revised accounting standards that have different effective dates for public and private companies until those standards apply to private companies. As a result of this election, our financial statements may not be comparable to companies that comply with public company effective dates.
We could remain an emerging growth company for up to five years, or until the earliest of (i) the last day of the first fiscal year in which our annual gross revenues exceed $1 billion, (ii) the date that we become a “large accelerated filer” as defined in Rule 12b-2 under the Exchange Act, which would occur if the market value of our common stock that is held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter, or (iii) the date on which we have issued more than $1 billion in non-convertible debt during the preceding three year period.
We are a reporting company and file all reports required under sections 13 and 15d of the Exchange Act.
13
Critical Accounting Policies
We prepare our consolidated financial statements in conformity with GAAP, which requires management to make certain estimates and apply judgments. We base our estimates and judgments on historical experience, current trends and other factors that management believes to be important at the time the consolidated financial statements are prepared. Due to the need to make estimates about the effect of matters that are inherently uncertain, materially different amounts could be reported under different conditions or using different assumptions. On a regular basis, we review our critical accounting policies and how they are applied in the preparation of our consolidated financial statements.
While we believe that the historical experience, current trends and other factors considered support the preparation of our consolidated financial statements in conformity with GAAP, actual results could differ from our estimates and such differences could be material.
Results of Consolidated Operations for the year ended December 31, 2016 and 2015.
The Company did not record any revenues during the year ended December 31, 2016. We expensed exploration costs of $18,344, professional fees of $37,349, property taxes of $548, consulting fees of $376,765, management fees of $348,000, and selling and administrative costs of $29,171 and travel costs of $13,042 resulting in total operating expenses of $833,219. We accrued interest expenses of $23,466, impairment losses on intangible assets of $155,000, losses on investment re-valuation of $6.077 and foreign exchange losses of $6,077. As a result, we had a net comprehensive loss of $1,536,455 for the year ended December 31, 2016.
Comparatively, the Company did not record any revenues during the year ended December 31, 2015. We expensed exploration costs of $194,690, professional fees of $45,216, and selling and administrative costs of $6,550, resulting in total operating expenses of $254,492. We accrued interest expenses of $28,424 and foreign exchange losses of $2,088, resulting in a net comprehensive loss of $285,004 for the year ended December 31, 2015.
The $714,980 increase in net comprehensive loss for the year ended December 31, 2016 compared to the year ended December 31, 2015 is primarily due to increase management fees and impairment losses on intangible assets during the year ended December 31, 2016.
14
Consolidated Financial Condition
Total Assets
. Total assets at were $25,565 and $176,593 at December 31, 2016 and December 31, 2015. Total assets at December 31, 2016 and December 31, 2015 consisted of cash of $17.670 and $8,477, respectively; prepaid expense of $3,895 and $3,894, respectively; investments of $-0- and $9,222, respectively; and intangible assets of $-0- and $155,000, respectively. Total assets were due to cash received via subscription agreements and a consulting contract. The prepaid expense was due to a legal retainer payment. The investment was due to purchased mineral rights of $9,222 and the intangible asset was due to the acquisition of an application company, Good2Drive LLC of $155,000. The Company re-measured and re-valued the investment and intangible asset to their impaired values as of December 31, 2016
Total Liabilities
. Total liabilities were $700,839 and $635,842 at December 31, 2016 and December 31, 2015. Total liabilities at December 31, 2016 and December 31, 2015 consisted of accounts payable of $567,528 and $290,702, respectively; notes payable of $101,820 and $276,904, respectively; due to related parties of $3,588 and $8,803, respectively and accrued interest of $27.902 and $59,353, respectively. Total liabilities were due to the promissory note related to consulting contracts and a payable associated with the preparation of the S1 registration statement and operating expenses.
Consolidated Liquidity and Capital Resources
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern which contemplates, among other things, the realization of assets and satisfaction of liabilities in the ordinary course of business.
The Company sustained a loss for the year ending December 31, 2016 of $1,536,455. The Company has an accumulated loss of $2,151,900 as of December 31, 2016. Because of the absence of positive cash flows from operations, the Company will require additional funding for continuing the development and marketing of services. These factors raise substantial doubt about the Company’s ability to continue as a going concern. The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty.
We are presently unable to meet our obligations as they come due. At December 31, 2016 we had working capital deficit of $675,686. Our working capital deficit is due to the results of operations.
Net cash used in operating activities for the year ended December 31, 2016 and 2015 was ($882,362) and ($97,704), respectively. Net cash used in operating activities includes our net loss, stock based compensation, Impairment of intangible assets, loss on investment re-valuation, loss on conversion of debt, prepaid expenses, accounts payable and accrued interest.
15
Net cash provided by financing activities for the year ended December 31, 2016 and 2015 was $729,822 and $115,798, respectively. Net cash provided by financing activities included proceeds from related parties of $0 and $8,803, respectively and proceeds (payments) from (to) notes payable of $(100,079) and $74,684, respectively.
We anticipate that our future liquidity requirements will arise from the need to fund our growth from operations, pay current obligations and future capital expenditures. The primary sources of funding for such requirements are expected to be cash generated from operations and raising additional funds from the private sources and/or debt financing. However, we can provide no assurances that we will be able to generate sufficient cash flow from operations and/or obtain additional financing on terms satisfactory to us, if at all, to remain a going concern. Our continuation as a going concern is dependent upon our ability to generate sufficient cash flow to meet our obligations on a timely basis and ultimately to attain profitability. Our Plan of Operation for the next twelve months is to raise capital to continue to expand our operations. Although we are not presently engaged in any capital raising activities, we anticipate that we may engage in one or more private offering of our company’s securities after the completion of this offering. We would most likely rely upon the transaction exemptions from registration provided by Regulation D, Rule 506 or conduct another private offering under Section 4(2) of the Securities Act of 1933. See “Note 2 – Going Concern” in our financial statements for additional information as to the possibility that we may not be able to continue as a “going concern.”
We are not aware of any trends or known demands, commitments, events or uncertainties that will result in or that are reasonably likely to result in material increases or decreases in liquidity.
Capital Resources.
We had no material commitments for capital expenditures as of December 31, 2016.
Off-Balance Sheet Arrangements
We have made no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our consolidated financial condition, changes in consolidates financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.
Item 7a. Quantitative and Qualitative Disclosures About Market Risk
Not applicable.
16
Item 8. Financial Statements and Supplementary Data
Atacama Resources International, Inc.
Index to
Financial Statements
|
|
| |
|
|
|
|
|
|
|
Page
|
|
Report of Independent Registered Public Accounting Firm
|
|
18
|
|
|
|
|
|
Report of Independent Registered Public Accounting Firm
|
|
19
|
|
|
|
|
|
Consolidated Balance Sheets of December 31, 2016 and 2015
|
|
20
|
|
|
|
|
|
Consolidated Statements of Operations for the Years ended December 31, 2016 and 2015
|
|
21
|
|
|
|
|
|
Consolidated Statement of Changes in Stockholders' Deficit for the Years ended December 31, 2016 and 2015
|
|
22
|
|
|
|
|
|
Consolidated Statements of Cash Flows for the Years ended December 31, 2016 and 2015
|
|
24
|
|
|
|
|
|
Notes to Consolidated Financial Statements
|
|
25
|
17
The accompanying notes are an integral part of these consolidated financial statements.
24
Atacama Resources International, Inc.
Notes to Consolidated Financial Statements
For the Years Ended December 31, 2016 and 2015
NOTE 1. NATURE OF BUSINESS
ORGANIZATION
Atacama Resources International, Inc. (hereinafter “ARII”) is a company incorporated in the State of Florida in June 2013. We were formed as a consultant to the mining industry. The mining industry is subject to constant change due to market trends, thereby making it extremely competitive. The mining industry is complex, because several segments are regulated by both federal and state governments. ARII’s approach assists general business operations with the growth and development, international expansion and marketing aspects of their business, allowing our potential customers to focus on the business aspects of operations. By using the services provided by ARII, our clients are free to focus on compliance with regulations within their industry, and to complete their primary business goals.
Atacama Resources International Inc. purchase 100% of Good2Drive LLC, a smartphone application company that establishes a baseline to test driver’s alertness, in December 2015. The acquisition includes the rights to two filed patent applications. The financial operations of Good2Drive LLC have been consolidated in the unaudited financial statements of Atacama Resources International Inc.
NOTE 2. GOING CONCERN
The Company’s consolidated financial statements are prepared using accounting principles generally accepted in the United States of America applicable to a going concern which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has not yet established an ongoing source of revenues sufficient to cover its operating cost and allow it to continue as a going concern. The ability of the Company to continue as a going concern is dependent on the Company obtaining adequate capital to fund operating losses until it becomes profitable. If the Company is unable to obtain adequate capital, it could be forced to cease operations.
In order to continue as a going concern, the Company will need, among other things, additional capital resources. Management’s plan to obtain such resources for the Company include, obtaining capital from management and significant stockholders sufficient to meet its minimal operating expenses. However, management cannot provide any assurance that the Company will be successful in accomplishing any of its plans.
25
There is no assurance that the Company will be able to obtain sufficient additional funds when needed or that such funds, if available, will be obtainable on terms satisfactory to the Company. In addition, profitability will ultimately depend upon the level of revenues received from business operations. However, there is no assurance that the Company will attain profitability. The accompanying financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern
NOTE 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION AND USE OF ESTIMATES
The Company prepares its consolidated financial statements in conformity with accounting principles generally accepted in the United States of America ("GAAP"), which require 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 of the consolidated financial statements, and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with an original maturity of three months or less at the date of acquisition to be cash equivalents. Cash and cash equivalents totaled $17,670 at December 31, 2016 and $8,477 at December 31, 2015.
CASH FLOWS REPORTING
The Company follows ASC 230, Statement of Cash Flows, for cash flows reporting, classifies cash receipts and payments according to whether they stem from operating, investing, or financing activities and provides definitions of each category, and uses the indirect or reconciliation method (“Indirect method”) as defined by ASC 230, Statement of Cash Flows, to report net cash flow from operating activities by adjusting net income to reconcile it to net cash flow from operating activities by removing the effects of (a) all deferrals of past operating cash receipts and payments and all accruals of expected future operating cash receipts and payments and (b) all items that are included in net income that do not affect operating cash receipts and payments. The Company reports the reporting currency equivalent of foreign currency cash flows, using the current exchange rate at the time of the cash flows and the effect of exchange rate changes on cash held in foreign currencies is reported as a separate item in the reconciliation of beginning and ending balances of cash and cash equivalents and separately provides information about investing and financing activities not resulting in cash receipts or payments in the period.
EXPLORATION AND DEVELOPMENT COSTS
Costs of acquiring mining properties and any exploration and development costs are expensed as incurred unless proven and probable reserves exist and the property is a commercially mineable property in accordance with FASB ASC 930, Extractive Activities – Mining. Mine development costs incurred either to develop new gold and
26
silver deposits, expand the capacity of operating mines, or to develop mine areas substantially in advance of current production are capitalized. Costs incurred to maintain current production or to maintain assets on a standby basis are charged to operations. Costs of abandoned projects are charged to operations upon abandonment. The Company evaluates at least quarterly, the carrying value of capitalized mining costs and related property, plant and equipment costs, if any, to determine if these costs are in excess of their net realizable value and if a permanent impairment needs to be recorded. The periodic evaluation of carrying value of capitalized costs and any related property, plant and equipment costs are based upon expected future cash flows and/or estimated salvage value.
The Company capitalizes costs for mining properties by individual property and defers such costs for later amortization only if the prospects for economic productions are reasonably certain.
Capitalized costs are expensed in the period when the termination has been made that economic production does not appear reasonably certain.
During the year ending December 31, 2016 and 2015, the Company recorded exploration costs of $18,344 and $194,690, respectively.
RELATED PARTIES
The Company follows ASC 850, “Related Party Disclosures,” for the identification of related parties and disclosure of related party transactions. Related party transactions are summarized in Note 7.
FINANCIAL INSTRUMENTS
The Company’s consolidated balance sheet includes certain financial instruments. The carrying amounts of current assets and current liabilities approximate their fair value because of the relatively short period of time between the origination of these instruments and their expected realization.
ASC 820, Fair Value Measurements and Disclosures, defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy that distinguishes between (1) market participant assumptions developed based on market data obtained from independent sources (observable inputs) and (2) an entity’s own assumptions about market participant assumptions developed based on the best information available in the circumstances (unobservable inputs). The fair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy are described below:
27
Level 1 - Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities
Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly, including quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability (e.g., interest rates); and inputs that are derived principally from or corroborated by observable market data by correlation or other means.
Level 3 - Inputs that are both significant to the fair value measurement and unobservable.
Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management as of December 31, 2016 and December 31, 2015. The respective carrying value of certain on-balance-sheet financial instruments approximated their fair values due to the short-term nature of these instruments.
REVENUE RECOGNITION
The Company follows ASC 605, Revenue Recognition. The Company recognizes revenue when it is realized or realizable and earned. The Company considers revenue realized or realizable and earned when all of the following criteria are met: (i) persuasive evidence of an arrangement exists, (ii) the product has been shipped or the services have been rendered to the customer, (iii) the sales price is fixed or determinable, and (iv) collectability is reasonably assured.
The Company derives revenue from consulting arrangements with clients. Revenue is generated by hourly fee structure or fixed contract costs, based on expected time to complete, additionally, costs incurred may be billed, as defined by the contractual arrangements.
DEFERRED INCOME TAXES AND VALUATION ALLOWANCE
The Company accounts for income taxes under ASC 740, Income Taxes. Under the asset and liability method of ASC 740, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the consolidated financial statements carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period the enactment occurs. A valuation allowance is provided for certain deferred tax assets if it is more likely than not that the Company will not realize tax assets through future operations. No deferred tax assets or liabilities were recognized as of December 31, 2016 or December 31, 2015.
28
NET INCOME (LOSS) PER COMMON SHARE
Net income (loss) per share is calculated in accordance with ASC 260, “Earnings Per Share.” The weighted-average number of common shares outstanding during each period is used to compute basic earning or loss per share. Diluted earnings or loss per share is computed using the weighted average number of shares and diluted potential common shares outstanding. Dilutive potential common shares are additional common shares assumed to be exercised.
Basic net income (loss) per common share is based on the weighted average number of shares of common stock outstanding at December 31, 2016 and December 31, 2015. As of December 31, 2016, the Company had no dilutive potential common shares.
SHARE-BASED EXPENSE
ASC 718, Compensation – Stock Compensation, prescribes accounting and reporting standards for all share-based payment transactions in which employee services are acquired. Transactions include incurring liabilities, or issuing or offering to issue shares, options, and other equity instruments such as employee stock ownership plans and stock appreciation rights. Share-based payments to employees, including grants of employee stock options, are recognized as compensation expense in the consolidated financial statements based on their fair values. That expense is recognized over the period during which an employee is required to provide services in exchange for the award, known as the requisite service period (usually the vesting period).
The Company accounts for stock-based compensation issued to non-employees and consultants in accordance with the provisions of ASC 505-50, Equity – Based Payments to Non-Employees. Measurement of share-based payment transactions with non-employees is based on the fair value of whichever is more reliably measurable: (a) the goods or services received; or (b) the equity instruments issued. The fair value of the share-based payment transaction is determined at the earlier of performance commitment date or performance completion date.
Share-based expense was $0 for the year ending December 31, 2016; $6,550 for the year ending December 31, 2015.
RECENT ACCOUNTING PRONOUNCEMENTS
Except for rules and interpretive releases of the SEC under authority of federal securities laws and a limited number of grandfathered standards, the FASB Accounting Standards Codification™ (“ASC”) is the sole source of authoritative GAAP literature recognized by the FASB and applicable to the Company.
We have reviewed the FASB issued Accounting Standard Update (“ASU 2014-10”) and have applied the standard as of the dates during the periods reported.
29
We have reviewed the FASB issued Accounting Standard Update (“ASU 2014-9”). The Company on recognizing revenue in contracts with customers on an effective date after December 31, 2017, will be evaluated as to impact and implemented accordingly.
We have reviewed the FASB issued Accounting Standards Update (“ASU”) accounting pronouncements and interpretations thereof that have effectiveness dates during the periods reported and in future periods. The applicability of any standard is subject to the formal review of our financial management and certain standards are under consideration.
NOTE 4. PREPAID EXPENSE
The Company’s prepaid expense consists of a retainer fee paid the law offices of Clifford J. Hunt, P.A. of $2,250 retainer; a last month rental fee for a storage facility of $1,644. The prepaid balance was $3,894 and $3,894, on December 31, 2016 and December 31, 2015, respectively.
NOTE 5. INVESTMENTS – MINERAL RIGHTS
31
NOTE 8. INCOME TAXES
At December 31, 2015, the Company had a net operating loss carry–forward for Federal income tax purposes that may be offset against future taxable income through 2032 No tax benefit has been reported with respect to these net operating loss carry-forwards in the accompanying financial statements because the Company believes that the realization of the Company’s net deferred tax assets calculated at the effective rates note below, was not considered more likely than not and accordingly, the potential tax benefits of the net loss carry-forwards are fully offset by the valuation allowance.
Deferred tax assets consist primarily of the tax effect of NOL carry-forwards. The Company has provided a full valuation allowance on the deferred tax assets because of the uncertainty regarding its realizability.
The tax effects of the temporary differences between reportable consolidated financial statement income and taxable income are recognized as deferred tax assets and liabilities.
In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment.
For the period ending December 31, 2016 and for the year ended December 31, 2015, the Company has net operating losses from operations. The carry forwards expire through the year 2032. The Company’s net operating loss carry forward may be subject to annual limitations, which could reduce or defer the utilization of the losses as a result of an ownership change as defined in Section 382 of the Internal Revenue Code. A valuation allowance has been applied due to the uncertainty of realization.
The Company is currently open to audit under the statute of limitations by the Internal Revenue Service for the period from inception ended December 31, 2013 through the year ended December 31, 2015. The Company recognizes interest and penalties related to income taxes in income tax expense. The Company had incurred no penalties and interest through the year ended December 31, 2015.
NOTE 9. SHAREHOLDERS’ EQUITY
The Company, through approval of its Board of Directors, authorized common shares of 500,000,000 with a par value of $0.0001.
32
COMMON STOCK
On January 27, 2016, the Company issued 25,000 shares at $0.10 per share to Ben Stewart, a non-related party for $2,500.
On March 4, 2016, the Company issued 100,000 shares at $0.10 per share to Kort Clair, a non-related party for $10,000 and 100,000 shares at $0.10 per share to Karen Clair, a non-related party for $10,000.
On March 8, 2016, the Company issued 266,667 shares at $0.04 per share to Don Swartz, a non-related party for $10,000 and 100,000 shares at $0.05 per share to Shawn Rich, a non-related party for $5,000.
On April 5, 2016, the Company issued 500,000 shares at $0.10 per share to Barbara Bush, a non-related party for $50,000.
On April 15, 2016, the Company accepted the conversion of debt to acquire shares from the following related parties; Glen Grant, CEO and director 472,865 shares at $0.09 per share, 1172321 Alberta Ltd. 924,000 shares at $0.09 per share; Bower Solutions Ltd. 3,096,583 shares at $0.09 per share.
On April 26, 2016, the Company issued 1,000,000 shares at $0.05 per share to Barbara Bush, a non-related party for $50,000.
May 1, 2016, the Company issued 5,600,000 shares at $0.10 per share to ALPCO, a related party for $56,000.
On May 9, 2016 the Company issued 2,000 shares at $0.10 per share to Dillan Leman, a non-related party for $200; 1,000 shares at $0.10 per share to Sharon Adair, a non-related party for $100, 1,000 shares at $0.10 per share to Howard Adair, a non-related party for $100; 5,000 shares at $0.10 per share to Heather Bujold, a non-related party for $500; 5,000 shares at $0.10 per share to Karen Gariepy, a non-related party for $500.
On June 15, 2016, the Company issued 200,000 shares at $0.05 per share to Kort Clair, a non-related party for $10,000 and 200,000 shares at $0.05 per share to Karen Clair, a non-related party for $10,000.
On June 16, 2016, the Company issued 100,000 shares at $.010 per share and 100,000 shares at $0.0001 per share to Ian Waddell, a non-related party for $10,000.
On June 20, 2016, the Company issued 60,000 shares at $0.09 per share to 5 Waves LLC, a non-related party, for consulting services instrumental in the progress of the Company.
33
On June 30, 2016, the Company issued 40,000 shares at $0.05 per share to Ed Taylor, a non-related party for $2,000.
On September 14, 2016, the Company issued 5,055 shares at $0.075 per share to Hugh Alex Smith for $500; a non-related party.
On September 23, 2016, the Company issued 50,731 shares at $0.075 per share to Linda and Bob Clark for $5,000; a non-related party.
On September 27, 2016, the Company issued 10,147 shares at $0.075 per share to Lucas Bjold for $743; a non-related party
.
On October 18, 2016, the Company issued 101,744 shares at $0.09 per share to Kort Clair Smith for $9,990, a non-related party; 50,927 shares $.09 per share to Chris Turner for 4,583, a non-related party; and 66,665 shares at $0.09 per share to Donald H Swartz for $ 6,000 USD; a non-related party.
On October 26, 2016, the Company issued 66,665 shares at $0.09 per share to Elsien Wildeboer for $6,000; a non-related party.
On October 31, 2016, the Company issued 66,665 shares at $0.09 per share to Brian Elliot for $6,000; a non-related party.
On November 1, 2016, the company issued 5,000,000 shares a $0.09 per share to Cougar Pipelines Inspection and Consulting Ltd, a non-related party, in lieu of debt payment; and 70,000 shares at $0.09 per share to Robert and Lynda Fisher for $6,300; a non-related party.
On November 8, 2016, the company issued 24,866 shares at $0.09 per share to James Claggett for 2.238; a non-related party.
On November 8, 2016, the company issued 24,866 shares at $0.09 per share to James Claggett for 2.238; a non-related party.
On November 24, 2016, the company issued 83,350 shares at$0.06 per share to Steven Labchuk for $5,000: a non-related party; and 83,350 shares at$0.06 per share to Sarah Labchuk, for $5,000; a non-related party.
On November 25, 2016, the company issued 166,700 shares at $0.06 per share to Donald H Swartz for $10,000; a non-related party.
On December 2, 2016, the company issued 79,809 shares at $0.06 per share to Loretta Best, a non-related party, in lieu of debt payment; 271,598 shares at $0.06 per share to Allan Flash, a non-related party, in lieu of debt payment; and 30,000 shares at $0.06.per share to Steven Labchuk for $1,800, a non-related party.
34
On December 19, 2016, the company issued 200,000 shares at $0.06 /share to Mary Carole Provett for $12,200; a non-related party; and 400,000 shares at $0.05 per share to William W Provett for $24,400: a non-related party.
On November 14, 2016, the company issued 6,000,000 shares at $0.06 per share to Antevorta Capital Partners Ltd; a related party, in lieu of debt payment.
There were 139,900,818 shares of common stock issued and outstanding at December 31, 2016.
NOTE 10. RELATED PARTY TRANSACTIONS
DUE TO/FROM RELATED PARTIES
During the year ended December 31, 2016, Glenn Grant, CEO and director paid certain expenses on behalf of the Company and is due reimbursement. As of December 31, 2016, the balance from the related party was $-0-. On April 15, 2016, the balance due to Glenn Grant, CEO was $16,550 and was converted for 472,865 common shares at a fair market price of $0.09 per share; as a result, there was a gain on conversion of $26,003 which was allocated to the additional paid up capital.
During the year ended December 31, 2016, Richard Roy, CFO and director paid for certain operating expenses on behalf of the Company and is due reimbursement. As of December 31, 2016, the balance due to the related party was $2,020.
During the year ended December 31, 2016, 1172321 Alberta Ltd., a company owned by Glenn Grant, CEO and an advisor to the Company, contributed $32,340 for certain operating expenses and is due reimbursement. On April 15, 2016, $32,340 was converted for 924,000 common shares of the Company at a fair market price of $0.9 per share; as a result, there was a loss on conversion of $50,820 which was recognized as a loss in the consolidated statement of operations. On September 30, 2016, 1172321 Alberta Ltd. contributed $3,587.
During the year ended December 31, 2016, two companies under the common control of New Opportunity Business Solutions, Inc., which holds a note payable of $144,880, acquired the following shares: on May 1, 2016, the Company issued 5,600,000 shares at $0.10 per share to ALPCO, a related party for $56,000; on November 14, 2016, the company issued 6,000,000 shares at $0.06 per share to Antevorta Capital Partners Ltd; a related party, in lieu of debt payment.
35
MANAGEMENT FEES
During the year ended December 31, 2016, the Company accrued expenses related to the management of company by Beco Financials, a company owned by Richard Roy, CFO and an advisor to the Company for $51,0000; Bower Solutions, a company owned by Glenn Grant, CEO and an advisor to the Company for $162,000 and Dannette Technologies, a company owned by Dan Finch, COO and an advisor to the Company, for $135,000.
NOTE PAYABLE/RECEIVABLE
On December 4, 2014, Bower Solutions Ltd., a company owned by Glenn Grant, CEO and an advisor to the Company, executed a demand note with the Company. The note carries an Eight percent (8%) annual percentage rate. The balance of the related party note, as of December 31, 2016 and December 31, 2015, were $-0- and $77,104, respectively. On April 15, 2016, the balance due to Bower Solutions Ltd. was $108,380 and was converted for 3,096,583 common shares at a fair market price of $0.5 per share; as a result, there was a loss on conversion of $123,863 which was recognized as a loss in the consolidated statement of Operations.
ACQUISITION
In December 2015, the Company purchased 100% of Good2Drive LLC FOR $155,000 in exchange for cash and common stock of Atacama Resources International Inc. Good2Drive contained only an intangible asset. The negotiation and acquisition was directed by Dan Finch, COO of Atacama Resources International Inc., who held a five (5%) interest in Good2Drive LLC. No goodwill was recognized. As of December 31, 2016, this acquisition was deemed to have an impaired value of nil and has been revalued at the impaired value.
EQUITY TRANSACTIONS
On April 15, 2016, through approval of its Board of Directors, the Company accepted the conversion of debt to acquire shares from the following related parties; Glen Grant, CEO and director 472,865 shares at $0.035 per share, 1172321 Alberta Ltd. 924,000 shares at $0.35 per share; Bower Solutions Ltd. 3,096,583 shares at $0.035 per share. At the time of conversion the share price was $0.035 per share; however, the market value at the time of conversion was re-valued at $0.05 per share which resulted in an aggregate loss of $153,730 and was recognized as a loss in the consolidate statement of operations.
NOTE 11. COMMITMENTS AND CONTINGENCIES
There are no commitments and contingencies of the Company as of December 31, 2016. All exploration commitments per the Company’s Mineral Rights Agreements have been met by December 2015.
36
NOTE 12. WARRANTS AND OPTIONS
There are no warrants or options outstanding to acquire any additional shares of common stock of the Company as of December 31, 2016.
NOTE 13. MANAGEMENT FEES
At December 31, 2016 the Company paid $348,000 in management fees to certain individuals who were engaged as independent contractors to perform services in a management capacity.
NOTE 14. SUBSEQUENT EVENTS
Management has evaluated subsequent events through the date the consolidated financial statements were issued. None noted.
37
Item 9. Changes In and Disagreements With Accountants On Accounting And Financial Disclosure
None
Item 9a. Controls and Procedures
The management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting. The Company’s internal control over financial reporting is a process designed under the supervision of the Company’s Principal Executive Officer and Principal Financial Officer to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the Company’s consolidates financial statements for external purposes in accordance with the U.S. generally accepted accounting principles.
As of December 31, 2016, under the supervision and with the participation of our management, we conducted an evaluation of the effectiveness of the design and operations of our disclosure controls and procedures, as defined in Rule 13a-15(e) and 15d-15(e) promulgated under the Securities Exchange Act of 1934. Based on this evaluation, management concluded that our financial disclosure controls and procedures were not effective so as to timely identify, correct and disclose information required to be included on our Securities and Exchange Commission (“SEC”) reports due to the Company’s limited internal resources and lack of ability to have multiple levels of transaction review. Through the use of external consultants and the review process, management believes that the consolidated financial statements and other information presented herewith are materially correct.
As of December 31, 2016, under the supervision and with the participation of our management, we conducted an evaluation of the effectiveness of the design and operations of our internal control over financial reporting, as defined in Rules 13a-15(f) or 15d-15(f) promulgated under the Securities Exchange Act of 1934 and based on the criteria for effective internal control described Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, management concluded that our internal control over financial reporting was not effective so as to timely identify, correct and disclose information required to be included on our SEC reports due to the Company’s limited internal resources and lack of ability to have multiple levels of transaction review. Through the use of external consultants and the review process, management believes that the consolidated financial statements and other information presented herewith are materially correct.
38
The management, including its principal executive officer and principal financial officer, does not expect that its disclosure controls and procedures, or its internal controls over financial reporting will prevent all error and all fraud. A control system no matter how well conceived and operated, can provide only reasonable not absolute assurance that the objectives of the control system are met. Further, the design of control system must reflect the fact that there are resource constraints, and the benefit of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any within the Company have been detected.
This Annual Report does not include an attestation report of the Company’s independent registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s independent registered public accounting firm pursuant to the temporary rules of the SEC that permit the Company to provide only management’s report in this Annual Report.
This report shall not be deemed to be filed for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liabilities of this section, and is not incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing.
Change in internal controls
We have not made any significant changes to our internal controls subsequent to the evaluation date. We have identified weaknesses, but have implemented strategies that include the use of external consultants as a part of our review process. We believe that our internal controls over financial reporting will provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with generally accepted accounting principles.
Item 9b. Other Information
None
39
PART III
Item 10. Directors, Executive Officers and Corporate Governance.
Directors and Executive Officers
The names and ages of our directors and executive officers are set forth below. Our bylaws provide for not less than one and not more than fifteen directors. All directors are elected annually by the stockholders to serve until the next annual meeting of the stockholders and until their successors are duly elected and qualified.
|
|
|
| |
|
NAME
|
AGE
|
POSITIONS HELD
|
SINCE
|
|
Glenn Grant
|
70
|
CEO, CAO, Director
|
January 2015 to present
|
|
Daniel Finch
|
74
|
COO, Director
|
June 2015 to present
|
|
Donald Swartz
|
53
|
Chairman of the Board
|
October 2016 to present
|
|
William Webb
|
53
|
CFO
|
February 2017 to present
|
|
Kenneth Olson
|
54
|
Former CEO
|
June 2013 to February 2015
|
|
Richard Roy
|
54
|
Former CFO
|
September 2015 to October , 2016
|
Business Experience of Officers, Directors and Significant Employees
Glenn Grant
Glenn B. Grant, CEO became CEO and director of Atacama Resources International Inc. in January 2015.
Glenn presently serves in that position with no specified ending date.
During the last 5 years Glenn has managed the operations of BOWER SOLUTIONS LIMITED which he owns and he operates in the capacity of an oilfield consulting firm.
Glenn holds a Construction Engineering Degree from the Middleham University which was completed May 25, 1995.
40
Daniel Finch
Daniel Finch was named COO of Atacama Resources on June 15, 2015 and elected to the board of directors of Atacama Resources by board resolution on July 15, 2015. He serves at the pleasure of the board with no specified ending date.
During the last five years Dan Finch has served as:
VP Administration, Americas Technologies Solutions, Inc. from January 1, 2009 to present. Mr. Finch handles the United States activities for this RFID company that does business primarily in Brazil.
COO, Revolutionary Tracker, LLC from February 1, 2011 to November 1, 2013. Dan Finch managed the development of a GPS based smart watch for the child safety market.
VP Corporate Development, Soellingen Advisory Group, from September 15, 2013 to January 25, 2015. Finch provided corporate advisory services for selected clients in North America.
In addition to the above positions Daniel Finch served as a managing partner for Engaged Mobility, LLC between January 1, 2015 and March 8, 2016 and as a member of the board of directors for Enable IPC from January 1, 2011 to the present.
Mr. Finch graduated from the Indiana Institute of Technology with a BS in Physics in June 1963 and an MBA from the Booth School of Business, the University of Chicago in December 1969.
William Webb
William Webb has been the Chief Financial Officer for the Company since February 2017. He worked as a securities consultant from June 2012 through December 2014. He acted as the CFO of Soellingen Advisory Group, Inc. from November 2013 through November 2014. He has been acting as the president of Bankers Life Securities, Inc. from February 2015 through today.
Donald Swartz
Donald Swartz was been the president and founder of Effectiveness Resource Group, Inc. from 1973 through December 2012. Effectiveness Resource Group, Inc. is a professional consulting group that helps companies, individuals, and organizations to improve their effectiveness. From 2012 through November of 2013, he served as the director for Condominio Playa Norte, a condominium association located in Mexico and for Nautibeach Condos SCP, a vacation rental business also located in Mexico. Mr. Swartz graduated from Lehigh University with a Bachelor of Science in mechanical engineering in 1953.
41
Section 16(a) Beneficial Ownership Reporting Compliance
To our knowledge, no director, officer or beneficial owner of more than ten percent of any class of our equity securities, failed to file on a timely basis reports required by Section 16(a) of the Exchange Act during 2016.
Code of Ethics Policy
We previously adopted a Code of Ethics that was attached as an exhibit to our Form S-1 filed with the SEC on November 8, 2013.
Corporate Governance
The Board of Directors acts as the Audit Committee, and the Board has no separate committees. The Company has no qualified financial expert at this time because it has not been able to hire a qualified candidate. Further, the Company believes that it has inadequate financial resources at this time to hire such an expert. The Company intends to continue to search for a qualified individual to hire.
Family Relationships
There are no family relationships between our officers and directors.
Involvement in Certain Legal Proceedings
None of our directors, executive officers and control persons has been involved in any of the following events during the past ten years:
·
Any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time,
·
Any conviction in a criminal proceeding or being subject to any pending criminal proceeding (excluding traffic violations and other minor offenses);
·
Being subject to any order, judgment or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his or her involvement in any type of business, securities or banking activities; or
·
Being found by a court of competent jurisdiction (in a civil action), the Commission or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated.
42
Meetings and Committees of the Board of Directors
We do not have a nominating committee of the Board of Directors, or any committee performing similar functions. Nominees for election as a director are selected by the Board of Directors.
The audit committee is comprised a three directors being the CEO, COO and CFO of the company. The company financial reporting is prepared by the company’s CFO and reviewed by the other directors of the company. Furthermore, our entire board of directors is aware of the importance of the financial and accounting due diligence that must be undertaken in furtherance of our business and they intend to conduct a comprehensive accounting financial analysis of the Company’s business.
Compensation Committee Interlocks and Insider Participation
As of December 31, 2016, our Board of Directors consisted of Messrs. Grant, Finch and Swartz. At present, the Board of Directors has not established any committees other than an audit committee.
Director Compensation
There are currently no compensation arrangements in place for members of the Board of Directors.
Item 11. Executive Compensation
The following table sets forth information concerning the annual and long term compensation of our executive officers who served during the fiscal year December 31, 2016 and 2015, for services rendered in all capacities to us. The listed individuals shall hereinafter be referred to as the “Named Executive Officers.” Currently, we have no employment agreements with any of our Directors or Officers. All of our directors are unpaid. Compensation for the future will be determined when and if additional funding is obtained.
43
45
Based upon 141,900,818 outstanding common shares as of April 17, 2017.
(1)
Includes shares owned by Dianne Finch, who is the wife of Daniel Finch.
(2)
Shares owned by the Donald H. Swartz Revocable Living Trust. Mr. Swartz is the trustee.
(3)
Includes 3,569,560 shares owned by 1172321 Alberta Ltd. and 12,000,000 shares owned by 1778928 Alberta Ltd., which are controlled by Glenn Grant and his wife, Sandra Grant, respectively. Includes 9,096,583 common shares owned by Bower Solutions Ltd., which is controlled by Mr. Grant.
Item 13. Certain Relationships and Related Transactions, and Director Independence
During the year ended December 31, 2016, Glenn Grant, CEO and director paid certain expenses on behalf of the Company and is due reimbursement. As of December 31, 2016, the balance from the related party was $-0-. On April 15, 2016, the balance due to Glenn Grant, CEO was $16,550 and was converted for 472,865 common shares at a fair market price of $0.09 per share; as a result, there was a gain on conversion of $26,003 which was allocated to the additional paid up capital.
During the year ended December 31, 2016, Richard Roy, CFO and director paid for certain operating expenses on behalf of the Company and is due reimbursement. As of December 31, 2016, the balance due to the related party was $2,020.
During the year ended December 31, 2016, 1172321 Alberta Ltd., a company owned by Glenn Grant, CEO and an advisor to the Company, contributed $32,340 for certain operating expenses and is due reimbursement. On April 15, 2016, $32,340 was converted for 924,000 common shares of the Company at a fair market price of $0.9 per share; as a result, there was a loss on conversion of $50,820 which was recognized as a loss in the consolidated statement of operations. On September 30, 2016, 1172321 Alberta Ltd. contributed $3,587.
Director Independence
We have not established our own definition for determining whether our director or nominees for directors are “independent” nor has it adopted any other standard of independence employed by any national securities exchange or inter-dealer quotation system, though our current directors would not be deemed to be “independent” under any applicable definition given that they are officers of the Company. We also have not established any committees of the Board of Directors.
46
Given the nature of our Company, its limited shareholder base and the current composition of management, the Board of Directors does not believe that we require any corporate governance committees at this time. As our operations generate revenue we intend to seek additional members for our board of directors and establish our own definition of “independent” as related to directors and nominees for directors. We further intend to establish committees that will be suitable for our operations as our business operations warrant.
Item 14. Principal Accounting Fees and Services
The Company’s audit committee has appointed Stevenson & Company CPAS LLC to complete the audit for the December 31, 2015 fiscal year and appointed BF Borgers CPA PC to complete the audit for the December 31, 2016 fiscal year. The normal functions of the audit committee are handled by the board of directors.
|
|
| |
|
|
2016
|
2015
|
|
Audit Fees
|
$10,600
|
$10,600
|
|
Audit-Related Fees
|
-
|
-
|
|
Tax Fees
|
-
|
-
|
|
All Other Fees
|
-
|
-
|
Audit Fees - This category includes the audit of our annual financial statements, review of financial statements included in our Form 10-Q Quarterly Reports and services that are normally provided by the independent auditors in connection with engagements for those fiscal years. This category also includes advice on audit and accounting matters that arose during, or as a result of, the audit or the review of interim financial statements.
Audit-Related Fees - This category consists of assurance and related services by the independent auditors that are reasonably related to the performance of the audit or review of our financial statements and are not reported above under "Audit Fees." The services for the fees disclosed under this category include consultation regarding our correspondence with the SEC and other accounting consulting.
Tax Fees - This category consists of professional services rendered by our independent auditors for tax compliance and tax advice. The services for the fees disclosed under this category include tax return preparation and technical tax advice.
Board of Directors Report
The Board of Directors has reviewed and discussed with the registrant's management and independent auditor the audited consolidated financial statements of the registrant’s contained in the registrant's Annual Report on Form 10-K for the registrant's fiscal year ended December 31, 2016. The Board has also discussed with the independent auditor the matters required to be discussed pursuant to SAS No. 61 (Codification of Statements on Auditing Standards, AU Section 380), which includes, among other items, matters related to the conduct of the audit of the registrant's consolidated financial statements.
47
The Board has received and reviewed the written disclosures and the letter from the independent auditor required by the applicable requirements of the Public Company Accounting Oversight Board regarding the independent auditor's communications with the Board concerning independence, and has discussed with its independent auditor its independence from the registrant.
The Board has considered whether the provision of services other than audit services is compatible with maintaining auditor independence.
Based on the review and discussions referred to above, the Board approved the inclusion of the audited consolidated financial statements in the registrant's Annual Report on Form 10-K for its fiscal year ending December 31, 2016 for filing with the SEC.
48
PART IV
Item 15. Exhibits, Financial Statement Schedules
(a)(1) List of Financial statements included in Part II hereof
Balance Sheets, December 31, 2016 and 2015
Statements of Operations for the years ended December 31, 2016 and 2015
Statements of Stockholders' Equity (Deficit) for the years ended December 31, 2016 and 2015
Statements of Cash Flows for the years ended December 31, 2016 and 2015
Notes to the Financial Statements
(a)(2) List of Financial Statement schedules included in Part IV hereof: None.
(a)(3) Exhibits
The following exhibits are included herewith:
|
| |
|
Exhibit No.
|
Description
|
|
31
|
Certification of Chief Executive Officer and Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|
|
32
|
Certification of Chief Executive Officer and Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
|
101.INS*
|
XBRL Instance Document
|
|
101.SCH*
|
XBRL Taxonomy Extension Schema Document
|
|
101.CAL*
|
XBRL Taxonomy Extension Calculation Linkbase Document
|
|
101.DEF*
|
XBRL Taxonomy Extension Definition Linkbase Document
|
|
101.LAB*
|
XBRL Taxonomy Extension Label Linkbase Document
|
|
101.PRE*
|
XBRL Taxonomy Extension Presentation Linkbase Document
|
*XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.
Following are a list of exhibits which we previously filed in other reports which we filed with the SEC, including the Exhibit No., description of the exhibit and the identity of the Report where the exhibit was filed.
49
|
|
|
| |
|
NO.
|
DESCRIPTION
|
FILED WITH
|
DATE FILED
|
|
3.1
|
Articles of Incorporation
|
Form S-1
|
November 8, 2013
|
|
3.2
|
Certificate of Amendment
|
|
January 15, 2015
|
|
3.3
|
Bylaws
|
Form S-1
|
November 8, 2013
|
|
10.1
|
Consulting agreement
|
Form S-1
|
June 19, 2013
|
|
14.0
|
Code of Ethics
|
Form S-1
|
November 8, 2013
|
50
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
ATACAMA RESOURCES INTERNATIONAL, INC.
BY:
/s/ Glenn Grant
Glenn Grant
Chief Executive Officer, Chief Accounting Officer,
Secretary and Director
Dated: April 17, 2017
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
BY:
/s/ Glenn Grant
Glenn Grant
Chief Executive Officer, Chief Accounting Officer,
Secretary and Director
Dated: April 17, 2017
BY:
/s/ Daniel Finch
Daniel Finch
Chief Operating Officer, Director
Dated: April 17, 2017
BY:
/s/ William Webb
William Webb
Chief Financial Officer, Director
Dated: April 17, 2017
BY:
/s/ Donald Swartz
Donald Swartz
Chairman of the Board
Dated: April 17, 2017
51