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 the Consolidated Financial Statements
1.
Organization and Significant Accounting Policies
The financial statements presented are those of BullsnBears.com, Inc. (the Company) (Formerly Spicy Gourmet Manufacturing, Inc.), a Delaware corporation. The Company was incorporated on December 30, 2010, under the laws of the State of Delaware. During November 2012, The Company changed its name from Spicy Gourmet Manufacturing, Inc. to BullsnBears.com, Inc.
Accounting Methods
The Company
s financial statements are prepared using the accrual method of accounting. The Company has elected a calendar year-end.
Principles of Consolidation
The accompanying financial statements reflect the consolidation of the individual financial statements of Michael James Enterprises, Inc. and BullsnBears Holdings, Inc. All significant intercompany accounts and transactions have been eliminated.
Basic and Diluted Loss Per Share
The Company presents both basic and diluted earnings per share (EPS) on the face of the income statement. Basic EPS is computed by dividing net income (loss) available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period including convertible debt, stock options, and warrants, using the treasury stock method, and convertible securities, using the if-converted method. In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive. The Company had net losses as of December 31, 2016 and 2015, so the diluted EPS excluded all dilutive potential shares in the diluted EPS because their effect is anti-dilutive.
Cash Equivalents
The Company considers all highly liquid investments with maturities of three months or less when purchased to be cash equivalents.
Fair Value of Financial Instruments
The carrying amount of accounts payable and accrued expenses are considered to be representative of their respective fair values because of the short-term nature of these financial instruments. The fair value of the derivative liabilities have been valued using a Black Scholes valuation model.
Derivative Liabilities
Certain of the Company
s convertible notes payable described in Note 3 contain conversion features that qualify for embedded derivative classification. The Company accounts for the embedded derivative features in its convertible debentures in accordance FASB ASC 815-10-
Derivatives and Hedging,
which requires a periodic valuation of their fair value and a corresponding recognition of liabilities associated with such derivatives. The recognition of derivative liabilities related to the issuance of the convertible debt is applied first to the proceeds of such issuance as a debt discount, at the date of issuance, and the excess of derivative liabilities over the proceeds is recognized as a
Loss on Derivative Liability
in other expense. The fair value of these liabilities will be re-measured at the end of every reporting period and the change in fair value will be reported in the statement of operations as a gain or loss on derivative financial instruments.
26
Use of Estimates
The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Revenue Recognition
The Company recognizes revenues and the related costs when persuasive evidence of an arrangement exists, delivery and acceptance has occurred or service has been rendered, the price is fixed or determinable, and collection of the resulting receivable is reasonably assured. Amounts invoiced or collected in advance of product delivery or providing services are recorded as deferred revenue. The Company accrues for warranty costs, sales returns, bad debts, and other allowances based on its historical experience. The Company has recognized minimal revenue since inception.
Income Taxes
The Company files income tax returns in the U.S. federal jurisdiction, and the state of Florida. The Company
s policy is to recognize interest accrued related to unrecognized tax benefits in interest expense and penalties in operating expenses.
Deferred taxes are provided on a liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carry forwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.
Net deferred tax assets consist of the following components as of December 31, 2016 and 2015:
|
| |
|
2016
|
2015
|
Deferred tax assets:
|
|
|
Deferred tax assets:
|
4,552,275
|
728,430
|
Valuation allowance
|
(4,552,275)
|
(728,430)
|
Net deferred tax asset
|
$
-
|
$
-
|
The Company had net operating losses of approximately ($13,261,022) that expire in years through 2031. Due to the change in ownership provisions of the Tax Reform Act of 1986, net operating loss carryforwards for Federal income tax reporting purposes are subject to annual limitations. Should a change in ownership occur, net operating loss carryforwards may be limited as to use in future years.
Stock-Based Compensation
The Company records stock-based compensation using the fair value method. Equity instruments issued to employees and the cost of the services received as consideration are accounted for in accordance with ASC 718
Stock Compensation
and are measured and recognized based on the fair value of the equity instruments issued. All transactions with non-employees in which goods or services are the consideration received for the issuance of equity instruments are accounted for in accordance with ASC 515
Equity-Based Payments to Non-Employees
, based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable.
New Accounting Pronouncements
In August 2014, the Financial Accounting Standards Board (
FASB
) issued Accounting Standards Update (
ASU
) 2014-15
Presentation of Financial Statements
Going Concern,
outlining management
s responsibility to evaluate whether there is substantial doubt about an entity
s ability to continue as a going concern, along with the required disclosures. ASU 2014-15 is effective for the annual period ending after December 15, 2016 with early adoption permitted. The Company does not anticipate a material impact to our financial statements as a result of this change.
In April 2015, the FASB issued ASU 2015-03, Simplifying the Presentation of Debt Issuance Costs (
ASU 2015-03
). ASU 2015-03 changes the presentation of debt issuance costs in financial statements, by requiring them to be presented in the balance sheet as a direct deduction from the related debt liability, rather than as an asset. Amortization of the costs is reported as interest expense. There is no change to the current guidance on the recognition and measurement of debt issuance costs. For public business entities, ASU 2015-03 will be effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015, with early adoption permitted. The Company does not expect ASU 2015-03 to have a material impact on its consolidated financial statements.
In January 2016, the FASB issued ASU 2016-01
Financial Instruments-Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities,
which revises an entity
s accounting related to (1) the classification and measurement of investments in equity
27
securities and (2) the presentation of certain fair value changes for financial liabilities measured at fair value. The ASU also amends certain disclosure requirements associated with the fair value of financial instruments. ASU 2016-01 is effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2017, with early adoption permitted under certain circumstances.
The Company is currently assessing the impact of ASU 2016-01 on its financial statements.
In February 2016, the FASB issued ASU No. 2016-02, Leases, which is effective for fiscal years, and interim periods within those years, beginning after December 15, 2018 with early adoption permitted. Under Accounting Standards Update 2016-02, lessees will be required to recognize for all leases at the commencement date a lease liability, which is a lessee
s obligation to make lease payments arising from a lease measured on a discounted basis, and a right-to-use asset, which is an asset that represents the lessee
s right to use or control the use of a specified asset for the lease term. The Company is currently evaluating the effect that the new guidance will have on its financial statements and related disclosures.
In March 2016, the FASB issued ASU No. 2016-09, Compensation
Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting, which includes multiple provisions intended to simplify various aspects of the accounting for share-based payments, including treatment of excess tax benefits and forfeitures, as well as consideration of minimum statutory tax withholding requirements. The ASU will take effect for public companies for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016, with early application permitted in any interim or annual period. The Company is evaluating the future impact of this ASU on the consolidated financial statements.
Other relevant recently issued accounting updates are not expected to have a material impact on the Company
s consolidated financial statements.
Long Lived Assets
Periodically the Company assesses potential impairment of its long-lived assets, which include property, equipment and acquired intangible assets, in accordance with the provisions of ASC Topic 360,
Property, Plant and Equipment.
The Company recognizes impairment losses on long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets
carrying values. An impairment loss would be recognized in the amount by which the recorded value of the asset exceeds the fair value of the asset, measured by the quoted market price of an asset or an estimate based on the best information available in the circumstances. There were no such losses recognized during 2014 or 2013.
Property, Equipment and Intangible Assets
Property and equipment are carried at cost, less accumulated depreciation. Additions are capitalized and maintenance and repairs are charged to expense as incurred. Intangible assets consist of acquired web site domains and web site content and are carried at cost, less accumulated amortization.
Depreciation and amortization is provided principally on the straight-line basis method over the estimated useful lives of the assets.
NOTE 2 - PROPERTY AND EQUIPMENT
Property and equipment are carried at cost, less accumulated depreciation and includes expenditures that substantially increase the useful lives of existing assets. Maintenance and repairs are charged to current operations as incurred. Upon sale, retirement, or other disposition of these assets, the costs and related accumulated depreciation are removed from the respective accounts, and any gain or loss on the disposition is included in other income. Depreciation expense is computed using the straight-line method over lives from three to five years.
Property and equipment and accumulated depreciation are as follows:
|
|
|
|
| |
|
|
|
December 31,
|
|
|
|
|
2016
|
2015
|
Furniture and fixtures
|
|
|
-
|
|
7,932
|
Computer and office equipment
|
|
|
|
|
19,388
|
Less: Accumulated depreciation
|
|
|
(-)
|
|
(22,470)
|
Total fixed assets
|
|
|
-
|
|
4,850
|
Depreciation expense for the years ended December 31, 2016 and 2015 was $0 and $6,915, respectively.
28
NOTE 3 - INTANGIBLE ASSETS
During October 2012, the Company entered into an Asset Purchase Agreement and a Promissory Note (see Note 4) in the amount of $150,000 for the URL domain names and websites of the Company with a current officer and director of the Company, prior to joining the Company.
The assets were capitalized and are being amortized over their estimated useful of 5 years. The website was placed into service during October 2012. Amortization expense for the years ended December 31, 2016 and 2015 was $0 and $30,000, respectively. As of December 31, 2015, the Company impaired the remaining value of $53,750. This asset was transferred out of the company with the spinoff.
NOTE 4 - RELATED PARTY TRANSACTIONS
Notes and Convertible Notes Payable
On October 31, 2012, the Company and an officer and director of the Company entered into a one year, 10% Senior Convertible Note for office equipment totaling $20,955 and supplies totaling $761, or a total of $21,716. The principal amount of the Senior Convertible Note can be convertible, at the sole option of the holder and in whole or in part, into shares of common stock of the Company at a conversion price to be determined by the Board of Directors of the Company at or prior to the maturity date. No conversion rate has been established by the Board of Directors. The Senior Convertible Note and the payment of the principal thereof and interest thereon shall at all times and in all respects constitute the Senior Indebtedness of the Company and shall not be junior or subordinate in right of payment to any other indebtedness of the Company. Accrued interest on the Senior Convertible Note totaled $16,266 and $6,010 at December 31, 2016 and December 31, 2015, respectively.
During the year ended December 31, 2014, the Company borrowed a total of $63,062 in unsecured short-term loans from an officer and director of the Company and repaid $2,925. During the year ended December 31, 2015, the Company borrowed a total of $45,127 in unsecured short-term loans from an officer and director of the Company and repaid $11,596. At December 31, 2015, $214,458 of the short-term loans was outstanding and are accruing interest at 6% per annum.
In April, 2015, an affiliate of the Company assigned an Account Payable balance in the principal amount of $22,500 to an unrelated party. The Note is due in June, 2015, and is convertible at the option of the holder into shares of Common Stock at market price. The note was converted in June of 2015 into 250,000 shares of common stock.
Consulting Expense
At December 31, 2016 and December 31, 2015, the Company owes an officer $0 and $444,400, respectively, for consulting expense which is included in accounts payable, related party. Consulting expenses year ended December 31, 2015 were $56,600.
Management Services
As of December 31, 2016 the company owes Integrated Capital Partners, Inc. (Nevada) $70,407.65 in expenses paid for the Company for the year ended December 31, 2016. The Company
s CEO is the controlling shareholder of Integrated Capital Partners, Inc. (Nevada).
As of December 31, 2016 the Company owes James M. Farinella $6,488.66 in expenses paid for the Company for the year ended December 31, 2016.
As of December 31, 2016 the company owes Michael James Enterprises, Inc. (Nevada) $15,434 in expenses paid for the Company for the year ended December 31, 2016. The Company
s CEO is the controlling shareholder and CEO of Michael James Enterprises, Inc. (Nevada).
In February 2017 the Company
s CEO, James Farinella, assigned his rights to the Voluptas provisional patents that he owns and all intellectual property rights to Voluptas for 2,350,000 preferred B shares of the Company. On May 10, 2017 the provisional patent was updated and refilled increasing the protection covering more than 10 delivery methods. In February 2017 the Company
s Chief Executive Officer, James M. Farinella, was issued 240,000 Preferred B shares. The Company agreed to issue these shares to Mr. Farinella in 2016 for him joining the Company as an Officer and Director. Mr. Farinella surrendered 120,000 Preffered B shares to pay of loans owed to three trust accounts and those trust accounts were issued 40,000 preferred C shares each. James M. Farinella now owns 2,890,000 Prefeerred B shares
In February 2017 the Company
s Chief Operating Officer, Gina Morreale, was issued 240,000 Preferred B shares. The Company agreed to issue these shares to Miss Morreale in 2016 for her joining the Company as an Officer and Director.
On August 4, 2016 the company issued 660,000 shares of preferred series B shares to RP Capital. Each preferred series B is convertible into 100 shares of the company
s common stock, for research and development services.
Formation of New Subsidiary
29
On December 31, 2015, the Company formed a new wholly-owned corporation, BullsnBears Holdings, Inc., for the purpose of holding the Company
s intellectual property assets. On December 28, 2016 Bullsnbears Holdings, Inc. was spun out.
Revenue
During the year ended December 31, 2015, the Company
s revenue included $10,000 from a company controlled by James Farinella, the current President of the Company. The transaction took place prior to Mr. Farinella
s appointment as an Officer and Director.
In November and December of 2016 the Company sold 50 bottles of LUNA at $20 per bottle for a total of $1,000.
30
NOTE 5 - CONVERTIBLE PROMISSORY NOTES PAYABLE
As of December 31, 2015 the Company had a total of nine convertible notes payable with an outstanding balance of $377,500. The interest rates varied from 10% to 20% and conversion rates ranging from $.20 to $1.00. The notes may be converted at any time and are all in default. This debt was included in the spin out of Bullsnbears Holdings, Inc. on December 28, 2016.
In February, 2015, we converted $90,620 of these notes ($84,200) and accrued interest ($6,420) into 90,620 shares of Common Stock. The balance of the notes matured between January 2015 and March 2015 and are now presently due. In the event one or more of the holders should elect to convert the notes, the issuance of shares of our common stock in satisfaction of the notes will be dilutive to our current stockholders. If the notes are not converted, we will be required to satisfy the notes in cash. We do not have sufficient cash to satisfy the presently due notes, nor the balance of these notes when they become due and there are no assurances we will be able to raise the funds if necessary.
In June 2015 the company converted an aggregate of $234,000 of note holder debt, $215,000 of principle and accrued interest of $19,000 into 234,000 shares. For the same period the company realized a gain on interest of $12,160.
During the year ended December 31, 2015, we sold an additional $17,500 principal amount of short-term bridge notes. The notes bear interest at 15% per annum, are unsecured, and are due six months from the date of issuance. At maturity the notes become convertible at $0.20. In addition, the notes become convertible upon an equity financing transaction of at least $500,000. At Maturity the note holders will also receive 105,000 shares of restricted common stock, which was valued at $88,200 and recorded as an expense.
Accrued interest on all outstanding non-related-party Notes was $67,938 at December 31, 2015.
On February 4, 2016, the Company entered into a $121,000 10% Convertible Promissory Note with Tangiers Investment Group, LLC, a non-affiliate. The term is for one year, with an original issuance discount of $11,000 for due diligence and legal costs. The Note is convertible at the option of the Holder into Common Stock of the Company at a conversion price which shall be equal to 55% of the lowest trading price of the Company
s Common Stock during the 20 trading days prior to the election to convert. See Note 4 for discussion of the derivative liability.
On August 4, 2016 $15,000 of this note was converted at $.05 for 333,333 shares of common stock.
On March 23, 2016, the Company entered into a $60,500 10% Convertible Promissory Note with Vista Capital Investments, LLC. a non-affiliate. The term is for two years, with an original issuance discount of $5,500 for due diligence and legal costs. The Note is convertible at the option of the Holder into Common Stock of the Company at a conversion price which shall be equal to 55% of the lowest trading price of the Company
s Common Stock during the 20 trading days prior to the election to convert. See Note 4 for discussion of the derivative liability. In connection with the note payable the Company is obligated to issue 200,000 that were valued at $120,000. Out of the full consideration $55,000 was recorded as debt discount and the remaining $65,000 was included in interest expense.
On March 24, 2016, the Company entered into a $60,500 10% Convertible Promissory Note with Tangiers Investment Group, LLC, a non-affiliate. The term is for one year, with an original issuance discount of $5,500 for due diligence and legal costs. The Note is convertible at the option of the Holder into Common Stock of the Company at a conversion price which shall be equal to 55% of the lowest trading price of the Company
s Common Stock during the 20 trading days prior to the election to convert. See discussion below for the derivative liability.
On December 5, 2016, the Company entered into a $79,000 10% Convertible Promissory Note with GHS Investments, LLC, a non-affiliate. The term is for eight months, with an original issuance discount of $2,000 for due diligence and legal costs. The Note is convertible at the option of the Holder into Common Stock of the Company at a conversion price which shall be equal to the lower of $.09 or 55% of the lowest trading price of the Company
s Common Stock during the 20 trading days prior to the election to convert. See discussion below for the derivative liability.
On December 16, 2016, the Company entered into a $63,250 12% Convertible Promissory Note with Auctus Fund, LLC, a non-affiliate. The term is for nine months, with an original issuance discount of $2,750 for due diligence and legal costs. The Note is convertible at the option of the Holder into Common Stock of the Company at a conversion price which shall be equal to the lower of $.09 or 50% of the lowest trading price of the Company
s Common Stock during the 25 trading days prior to the election to convert. See discussion below for the derivative liability.
Accrued interest on all outstanding non-related-party Notes was $15,703 at December 31, 2016 and $67,938 as for December 31, 2015.
| |
Debt Discount
|
|
Balance as of December 31, 2015
|
$ -
|
Initial recognition of additional derivative liability
|
384,250
|
Amortization of Debt Discount
|
(212,637)
|
Balance December 31, 2016
|
$
171,613
|
| |
Balance of 2015 and Prior notes payable at December 31, 2016
|
$
377,500
|
Notes Payable recorded in 2016
|
415,710
|
Notes Transferred with spinoff in 2016
|
(377,500)
|
Notes Converted in 2016
|
(70,500)
|
Total Notes payable at December 31, 2016
|
345,210
|
Debt discount
|
(171,613)
|
Notes Payable, net
|
$
173,597
|
DERIVATIVE LIABILITY
The Company issued financial instruments in the form of convertible notes with embedded conversion features. The convertible notes payable has conversion rates which are indexed to the market value of the Company
s common stock price.
Price protection clauses of the conversion features of the 2016 convertible notes (see Note 3) triggered derivative accounting under GAAP.
During the year ending December 31, 2016, the company issued five convertible promissory notes totaling $415,710.
| |
Derivative Liability
|
|
Balance as of December 31, 2015
|
$
-
|
Initial recognition of additional derivative liability
|
1,090,639
|
Change in derivative liability
|
(623,148)
|
Balance December 31, 2016
|
$
467,491
|
NOTE 6 - COMMON STOCK AND COMMON STOCK WARRANTS
Common Stock
For the year ended December 31, 2015, the Company issued 50,000 shares of Common Stock valued at $45,500 in exchanges for services rendered to the Company.
On August 4, 2016 the company issued 6,218,000 at $.13 for consulting services.
On August 4, 2016, $15,000 of the note dated February 4, 2016 was converted at $.05 for 333,333 shares of common stock. In addition 100,000 were issued to the holder of this note for a financing fee on this note.
On October 3, 2016, 750,000 shares of common stock held by Dignitas Consulting, LLC. was cancelled due to lack of performance under a contract entered into June of 2016.
On October 20, 2016, Vista Capital Investments, LLC converted $7,500 of its $60,500 note dated March 23, 2016 at a conversion price of $0.0385 for 194,805 shares.
On December 6, 2016, GHS Investments, LLC converted $33,000 of its $66,500 note it acquired from Tangiers dated March 24, 2016 at a conversion price of $0.033 for 1,100,000 shares.
On December 14, 2016, Tangiers Investment Group, LLC converted $15,000 of its $121,000 note dated February 4, 2016 at a conversion price of $0.0325 for 461,538 shares.
Common Stock Warrants
In December, 2010, the Company issued a total of 5,000,000 Common Stock Purchase Warrants. In October 2012, the Company agreed to reduce the exercise price of the outstanding warrants to $0.25 per share. Pursuant to an extension approved by the Board of Directors in June, 2015, all Warrants are exercisable at any time prior to November 19, 2017.
32
The following table summarizes the outstanding warrants and associated activity for the years ended December 31, 2015 through 2016:
|
|
|
|
|
|
| |
``
|
|
Number of
|
Weighted
|
Weighted
|
|
|
Warrants
|
Average
|
Average
|
|
|
Outstanding
|
Price
|
Remaining
|
|
|
|
|
Contractual
|
|
|
|
|
Life
|
Balance, December 31, 2014
|
|
|
5,000,000
|
|
0.25
|
|
2.89
|
Granted
|
|
|
|
|
|
|
|
Exercised
|
|
|
|
|
|
|
|
Expired
|
|
|
|
|
|
|
|
Balance, December 31, 2015
|
|
|
5,000,000
|
$
|
0.25
|
|
1.89
|
Granted
|
|
|
|
|
|
|
|
Exercised
|
|
|
|
|
|
|
|
Expired
|
|
|
|
|
|
|
|
Balance, December 31, 2016
|
|
|
5,000,000
|
$
|
0.25
|
|
.89
|
NOTE 7. PREFERRED STOCK
The Company has authorized a total of 20,000,000 Shares of Preferred Stock, $.001 par value, which may be issued from time to time and bearing such rights, privileges and preferences as shall be designated by the Board of Directors. As of December 31, 2015, the Company had issued 4,000 Shares of Preferred Stock, designated as
Cumulative Preference
A
, at a price of $1.25 per Share. The Shares bear an annual coupon of 5%, and are convertible into Shares of Common Stock of the Company at any time commencing one (1) year from the date of issuance at a conversion price of $1.25 per Share
During the year ended December 31, 2014, we sold $5,000 principal amount of Series
A
5% Cumulative Convertible Preferred Stock, at a price of $1.25 per Share. These Shares bear annual cumulative dividends of 5%, payable at the option of the Company in cash or Shares of Common Stock. At the option of the holder, beginning one year from the date of issuance the Shares are convertible into Shares of Common Stock at a price of $1.25 per Share.
In April, 2015, the Corporation authorized the issuance of up to 10,000,000 shares of Preferred Stock to be designated
Series B Preferred Stock
, having a conversion right at the option of the holder beginning one year from the date of issuance, and which shall be convertible into Shares of Common stock at a Conversion Price equal to the closing market Bid price of the Corporation
s Common Stock on the trading date immediately preceding the date of conversion, in accordance with the Certificate of Designation attached hereto and made a part hereof. In addition, the holder of each Share of Series B Stock shall have the equivalent voting rights of two (2) Shares of Common Stock. The Preferred B shares certificate of Designation was changed as described below.
In August of 2016 the company changed the Certificate of Designation for the preferred B shares giving the holder 1,000 common votes for every preferred B share held with a conversion right of 100 common shares for every preferred B share held. Preferred B shares will be issued in the second quarter 2017, following the effectiveness of the Information Statement as filed by the Company on Form 14C. This change gives approximately 99% voting control to the three Board of Directors (if they vote together). There will be 3,790,000 preferred B shares issued to the Board of Directors in the early part of 2017
On August 4, 2016 the company issued 660,000 shares of preferred series B shares to RP Capital. Each preferred series B is convertible into 100 shares of the company
s common stock, for research and development services.
In February 2017 the Company
s CEO, James Farinella, assigned his rights to the Voluptas provisional patents that he owns and all intellectual property rights to Voluptas for 2,350,000 preferred B shares of the Company. On May 10, 2017 the provisional patent was updated and refilled increasing the protection covering more than 10 delivery methods. In February 2017 the Company
s Chief Executive Officer, James M.
33
Farinella, was issued 660,000 Preferred B shares. The Company agreed to issue these shares to Mr. Farinella in 2016 for him joining the Company as an Officer and Director. Mr. Farinella surrendered 120,000 Preferred B shares to pay of loans owed to three trust accounts and those trust accounts were issued 40,000 preferred C shares each. James Farinella now owns 2,890,000 Preferred B shares.
In February 2017 the Company
s Chief Operating Officer, Gina Morreale, was issued 240,000 Preferred B shares. The Company agreed to issue these shares to Miss Morreale in 2016 for her joining the Company as an Officer and Director.
In August of 2016 the Company also created a Certificate of Designation for a preferred C class as an investment class of stock that carries no voting rights and converts into 100 shares of common for every preferred C share owned. Additionally these shares only allow the holder to convert into common and own no more than 9.9% of the outstanding at any point in time. There will be 130,000 preferred C shares issued in the first part of 2017.
NOTE 8 - GOING CONCERN
The Company's financial statements are prepared using Generally Accepted Accounting Principles applicable to a going concern that contemplates the realization of assets and liquidation of liabilities in the normal course of business. However, the Company has recently accumulated significant losses and has negative working capital. All of these items raise substantial doubt about its ability to continue as a going concern. Management's plans with respect to alleviating the adverse financial conditions that caused management to express substantial doubt about the Company's ability to continue as a going concern are as follows:
The Company is currently trying to raise new debt or equity to set up the manufacturing for the VOLUPTAS product and to continue the development of new essential oil mixtures. If the Company is not successful in the development and implementation of a concept which produces positive cash flows from operations, the Company may be forced to continue to raise additional equity or debt financing to fund its ongoing obligations or risk ceasing doing business.
There can be no assurance that the Company will be able to achieve its business plans, raise any more required capital or secure the financing necessary to achieve its current operating plan. The ability of the Company to continue as a going concern is dependent upon its ability to successfully accomplish the plan described in the preceding paragraph and eventually attain profitable operations.
NOTE 9
COMMITMENTS AND CONTINGENCIES
A lawsuit was filed against the Company on November 13, 2014, in the First Circuit Court of the 15th Judicial Circuit in and for Palm Beach County, Florida entitled Thinspace Technology, Inc. v. Michael James Enterprises, Inc. (formerly BullsnBears.com, Inc.) The complaint alleges that BullsnBears failed to provide certain services it was contractually committed to provide and seeks damages in excess of $15,000. The Company believes that this claim is without merit and no action as been taken in this matter in more than 18 months.
On September 1, 2015, the Company received notice of an Administrative Complaint filed by the State of Florida Office of Financial Regulation (OFR) concerning certain private placement investments received by the Company during the period from 2011 to 2013 and the applicability of the registration exemption provisions of the Florida Statutes to said investments. The Company vigorously disputes the legal basis for this Administrative Complaint as it relates to the Company. Written submissions were presented to the OFR and the OFR designated hearing offer has rendered a recommendation that the Company should be fined in the amount of $980,000. The Company had previously had settlement discussions for a small fraction of that amount and and the Company is presently conducting mitigating discussions with the OFR. To date no Order or Judgment has been entered and the Company is exploring its appeal remedies in the event a substantial adverse ruling is rendered.
NOTE 10- SUBSEQUENT EVENTS
On January 5, 2017, the Company entered into a $53,000 8% Convertible Promissory Note with Power Up Lending Group, LTD, a non-affiliate. The term is for 9 months, with an original issuance of $3,000 for due diligence and legal costs. The Note is convertible at the option of the Holder into Common Stock of the Company at a conversion price which shall be equal to 55% of the average of the three lowest trading prices of the Company
s Common Stock during the 10 trading days prior to the election to convert.
On March 7, 2017,, the Company entered into a $25,000 12% Convertible Promissory Note with Vista Capital Investments, LLC, a non-affiliate. The term is for two years, with an original issuance of $5,000 for due diligence and legal costs. The Note is convertible at the option of the Holder into Common Stock of the Company at a conversion price which shall be equal to 50% of the lowest trading price of the Company
s Common Stock during the 25 trading days prior to the election to convert.
In February of 2017, the Company filed a provisional paten for VOLUPTAS making the product patent pending.
On February 8, 2017 the Company
s CEO James M. Farinella Retired 8,400,000 shares of common stock.
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In March of 2017, the Company entered into a manufacturing agreement with Globe Medical Tech based in Houston, Texas for the development of molds, samples to be produced of VOLUPTAS, stability testing of the packaged product, final mold development for preparation of market launch approximately 9 months from date the Company receives the $2,500,000 investment that it is currently seeking.
On January 17, 2017 Vista Capital Investments, LLC converted $10,000 of its $60,500 note dated March 23, 2016 at a conversion price of $0.01925 for 519,481 shares
On January 24, 2017 Tangiers Investment Group, LLC converted $19,943.00 of its $121,000 noted dated February 4, 2016 at a conversion price of $0.0175 for 1,139,600 shares
On January 30, 2017 Vista Capital converted $14,500 of its $60,500 note dated March 23, 2016 at a conversion price of $0.01375 for 1,054,545 shares.
On February 22, 2017 Tangiers Investment Group, LLC converted $10,119.00 of its $121,000 noted dated February 4, 2016 at a conversion price of $0.0061 for 1,658,852 shares.
On March 3, 2017 Vista Capital Investments, LLC converted $5,637.50 of its $60,500 note dated March 23, 2016 at a conversion price of $0.00451 for 1,250,000 shares.
On March 9, 2017 GHS Investments, LLC converted $4,100.00 of its $66,500 note it acquired from Tangiers Investment Group, LLC dated March 24, 2016 at a conversion price of $0.0041 for 1,000,000 shares.
On March 17, 2017 Vista Capital Investments, LLC converted $7,995.00 of its $75,000 note it acquired from Tangiers Investment Group, LLC dated February 4, 2016 at a conversion price of $0.00410 for 1,950,000 shares.
On March 23, 2016, the Company entered into a $60,500 10% Convertible Promissory Note with Vista Capital Investments, LLC. a non-affiliate. The term is for two years, with an original issuance discount of $5,500 for due diligence and legal costs. The Note is convertible at the option of the Holder into Common Stock of the Company at a conversion price which shall be equal to 55% of the lowest trading price of the Company
s Common Stock during the 20 trading days prior to the election to convert. See Note 4 for discussion of the derivative liability. In connection with the note payable the Company is obligated to issue 200,000 that were valued at $120,000. Out of the full consideration $55,000 was recorded as debt discount and the remaining $65,000 was included in interest expense.
On May 16, 2017 GPL Ventures purchased the remaining balance on the note for 42,222.50 from Vista Capital Investments, LLC. The closing of this Note purchase will take place upon the filing of the Company
s 2016 year-end 10K and the 2017 first Quarter Filings.
On February 4, 2016, the Company entered into a $121,000 10% Convertible Promissory Note with Tangiers Investment Group, LLC, a non-affiliate. The term is for one year, with an original issuance discount of $11,000 for due diligence and legal costs. The Note is convertible at the option of the Holder into Common Stock of the Company at a conversion price which shall be equal to 55% of the lowest trading price of the Company
s Common Stock during the 20 trading days prior to the election to convert. See Note 4 for discussion of the derivative liability. This note was then purchased by Vista Capital on March 7, 2017. On May 16, 2017 GPL Ventures purchased the remaining balance on the note for 67,005.00 from Vista Capital Investments, LLC. The closing of this Note purchase will take place upon the filing of the Company
s 2016 year-end 10K and the 2017 first Quarter Filings. GPL Ventures is combining his note and the $42,222.50 note into one master note totaling $109,227.50
On May 16, 2017 the Company entered into a $200,000 8% Convertible Promissory Note with Tri-Bridge Ventures LLC, a non-affiliate. The term of the Note is for 9 months. The Note is convertible at the option of the Holder into Common Stock of the Company at a conversion price which, shall be equal to 50% of the lowest trading price of the Company
s Common Stock during the 20 trading days prior to the election to convert. Tri-Bridge Ventures, LLC will fund $100,000 of the $200,000 Convertible Promissory Note Upon the filing of the Company
s 2016 year-end 10K and the 2017 first Quarter Filings and Tri-Bridge Ventures, LLC will have the right to fund the remaining balance during the term of the Note.
On May 16, 2017, the Company entered into a $10,000,000 equity line with GPL Ventures, LLC, which will require a registration statement to be filed. As part of the Equity line the Company entered into a commitment note for $100,000. The term of the Note is for 6 months. The Note is convertible at the option of the Holder into Common Stock of the Company at a conversion price, which shall be equal to 80% of the lowest trading price of the Company
s Common Stock during the 20 trading days prior to the election to convert.
In February 2017 the Company
s CEO, James Farinella, assigned his rights to the Voluptas provisional patents that he owns and all intellectual property rights to Voluptas for 2,350,000 preferred B shares of the Company. On May 10, 2017 the provisional patent was updated and refilled increasing the protection covering more than 10 delivery methods.
On May 12, 2017 the Company entered into an Agency Services Agreement with Thor Associates for an initial three months and a 5% royalty on the gross sales of Voluptas for three years starting on the date of the Voluptas Market launch. Both parties to this agreement will discuss a scope of work beyond the end of the three-month contract end date and will then extend this agreement based on the agreed scope of work to be performed moving forward. The contracts start date is June 1, 2017.
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On May 12, 2017 the company entered into a Corporate Consulting Agreement with Global Discovery Group to create and compose stories and articles about the Company, its industry and competition, syndicate and distribute the stories to major financial websites and wire services to reach potential investors. The agreement runs for six months at a cost of $50,000 per month.