UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
(Mark One)
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the fiscal year ended December 31, 2016
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the transition period from __________________ to __________________________.
Commission File Number:
333-148910
ADAMA TECHNOLOGIES CORPORATION
(Exact name of Company as specified in its charter)
Delaware
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98-0552470
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(State or other jurisdiction of incorporation)
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(IRS Employer Identification No.)
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110 Director’s Row, Suite B Jackson, TN
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38301
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(Address of principal executive offices)
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(Zip Code)
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Company’s telephone number, including
area code:
(702) 896-1009
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 Company is a well-known seasoned
issuer, as defined in Rule 405 of the Securities Act.
Yes
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No
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Indicate by check mark if the Company is not required to file
reports pursuant to Section 13 or Section 15(d) of the Act.
Yes
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No
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Check whether the issuer (1) filed all reports required to be
filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the Company was required
to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
1)
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Yes
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No
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2)
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Yes
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No
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Indicate by check mark if disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of
Company’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.
x
Indicate by check mark whether the Company is a large accelerated
filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of large accelerated
filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act. (Check one):
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Large accelerated filer
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Accelerated filer
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Non-accelerated filer
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Smaller reporting company
x
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Emerging Growth Company
o
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Indicate by check mark whether the Registrant has submitted
electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant
to Rule 405 of Regulation S-T (§232.405 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
x
No
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Indicate by check mark whether the Company is a shell company
(as defined in Rule 12b-2 of the Act).
Yes
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No
x
If an emerging growth company, indicate by check mark if the
registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards
provided pursuant to Section 7(a)(2)(B) of the Securities Act.
o
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 Company’s most recently completed fiscal quarter.
Approximately $5,621,936 based upon $.055 per share which
was the last price at which the common equity purchased by non-affiliates was last sold.
The number of shares of the issuer’s common stock issued
and outstanding as of October 1, 2017 was 157,217,031 shares.
TABLE OF CONTENTS
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Page
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PART I
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Item 1
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Business
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4
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Item 1A
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Risk Factors
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6
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Item 1B
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Unresolved Staff Comments
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Item 2
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Properties
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Item 3
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Legal Proceedings
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Item 4
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Removed and Reserved
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PART II
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Item 5
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Market for Company’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
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Item 6
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Selected Financial Data
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Item 7
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Management’s Discussion and Analysis of Financial Condition and Results of Operation
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Item 7A
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Quantitative and Qualitative Disclosures About Market Risk
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Item 8
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Financial Statements.
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Item 9
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Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
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Item 9A
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Controls and Procedures
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Item 9B
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Other Information
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PART III
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Item 10
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Directors, Executive Officers and Corporate Governance
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Item 11
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Executive Compensation
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Item 12
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Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
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Item 13
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Certain Relationships and Related Transactions, and Director Independence
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Item 14
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Principal Accountant Fees and Services
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PART IV
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Item 15
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Exhibits, Financial Statement Schedules
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SIGNATURES
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Cautionary
Note Regarding Forward Looking Statements
This annual report contains forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.The
words “believe,” “expect,” “anticipate,” “intend,” “estimate,” “may,”
“should,” “could,” “will,” “plan,” “future,” “continue, “
and other expressions that are predictions of or indicate future events and trends and that do not relate to historical matters
identify forward-looking statements. These forward-looking statements are based largely on our expectations or forecasts of future
events, can be affected by inaccurate assumptions, and are subject to various business risks and known and unknown uncertainties,
a number of which are beyond our control. Therefore, actual results could differ materially from the forward-looking statements
contained in this document, and readers are cautioned not to place undue reliance on such forward-looking statements. We undertake
no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events
or otherwise. A wide variety of factor could cause or contribute to such differences and could adversely impact revenues, profitability,
cash flows and capital needs. There can be no assurance that the forward-looking statements contained in this document will, in
fact, transpire or prove to be accurate. These statements are only predictions and involve known and unknown risks, uncertainties
and other factors, including the risks in the section entitled “Risk Factors” that may cause our or our industry’s
actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity,
performance or achievements expressed or implied by any forward-looking statements.
Important factors that may cause the actual
results to differ from the forward-looking statements, projections or other expectations include, but are not limited to, the following:
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risk that we will not be able to remediate identified material weaknesses in our internal control over financial reporting and disclosure controls and procedures;
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risk that we fail to meet the requirements of the agreements under which we acquired our business interests, including any cash payments to the business operations, which could result in the loss of our right to continue to operate or develop the specific businesses described in the agreements;
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risk that we will be unable to secure additional financing in the near future in order to commence and sustain our planned development and growth plans;
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risk that we cannot attract, retain and motivate qualified personnel, particularly employees, consultants and contractors for our operations;
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risks and uncertainties relating to the various industries and operations we are currently engaged in;
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results of initial feasibility, pre-feasibility and feasibility studies, and the possibility that future growth, development or expansion will not be consistent with our expectations;
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risks related to the inherent uncertainty of business operations including profit, cost of goods, production costs and cost estimates and the potential for unexpected costs and expenses;
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risks related to commodity price fluctuations;
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the uncertainty of profitability based upon our history of losses;
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risks related to failure to obtain adequate financing on a timely basis and on acceptable terms for our planned development projects;
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risks related to environmental regulation and liability;
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risks related to tax assessments;
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other risks and uncertainties related to our prospects, properties and business strategy.
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Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. You should not place undue reliance on these forward-looking statements, which speak only as of the date of this report. Except as required by law, we do not undertake to update or revise any of the forward-looking statements to conform these statements to actual results, whether as a result of new information, future events or otherwise.
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As used in this annual report, “Adama,” the “Company,” “we,” “us,” or “our” refer to Adama Technologies Corp., unless otherwise indicated.
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ADAMA TECHNOLOGIES CORPORATION
Annual Report on Form 10-K for the
Year Ended December 31, 2016.
FORWARD LOOKING STATEMENTS
This annual report on Form 10-K for Adama
Technologies Corporation (the “Company”) contains forward-looking statements that involve risks and uncertainties,
as well as assumptions that, if they never materialize or prove incorrect, could cause the results of the Company to differ materially
from those expressed or implied by such forward-looking statements. All statements other than statements of historical fact are
statements that could be deemed forward-looking statements, including any projections of revenue, expenses, earnings or losses
from operations or investments, or other financial items; any statements of the plans, strategies and objectives of management
for future operations; any statements of expectation or belief; and any statements of assumptions underlying any of the foregoing.
The risks, uncertainties and assumptions referred to above include risks that are described from time to time in our Securities
and Exchange Commission, or the SEC, reports filed before this report.
The forward-looking statements included
in this annual report represent our estimates as of the date of this annual report. We specifically disclaim any obligation to
update these forward-looking statements in the future. Some of the statements in this annual report constitute forward-looking
statements, which relate to future events or our future performance or financial condition. Such forward-looking statements contained
in this annual report involve risks and uncertainties.
We use words such as anticipates, believes,
expects, future, intends and similar expressions to identify forward-looking statements. Our actual results could differ materially
from those projected in the forward-looking statements for any reason. We caution you that forward-looking statements of this type
are subject to uncertainties and risks, many of which cannot be predicted or quantified.
The following analysis of our financial
condition and results of operations should be read in conjunction with our financial statements and the related notes thereto contained
elsewhere in this Form 10-K, as well as the risk factors included in this Form 10-K under Item 1A.
Item 1. Business.
HISTORY OF OUR COMPANY
We were incorporated in Delaware on September
17, 2007 as 1 Lane Technologies Corporation. On February 27, 2009, our corporate name was changed to Adama Technologies Corporation
to better reflect our business activities. We acquired the rights to a patent-pending technology upon which a unique wireless data
platform is built. On October 27, 2008, we abandoned the business relating to the patented technology and executed an exclusive
brownfield license agreement with Solucorp Industries Ltd., pursuant to which we acquired a 15-year license to certain environmental
hazard remediation technology. Subsequently, we have acquired and thereafter abandoned several mining and mining related companies,
but as of December 31, 2014, we became a shell company and have no operating activities.
On
September 10, 2015, the Company entered into an Agreement and Plan of Merger and Acquisition with Incubator Holdings, Inc., a Wyoming
corporation (the “Agreement”). Under the terms of that Agreement, Incubator Holdings formed an acquisition subsidiary,
ADAC Acquisition Corp. in Florida; Incubator Holdings, Inc. (Wyoming) merged with that Florida subsidiary. This Agreement was later
unwound by the board, however, the plan to continue with the reverse split of the common shares of the stock that was previously
approved by the Board and Shareholders. This decision was submitted to the ADAC preferred shareholder and approved by vote of the
preferred shares representing 51 percent of the total votes of all shareholders. ADAC, by Board resolutions and majority preferred
shareholder vote, approved and reaffirmed this reverse action on November 1, 2016. On November 18, 2016 FINRA effectuated this
reverse and stock was reverse 250 to 1.
On November 23, 2016 Adama Technologies successfully completed its acquisition of
Alpine Industries, a defense contractor that manufactures a number of parts for the United States government. This purchase and
sale agreement was disclosed in an 8-K filed on December 13, 2016. With Alpine having substantial annual revenues, Adama Technologies
underwent a reverse merger and ceased to be a shell company at that time.
Our principal executive offices are now
located at 110 Director’s Row, Suite B Jackson, TN 38301. Our registered office in Delaware is located at 113 Barksdale Professional
Center, Newark, DE 19711, and our registered agent is Delaware Intercorp. Our fiscal year end is December 31.
OUR CURRENT BUSINESS
During the past year our main business
was derived from our reverse merger target, Alpine Industries, which is a defense contractor for divisions of the United States
military. We derive most of our revenues from government contracts. Our contracts are principally with the Department of Defense
and various military acquisition organizations. Alpine is in the process of continually expanding its base of operation. It looks
to develop a broader range of activities to accomplish its objectives. To that end Alpine has focused on developing its commercial
services division and has developed key relationships to facilitate that. Alpine has developed a key relationship with IPEX Corporation
based out of Canada. Throughout the year we have serviced 11 Research and Development contracts with them and this trend looks
to continue. It is the hope of the corporation that more production work will come from these contracts.
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Additionally, Alpine has been doing production
work for Ducworks, a diverse company offering aerospace products as well as high-end commercial construction products. These types
of projects add diversity and showcase Alpine’s ability to develop and manage multiple types of products. Alpine looks to
continue building this relationship.
Focusing on continuing its Aerospace division,
Alpine continues to service its 16 existing contracts. With over $2.2 million in anticipated revenues, it represents a major part
of the business to be completed. As a commitment to its aerospace division Alpine also continues to bid on contracts available.
Alpine has currently bid on over 40 contracts that fit within the over 200 different types of products that Alpine can produce.
Alpine looks to continue its path to deliver
record setting growth, and feels as if the newly developed commercial services along with the steady and growing government contracts
will produce the results the Company is looking for.
Additionally, we are actively seeking merger
and acquisition candidates.
In the process of seeking merger and acquisition
partners Adama has been able to successfully engage in three additional transactions which are asset purchase opportunities.
Transaction #1: On April 29, 2017, Adama
completed the asset purchase of SafeGuard PII in which Adama acquired the technology products within SafeGuard PII. Safeguard protects
families and businesses from identity theft. This technology provides far more than the typical credit card protection. In fact,
it supplies the “7” essential components of whole identity protection. These include:
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Whole identity monitoring-not just credit cards
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Cyber-crime protection—hackers, viruses, etc.
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Credit-management and credit protection
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Privacy-minimized junk mail, spam, etc.
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Lost wallet protection
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Whole identity recovery—restoration to pre-theft status
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Cyberhood watch—24/7 real-time alerts
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SafeGuard PII’s technology is
an industry pioneer and top-tier Privacy Management Firm that provides compliance solutions to companies throughout the U.S.
SafeGuard PII is also a provider of the most robust identity theft protection and restoration product in the marketplace. SafeGuard
PII has become known not only for educating the corporate environment on data protection strategies and privacy law compliance,
it is also known for its whole identity monitoring and restoration solutions.
Where many programs just focus on credit
cards and bank accounts, our PII Defender program monitors internet black market sites, other internet trading sites where ID thieves
buy and sell information, utility and phone records, public databases, criminal databases and DMV records, in addition to
credit files for your personal information. No other service gives you this level of protection. Members also receive lost wallet
recovery services, Cyber security membership, credit report review and correction services and fully managed expert recovery
assistance, restoring your identity back to pre-theft status including prosecution of the identity thief and so much more.
The terms of the transaction with Safeguard
were an asset purchase of the technology in software for $2,000,000, payable in restricted shares of stock. Additionally, the Company
appointed the founder of Safeguard, Mr. Mark Brown, to an advisory position and named him the director of sales in order to help
better market and sale the assets acquired.
Transaction #2: Subsequent to this filing
period, Adama Technologies negotiated and completed an asset acquisition of several technology platforms called Prenr, Trove and
Generation H.E.R.O. from Element 99, LLC. In this transaction, Adama Technologies acquired a 25% participation of these technologies
and platforms within their own sales environments. This transaction is pending the Company becoming current in its financial reporting
obligations with the SEC.
Element99 was founded in early 2016 as
a startup focused on creating innovative solutions for entrepreneurs. During the last 20 months, Element99 has been in development
of several product brands that will become the foundation for the upcoming entrepreneurial ecosystem. One of the driving motivators
behind Element99 is to band together with organizations worldwide to help fight entrepreneurial burnout and depression. Generation
H.E.R.O. was formed to help entrepreneurs reach out in times of failure and distress, a common enemy that every entrepreneur can
relate with. Generation H.E.R.O. will begin by publishing unique content showcasing the journeys of several successful entrepreneurs
through short films, podcasts, interviews, and social broadcasts. The mechanism to distribute awareness for Generation H.E.R.O.
is the product PRENR, a lifestyle brand that provides education, services, and merchandise to support the overall identity
of this subculture.
Element99 has also been developing a social
commerce platform called Trove, innovating around how people discover and share the things they use and enjoy every day. This social
platform is an integrated marketplace that allows consumers to discover and share products with their
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peers in a dedicated network focused on
user experiences instead of friendship and status. Trove provides a social experience that cannot be found on any other platform
and has created a vehicle to connect consumer and advertiser together in ways that can push commerce forward into the digital economy.
The team behind Element99 has over 40 years
combined marketing and product development experience and is growing rapidly as they enter the first phase of release in late 2017.
The mission behind Element99 is to help entrepreneurs reach their goals through passion, creativity, and the relentless pursuit
of innovation. This mission is driven and reiterated throughout the company by founder Chris Jones, and in his words, ”My
passion is to build the greatest entrepreneurial brand in the world and my vision is to always believe we can build a brand that
makes a difference.”
Transaction #3: Subsequent to this filing
period, Adama Technologies negotiated the acquisition of EZ Mart Food Stores, Inc. This acquisition will include the assignment
of two contracts to purchase convenience store operations in Cusseta, Alabama and Holiday, Florida. These operations are currently
generating $10 million and $8 million in annualized revenue respectively. Both locations are set to close in the fourth quarter
of 2017.
Employees
The Company currently has 7 full time employees, 3 of those are salaried employees and 4 of those employees earn an hourly wage.
Facilities
Our principal executive offices are now located at 110 Director’s Row, Suite B Jackson, TN 38301. Our registered office in
Delaware is located at 113 Barksdale Professional Center, Newark, DE 19711, and our registered agent is Delaware Intercorp.
Alpine Industries leases a 11,700 square
foot facility in Richmond, Utah that is utilized for manufacturing and operations.
Government Regulations
During the period covered by this report, our business was not subject to direct regulation by any domestic or foreign governmental
agency, other than regulations generally applicable to businesses, and we believe that we have complied with these laws and regulations
in all material respects.
Item 1A.
Risk Factors
Risks Associated With Our Business
We have unsecured convertible notes
that came due in 2016 and will continue to come due in 2017 and we have limited resources to pay these notes on the maturity date.
Over the last several
years, we have been funding our operations through the sale of both equity and debt securities. We have $643,689 worth of convertible
notes outstanding at December 31, 2016 (net of unamortized discount).
If the note holders
decide not to convert these notes to common stock, we will have an obligation on the maturity date of each note to pay the note
holder all accrued interest and principal on such note. In such case, we would have to find sources of cash to re-pay the note
holder and there can be no assurance such resources will be available.
We will need to raise funds through
financings in the future, which would dilute the ownership of our existing stockholders and possibly subordinate certain of their
rights to the rights of new investors or creditors.
We expect to seek additional
funds in debt or equity financings if they are available to us on terms we believe reasonable to provide for working capital, carry
out business operations or to make acquisitions. Any sales of additional equity or convertible debt securities would result in
dilution of the equity interests of our existing stockholders, which could be substantial. Additionally, if we issue shares of
preferred stock or convertible debt to raise funds, the holders of those securities might be entitled to various preferential rights
over the holders of our common stock, including repayment of their investment. Such additional debt, if authorized, would create
rights and preferences that would be senior to, or otherwise adversely affect, the rights and the value of our common stock and
would have to be repaid from future cash flow.
If we fail to raise additional capital to fund our business
growth our business could fail.
We have to raise significant
amounts of capital to meet our anticipated needs for working capital and other cash requirements for the near term to develop and
grow our existing businesses. We will attempt to raise such capital through the sale of common stock or debt instruments. However,
there is no assurance that we will be successful in raising or borrowing sufficient additional capital and we have no arrangements
for future financing and there can be no assurance that additional financing will be available to us. If adequate funds are not
available or are not available on acceptable terms, our ability to fund our exploration projects, take advantage of potential acquisition
opportunities, possibly develop or enhance its properties in the future or respond to competitive pressures would be significantly
limited. Such limitation could have a material adverse effect on our business and financial condition and cause our business to
fail.
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Our success is dependent upon a limited
number of people and we may not be able to attract and retain qualified personnel necessary for the implementation of our business
strategy.
The ability to identify,
negotiate and consummate transactions that will benefit us is dependent upon the efforts of our management team. The loss of the
services of any member of our management could have a material adverse effect on not only the Company’s operational status,
but also its financial health.
Our future success
depends largely upon the continued service of board members, executive officers and other key personnel. Our success also depends
on our ability to continue to attract, retain and motivate qualified personnel, particularly employees, consultants and contractors
for our operations. Personnel do represent a significant asset, and the competition for such personnel is intense in the current
market place. We may have particular difficulty attracting and retaining key personnel in the initial phases of our operations.
Our officers and directors do not devote full time to our
operations.
Our officers do not
devote their full time to our operations. Until such time that we can afford executive compensation to afford full time service,
our directors and officers will remain divided in the amount of time they can spend on our business activities.
Risks Relating to our Common Stock
Trading on the OTC pink sheets may be
volatile and sporadic, which could depress the market price of our common stock and make it difficult for our stockholders to resell
their shares.
We have convertible
notes outstanding that may be converted, at a discount, into shares of our common stock thus increasing the number of shares issued
and outstanding we have and having a potential negative effect on our stock price.
We have never paid dividends and have
no plans to in the future.
Holders of shares of
our common stock are entitled to receive such dividends as may be declared by our board of directors. To date, we have paid no
cash dividends on our shares of common stock and we do not expect to pay cash dividends on our common stock in the foreseeable
future. We intend to retain future earnings, if any, to provide funds for operation of our business. Therefore, any return investors
in our common stock will have to be in the form of appreciation, if any, in the market value of their shares of common stock.
We have additional securities available
for issuance, which, if issued, could adversely affect the rights of the holders of our common stock.
Our Articles of Incorporation
authorize the issuance of 500,000,000 shares of our common stock and 500,000,000 shares of blank check preferred stock. The common
stock or blank check preferred stock can be issued by our board of directors, without stockholder approval. Any future issuances
of our common stock would further dilute the percentage ownership of our common stock held by public shareholders.
Because the SEC imposes additional sales
practice requirements on brokers who deal in our shares that are penny stocks, some brokers may be unwilling to trade them. This
means that you may have difficulty in reselling your shares and may cause the price of the shares to decline.
Our stock is a penny
stock. The Securities and Exchange Commission has adopted Rule 15g-9 which generally defines “penny stock” to be any
equity security that has a market price (as defined) less than $5.00 per share or an exercise price of less than $5.00 per share,
subject to certain exceptions. Our securities are covered by the penny stock rules, which impose additional sales practice requirements
on broker-dealers who sell to persons other than established customers and “accredited investors”. The term “accredited
investor” refers generally to institutions with assets in excess of $5,000,000 or individuals with a net worth in excess
of $1,000,000 or annual income exceeding $200,000 or $300,000 jointly with their spouse. The penny stock rules require a broker-dealer,
prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document
in a form prepared by the SEC which provides information about penny stocks and the nature and level of risks in the penny stock
market. The broker-dealer also must provide the customer with current bid and offer quotations for the penny stock, the compensation
of the broker-dealer and its salesperson in the transaction and monthly account statements showing the market value of each penny
stock held in the customer’s account. The bid and offer quotations and the broker-dealer and salesperson compensation information
must be given to the customer orally or in writing prior to effecting the transaction and must be given to the customer in writing
before or with the customer’s confirmation. In addition, the penny stock rules require that prior to a transaction in a penny
stock not otherwise exempt from these rules; the broker-dealer must make a special written determination that the penny stock is
a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction. These disclosure
requirements may have the effect of reducing the level of trading activity in the secondary market for the stock that is subject
to these penny stock rules. Consequently, these penny stock rules may affect the ability of broker-dealers to trade our securities.
We believe that the penny stock rules discourage investor interest in, and limit the marketability of, our common stock.
7
In addition to the
“penny stock” rules promulgated by the Securities and Exchange Commission, FINRA has adopted rules that require that
in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is
suitable for that customer. Prior to recommending speculative, low-priced securities to their non-institutional customers, broker-dealers
must make reasonable efforts to obtain information about the customer’s financial status, tax status, investment objectives
and other information. Under interpretations of these rules, FINRA believes that there is a high probability that speculative low-priced
securities will not be suitable for at least some customers. The FINRA requirements make it more difficult for broker-dealers to
recommend that their customers buy our common stock, which may limit your ability to buy and sell our stock.
Our stock price is likely to be highly volatile because of
several factors, including a limited public float.
The market price of
our common stock is likely to be highly volatile because there has been a relatively thin trading market for our stock, which causes
trades of small blocks of stock to have a significant impact on our stock price. You may not be able to resell shares of our common
stock following periods of volatility because of the market’s adverse reaction to volatility.
Other factors that could cause such volatility
may include, among other things:
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actual or anticipated fluctuations in our operating results;
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the absence of securities analysts covering us and distributing research and recommendations about us;
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we expect our actual operating results to continue to fluctuate;
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we may have a low trading volume for a number of reasons, including that a large amount of our stock is closely held;
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overall stock market fluctuations;
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economic conditions generally;
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announcements concerning our business or those of our competitors or vendors;
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our ability to raise capital when we require it, and to raise such capital on favorable terms;
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conditions or trends in the industry;
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litigation;
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changes in market valuations of other similar companies;
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announcements by us or our competitors of significant contracts, acquisitions, strategic partnerships or joint ventures;
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●
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future sales of common stock;
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●
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actions initiated by the SEC or other regulatory bodies;
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●
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departure of key personnel or failure to hire key personnel; and
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general market conditions.
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convertible note holders have the right to convert the notes to common shares at a discount which could have the effect of depressing the stock price
|
ITEM 1B. UNRESOLVED STAFF COMMENTS.
None
ITEM 2. PROPERTIES.
Our executive offices are located at 110 Director’s Row,
Suite B Jackson, TN 38301, in offices provided by an independent consulting firm. We believe that this space is adequate for our
current and immediately foreseeable operating needs. Alpine Industries leases a 11,700 square foot facility in Richmond, Utah where
it does all of its manufacturing.
ITEM 3. LEGAL PROCEEDINGS.
8
On October 25, 2012, JS Barkats PLLC filed
a breach of contract action against the Company and a former officer, Aviram Malik in the Supreme Court of New York, for breach
of contract relating to a funding transaction in June 2012. The Complaint, which was apparently served on former management but
was never answered or otherwise responded to by former management and which was never disclosed in our prior episodic filings,
seeks to recover $45,395 in a cash finders ‘ fee allegedly due plus 2.5 percent of our issued and outstanding common stock
as of the date the fee was earned, plus forfeiture of all of the common stock, warrants and options owned by Aviram Malik, individually.
As a result of the failure to respond to the action, the plaintiff has been awarded a default judgement which was entered on December
15, 2015 for a cash amount of $181,500 and 2.5% of the fully diluted common stock issued and outstanding of Adama Technologies
Corporation which was valued at $67,240 for a total amount of $248,490.
There are no other known pending legal
proceedings to which the Company is a party or in which any director, officer or affiliate of the Company, any owner of record
or beneficially of more than 5% of any class of voting securities of the Company, or security holder is a party adverse to the
Company or has a material interest adverse to the Company. The Company ‘ s property is not the subject of any other pending
legal proceedings.
ITEM 4. Mine Safety Disclosures
Not applicable.
PART II
ITEM 5. MARKET FOR COMPANY’S COMMON EQUITY, RELATED
STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.
Market Information
Our common stock is eligible to be traded on the OTC Markets,
under the ticker symbol ADAC.
Historic Trading Prices - Adama Technologies Corp
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Year
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2016
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Quarter 1
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Quarter 2
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Quarter 3
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Quarter 4
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Jan - Mar
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Apr - Jun
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Jul - Sept
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Oct - Dec
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High
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3.25
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0.23
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0.38
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1.08
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Low
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0.10
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0.05
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0.08
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0.10
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Holders
As of December 31, 2016, there were 114,815,781
shares of our common stock issued and outstanding, which were held by stockholders of record.
Dividends
We have never declared or paid any cash
dividends on our common stock nor do we anticipate paying any in the foreseeable future. Furthermore, we expect to retain any future
earnings to finance our operations and expansion. The payment of cash dividends in the future will be at the discretion of our
Board of Directors.
Equity Compensation Plans
On July 22, 2009, the Company adopted the
Stock Incentive Plan, pursuant which the Company is authorized to grant equity-based awards in the form of stock options, restricted
common stock, restricted stock units, stock appreciation rights, and other stock based awards to employees (including executive
officers), directors, consultants and service providers of the Company and its subsidiaries. The maximum number of shares
available for grant under the plan is 25,000,000 shares of common stock. The number of shares available for award under the plan
is subject to adjustment for certain corporate changes and based on the types of awards provided, all in accordance with the provisions
of the plan. The plan is administered by the Board. No shares have been issued under this Plan.
Recent Sales of Unregistered Securities; Use of Proceeds
from Registered Securities
There were 114,815,781 shares issued in the fiscal year ended
December 31, 2016.
ITEM 6. SELECTED FINANCIAL DATA.
9
As a smaller reporting company, we are not required to provide
this information.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
Results of Operations
In the year ended December 31, 2016 the
Company generated $2,880,248 in annual revenue compared to $2,468,657 in 2015. Cost of sales was $2,082,662 for the year ended
December 31, 2016 and $2,107,697 for the year ended December 31, 2015. Our gross revenue substantially in 2016 as we adjusted our
business operations between years. Our operating expenses in the year ended December 31, 2016 amounted to $487,494 as compared
to $432,959 for the year ended December 31, 2015.
Our net income in the year ended December
31, 2016, was $2,038,261 as compared to the net loss of $117,641 during the year ended December 31, 2015. The major change
in 2016 was due to a change in the fair value of derivatives which resulted in a gain of $1,718,507 during 2016.
The amounts presented in the financial
statements do not provide for the effect of inflation on our operations or our financial position. Amounts shown for machinery,
equipment, and leasehold improvements and for costs and expenses reflect historical cost and do not necessarily represent replacement
cost. The net operating losses shown would be greater than reported if the effects of inflation were reflected either by charging
operations with amounts that represent replacement costs or by using other inflation adjustments.
Liquidity and Capital Resources
On November 23, 2016, The Company completed
its acquisition of Alpine Industries, Inc. This acquisition and reverse merger recorded significant revenues for the Company.
We had $202,339 cash on hand at December
31, 2016, compared to none at December 31, 2015.
Our revenue for year ended December 31,
2016 was $2,468,657 compared to $2,082,662 for year ended December 31, 2015. In 2015 numerous contracts that had already been awarded
were completed and then in 2016 the Company was able to bid on numerous additional contracts that we hope to be awarded in 2017
and 2018.
Additionally, we plan to use 2017 to develop
the other three products we have acquired to enable those transactions to begin to yield revenue. Those products as itemized in
Note 13 (Subsequent Events) each have operational and cash flow demands that we will also have to consider in the upcoming year.
The Company plans to raise capital to finance those requirements through the issuance of convertible notes that will offer the
company additional liquidity.
At December 31, 2016, we had $643,689 in
principal amount of outstanding convertible notes, net of debt discount.
The proceeds from loans as well as cash
on hand is being used to fund the operations of our current operations including our two technology deals, as well as the continued
operations within Alpine Industries.
The following table provides detailed information
about our net cash flows for the years ended December 31, 2016 and 2015.
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December
31, 2016
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December
31, 2015
|
|
Net cash used in operating activities
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$
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(543,010
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)
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$
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(37,219
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)
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Net cash provided by (used in) investing activities
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|
$
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648,000
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|
$
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(1,699
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)
|
Net cash provided by financing activities
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|
$
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97,349
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$
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5,179
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Net increase(decrease) of cash
|
|
$
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202,339
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|
$
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(33,739
|
)
|
The decrease in our cash used in operating
activities in 2016 was primarily caused by net income of $2,038,261 offset by non-cash gains on the sale of property and equipment
and derivative liabilities of $228,018 and $1,718,507, respectively. There was also a decrease in client deposits of $1,937,351,
a decrease in accounts payable and accrued liabilities of $201,692 offset by an increase in inventory of $1,230,287. Our goal is
that because we have bid an increased number of government contracts in 2016, that the awarded contracts will drive revenues in
2017, 2018 and 2019.
During the year ended December 31, 2016,
cash provided by investing activities was $648,000 compared to cash used in investing activities of $1,699 the prior year . The
large increase in 2016 was created from cash received from the sale of land, buildings and equipment.
Cash provided by financing activities for
the year ended December 31, 2016 was $97,349 compared to $5,179 from the prior year. . The increase in 2016 was due to $375,000
proceeds received from notes payable and $110,816 in proceeds received from related parties compared to $207,630 in proceeds received
from related parties in the prior year.
10
Critical Accounting Policies and
Estimates
The SEC issued Financial Reporting Release No. 60, “Cautionary Advice Regarding Disclosure About Critical Accounting Policies”
suggesting that companies provide additional disclosure and commentary on their most critical accounting policies. In Financial
Reporting Release No. 60, the SEC has defined the most critical accounting policies as the ones that are most important to the
portrayal of a company’s financial condition and operating results, and require management to make its most difficult and
subjective judgments, often as a result of the need to make estimates of matters that are inherently uncertain. Based on this definition,
we have identified the following significant policies as critical to the understanding of our financial statements. The preparation
of financial statements in conformity with generally accepted accounting principles requires management to make a variety of estimates
and assumptions that affect (i) the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities
as of the date of the financial statements and (ii) the reported amounts of revenues and expenses during the reporting periods
covered by the financial statements. Our management expects to make judgments and estimates about the effect of matters that are
inherently uncertain. As the number of variables and assumptions affecting the future resolution of the uncertainties increase,
these judgments become even more subjective and complex. Although we believe that our estimates and assumptions are reasonable,
actual results may differ significantly from these estimates. Changes in estimates and assumptions based upon actual results may
have a material impact on our results.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements
that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition,
revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK.
As a smaller reporting company, we are not required to provide
this information.
ITEM 8. FINANCIAL STATEMENTS.
The financial statements and supplementary financial information
required by this Item are set forth immediately following the signature page and are incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.
None.
ITEM 9A. CONTROLS AND PROCEDURES
Our Chief Executive Officer and Principal
Financial Officer, after evaluating the effectiveness of our disclosure controls and procedures” (as defined in the Securities
Exchange Act of 1934 (Exchange Act) Rules 13a-15(e) or 15d-15(e)) as of the end of the period covered by this annual report, has
concluded that our disclosure controls and procedures are not effective at a reasonable assurance level based on their evaluation
of these controls and procedures as required by paragraph (b) of Exchange Act Rules 13a-15 or 15d-15.
Management’s Report on Internal Control Over Financial
Reporting
Our management is responsible for establishing
and maintaining adequate internal control over financial reporting. As defined in Rules 13a-15(f) under the Securities Exchange
Act of 1934, internal control over financial reporting is a process designed by, or under the supervision of, our principal executive,
principal accounting and principal financial officers, or persons performing similar functions, and effected by the our Board
of Directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in
the United States of America.
Our internal control over financial reporting
includes those policies and procedures that (1) pertain to the maintenance of records, that, in reasonable detail, accurately and
fairly reflect the transactions and dispositions of our assets; (2) provide reasonable assurance that transactions are recorded
as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that
our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and (3) provide
reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that
could have a material effect on the financial statements.
Because of its inherent limitations, internal
control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness
to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree
of compliance with the policies or procedures may deteriorate.
Our management, including our Chief Executive
Officer and Principal Financial Officer assessed the effectiveness of our internal control over financial reporting as of December
31, 2016. In making this assessment, management used the framework in Internal Control - Integrated Framework promulgated by the
Committee of Sponsoring Organizations of the Treadway Commission, commonly referred to as the COSO-
11
2013 criteria. Based on the assessment
performed, management believes that as of December 31, 2016, our internal control over financial reporting was not effective based
upon the COSO-2013 criteria. Additionally, based on management’s assessment, we determined that there were material weaknesses
in our internal control over financial reporting as of December 31, 2016.
This Annual Report does not include an
attestation report of our independent registered public accounting firm regarding internal control over financial reporting. Management’s
report was not subject to attestation by our registered public accounting firm pursuant to temporary rules of the SEC that permit
us to provide only management’s report in this annual report.
Changes in Internal Controls
During the year ended December 31, 2016, there was no change
in internal control over financial reporting that has materially affected, or is reasonably likely to materially affect our internal
control over financial reporting.
ITEM 9B. OTHER INFORMATION.
Management Changes
At a meeting of the Board of Directors
held on August 26, 2016, the Board of Directors voted to remove John Griffin as the Chairman and Chief Executive Officer of Adama
Technologies and voted to replace him with Eric Sills. The board also voted to appoint Brandon James Rushing to the position of
Vice President and Chief Operational Officer. This change in management was reported on a Form 8-K filed with the SEC on August
29, 2016.
Alberta, Canada Securities Commission Cease Trade Order.
In late January, 2014, we were notified
by letter from the Alberta Securities Commission in Calgary, Alberta, Canada, that we are considered by them to be an “Alberta
reporting company” by virtue of an Alberta ordinance making any US company with its shares trading in the US over-the-counter
markets, automatically an Alberta reporting company if any officer, director or consultant with executive or fund-raising responsibilities
is a resident of Alberta. Since Michael Gelmon, our former CEO, was a Calgary resident, the Alberta Securities Commission deemed
the Company to be a reporting issuer, required retroactively to file periodic reports in Alberta and to submit to the regulatory
control of the Alberta Securities Commission, and accordingly issued a trading “cease and desist” order against trading
of our common stock in Alberta. Mr. Gelmon was only affiliated with the Company from June 19, 2013 to February 4, 2015. There has
been no further activity or response to this action and currently the Company has no officers or directors, shareholders of record,
offices, assets or business located in Alberta.
Acquisitions.
Adama has completed the acquisition and subsequent reverse merger
with Alpine Industries and is engaged in 3 additional asset based purchases as detailed in Item 1.
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information regarding
the members of our Board of Directors and our executive officers as of December 31, 2016.
Name
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Age
|
|
Positions and Offices Held
|
|
|
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Eric Sills
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49
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Chief Executive Officer, Chief Financial/Accounting Officer, Secretary and Director
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Brandon Rushing
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|
32
|
|
Vice President, Chief Operating Officer, Director
|
Our Directors hold office until the next
annual meeting of our stockholders or until their successors is duly elected and qualified. Set forth below is a summary description
of the principal occupation and business experience of each of our Directors and executive officers for at least the last five
years.
Eric Sills.
Eric Sills is an engineer
by training. He has worked in manufacturing, plant management and operations with large plant facilities. He received his engineering
and management degree at The University of Tennessee in Knoxville in 1991. He started out as an engineer in 1991 for the LEE jeans
company where he served as manager of quality control for all of LEE’s denim products and played a large role in putting
together all of LEE’s strategic markets in the Southeast. He then started his own company, SILLCO, INC., where he was
responsible
for operations of SILLCO production, sales and financial budgeting and analysis. Eric provided management to mid-level managers,
worked
12
with
financing sources to secure financing for the capital needs of the company, and provided leadership and oversight to the product
development team and helped launch new product brands that were sold to wholesale and retail markets.
Eric
eventually sold SILLCO and became a partner in a contracting company in central Tennessee where he currently serves as an executive
director and sales manager. Eric manages the sales team, oversees all procurement activity, scheduling materials, laborers and
customer service. This company is on schedule to have revenue in excess of $20 million in 2017.
Eric
has been married for 24 years and has two children. He is very active with his children, coaching both soccer and baseball.
Brandon James Rushing.
Brandon is
a Graduated from the University of Tennessee and also serves as a sales manager for a large auto dealer software company. His background
in both sales as well as software supply and development give him a keen understanding of the unique challenges and opportunities
facing Adama Technologies. Brandon has been instrumental in utilizing his background and contacts to help navigate the difficult
waters of operating a tech startup and turning it into a marketable product. Brandon continues to believe in the vision and direction
of Adama Technologies and is very focused on growing the tech sector opportunities that are currently in development.
Audit Committee and Financial Expert
We do not have an audit committee or an
audit committee financial expert. Our corporate financial affairs are simple at this stage of development and each financial transaction
can be viewed by any officer or Director at will. We will form an audit committee if it becomes necessary as a result of growth
of the Company or as mandated by public policy.
Code of Ethics
We do not currently have a Code of Ethics
applicable to our principal executive, financial and accounting officers; however, the Company plans to implement such a code in
the third quarter of 2017.
Potential Conflicts of Interest
Since we do not have an audit or compensation
committee comprised of independent Directors, the functions that would have been performed by such committees are performed by
our Board of Directors. Thus, there is a potential conflict of interest, in that our Directors who are also our officers have the
authority to determine issues concerning management compensation, and audit issues that may affect management decisions. We are
not aware of any other conflicts of interest with any of our Directors or officers.
ITEM 11. EXECUTIVE COMPENSATION
Any compensation received by our officers,
directors, and management personnel will be determined from time to time by our Board of Directors. Our officers, directors, and
management personnel will be reimbursed for any out-of-pocket expenses incurred on our behalf.
Summary Compensation
Employment Contracts
. We have no employment agreements
with any of our Directors or executive officers.
Stock Options/SAR Grants
. On July 22, 2009, the Company adopted the Stock Incentive Plan, pursuant which the Company is authorized to grant equity-based
awards in the form of stock options, restricted common stock, restricted stock units, stock appreciation rights, and other stock
based awards to employees (including executive officers), directors, consultants and service provider of the Company and its subsidiaries. The
maximum number of shares available for grant under the plan is 25,000,000 shares of common stock. The number of shares available
for award under the plan is subject to adjustment for certain corporate changes and based on the types of awards provided, all
in accordance with the provisions of the plan. The plan may be administered by the Board. No options have been issued to date under
the plan.
SUMMARY COMPENSATION TABLE
Name and principal
position
|
|
Year
|
|
Accrued
Salary
($)
|
|
|
Bonus
($)
|
|
|
Stock
Awards
($)
|
|
|
Option
Awards
($)
|
|
|
Non-Equity
Incentive Plan
Compensation
($)
|
|
|
Nonqualified
Deferred
Compensation
Earnings ($)
|
|
|
All Other
Compensation
($)
|
|
|
Total
($)
|
|
Eric Sills, CEO
|
|
2016
|
|
|
--
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
$
|
-
|
|
Brandon Rushing
|
|
2016
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
$
|
-
|
|
Long-Term Incentive Plans.
As of December 31, 2016, we had no group life, health, hospitalization, or medical reimbursement or relocation plans in effect.
Further, we had no pension plans or plans or agreements which provide compensation on the event of termination of employment or
corporate change in control.
13
Outstanding Equity Awards.
As of December 31,
2016, none of our Directors or executive officers holds unexercised options, stock that has not vested, or equity incentive plan
awards.
Compensation of Directors
During the year 2016 no compensation has
been paid to any of our Directors in consideration for their services rendered in their capacity as directors.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.
The following table lists the number of
shares of common stock of our Company that are beneficially owned by (i) each person or entity known to our Company to be the beneficial
owner of more than 5% of the outstanding common stock; (ii) each officer and director of our Company; and (iii) all officers and
directors as a group. Information relating to beneficial ownership of common stock by our principal shareholders and management
is based upon information furnished by each person using “beneficial ownership” concepts under the rules of the Securities
and Exchange Commission. Under these rules, a person is deemed to be a beneficial owner of a security if that person has or shares
voting power, which includes the power to vote or direct the voting of the security, or investment power, which includes the power
to vote or direct the voting of the security. The person is also deemed to be a beneficial owner of any security of which that
person has a right to acquire beneficial ownership within 60 days. Under the Securities and Exchange Commission rules, more than
one person may be deemed to be a beneficial owner of the same securities, and a person may be deemed to be a beneficial owner of
securities as to which he or she may not have any pecuniary beneficial interest. Except as noted below, each person has sole voting
and investment power.
The percentages below are calculated based
on 114,815,971 shares of our common stock issued and outstanding as of December 31, 2016. The address of each person listed
is c/o the Company
|
|
|
No. of
|
|
|
Percentage
|
|
Officers, Directors and 5% Stockholders
|
|
|
Shares
|
|
|
Ownership
|
|
Keith Rosenblum
|
|
|
25,000,000
|
|
|
21.7
|
%
|
Rowen Pfeifer
|
|
|
25,000,000
|
|
|
21.7
|
%
|
|
|
|
50,000,000
|
|
|
43.4
|
%
|
1
The vote attributed to the
common stock listed above is only 49% of the total vote
JA Investment Holdings, LLC. holds 498
million shares of preferred stock with 51% of the total vote, JA Investment Holdings, LLC. is the controlling voting shareholder
of the Company, with 51 percent of the total voting power of all classes of stock voting on any matter.
Item 13. Certain Relationships and Related Transactions,
and Director Independence.
We have not entered into any transaction
nor are there any proposed transactions in which our Director, executive officer, stockholders or any member of the immediate families
of the foregoing had or is to have a direct or indirect material interest during the year ended December 31, 2016.
Director Independence
We are not subject to listing requirements
of any national securities exchange or national securities association and, as a result, we are not at this time required to have
a majority of “independent directors” on our board of directors. We do not believe that any of our current directors
are independent.
Item 14. Principal Accountant Fees and Services.
Fees Paid to Principal Accountant
Heaton & Company, PLLC is as our independent
auditor for the fiscal years ended December 31, 2016 and 2015. The following table reflects the fees paid or accrued to our independent
auditors in years ended December 31, 2016 and 2015:
|
|
|
December
31, 2016
|
|
|
December
31, 2015
|
|
Audit Fees
|
|
$
|
4,000
|
|
$
|
—
|
|
Tax Fees
|
|
$
|
—
|
|
$
|
—
|
|
All Other Fees
|
|
$
|
—
|
|
$
|
—
|
|
Audit Fees -
Consists of fees
for professional services rendered by our principal accountants for the audit of our annual financial statements and review of
the financial statements included in our Forms 10-Q or services that are normally provided by our principal accountants in connection
with statutory and regulatory filings or engagements.
14
Audit-related Fees -
Consists
of fees for assurance and related services by our principal accountants that are reasonably related to the performance of the audit
or review of our financial statements and are not reported under “Audit fees.”
Tax Fees -
Consists of fees
for professional services rendered by our principal accountants for tax compliance, tax advice and tax planning.
All Other Fees -
Consists of
fees for products and services provided by our principal accountants, other than the services reported under “Audit fees,”
“Audit-related fees,” and “Tax fees” above.
Policy on Audit Committee Pre-Approval
of Audit and Permissible Non-Audit Services of Independent Auditors
We have not adopted an Audit Committee;
therefore, there is no Audit Committee policy in this regard. However, we do require approval in advance of the performance of
professional services to be provided to us by our principal accountant. Additionally, all services rendered by our principal accountant
are performed pursuant to a written engagement letter between us and the principal accountant.
15
Audit Committee Pre-Approval of Audit and Permissible Non-Audit
Services of Independent Registered Public Accounting Firm.
As of December 31, 2016, the Board has
not established a formal documented pre-approval policy for the fees of our principal accountant.
The percentage of hours expended on the
principal accountant’s engagement to audit our financial statements for the most recent fiscal year that were attributed
to work performed by persons other than the principal accountant’s full-time, permanent employees was 0%.
Part IV
Item 15. Exhibits, Financial Statement Schedules.
Exhibit No.
|
|
Description
|
|
|
|
31.1
|
|
Certification of Chief Executive Officer required by Rule 13a-14(a) under the Exchange Act (filed herewith).
|
|
|
|
31.2
|
|
Certification of Chief Financial Officer required by Rule 13a-14(a) under the Exchange Act (filed herewith).
|
|
|
|
32
|
|
Certification of Principal Executive, Financial and Accounting Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of Sarbanes-Oxley Act of 2002 (filed herewith).
|
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934
ADAMA TECHNOLOGIES CORPORATION
has duly caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
|
ADAMA TECHNOLOGIES CORP.
|
|
|
|
|
|
Date: September 20, 2017
|
By:
|
/s/ Eric Sills
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|
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Eric Sills
|
|
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Chief Executive Officer & Chief Financial Officer
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|
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|
16
ADAMA TECHNOLOGIES CORP.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2016 AND 2015
Report of Independent Registered Public Accounting Firm
|
F-1
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|
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Consolidated Financial Statements
|
|
|
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Consolidated Balance Sheets as of December 31, 2016 and December 31, 2015
|
F-2
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|
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Consolidated Statements of Operations for the Years Ended December 31, 2016 and 2015
|
F-3
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|
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Consolidated Statements of Cash Flows for the Years Ended December 31, 2016 and 2015
|
F-4
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|
|
Consolidated Statement of Stockholders’ equity (deficit) for the Years Ended December 31, 2016 and 2015
|
F-5
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|
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Notes to Consolidated Financial Statements
|
F-6
|
Heaton & Company, PLLC
Kristofer Heaton, CPA
|
|
REPORT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
To The Board of Directors and Stockholders of
Adama Technologies Corporation
We have audited the accompanying balance
sheets of Adama Technologies Corporation. (the Company) as of December 31, 2016 and 2015, and the related statements of operations,
stockholders’ equity (deficit) and cash flows for the years then ended. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with
the standards of the Public Company Accounting Oversight Board (United States of America). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.
The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.
Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal
control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable
basis for our opinion.
In our opinion, the financial statements
referred to above present fairly, in all material respects, the financial position of Adama Technologies Corporation as of December
31, 2016 and 2015, and the results of its operations and its cash flows for the years then ended, in conformity with accounting
principles generally accepted in the United States of America.
The accompanying financial statements
have been prepared assuming the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the
Company has negative working capital. This factor, among others, raise substantial doubt about the Company’s ability to continue
as a going concern. Management’s plans in regards to this matter are also described in Note 2. The financial statements do
not include any adjustments that might result from the outcome of this uncertainty.
/s/Heaton & Company, PLLC
Farmington, Utah
|
240 N. East Promontory
Suite 200
Farmington, Utah 84025
(T) 801.218.3523
heatoncpas.com
|
|
October 10, 2017
|
F- 1
ADAMA TECHNOLOGIES CORP.
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 2016 AND 2015
|
|
|
December 31, 2016
|
|
|
December 31, 2015
|
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
Current Assets
|
|
|
|
|
|
|
|
Cash
|
|
$
|
202,339
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
Prepaid Expenses and Other Current Assets
|
|
|
1,500
|
|
|
2,609
|
|
Inventory
|
|
|
1,642,860
|
|
|
2,873,147
|
|
Accounts Receivable
|
|
|
—
|
|
|
102,894
|
|
Total current assets
|
|
|
1,846,699
|
|
|
2,978,650
|
|
|
|
|
|
|
|
|
|
Property and Equipment
|
|
|
281,055
|
|
|
784,080
|
|
|
|
|
|
|
|
|
|
Total Assets
|
|
$
|
2,127,754
|
|
$
|
3,762,730
|
|
|
|
|
|
|
|
|
|
Liabilities & Stockholders’ Equity/(Deficit)
|
|
|
|
|
|
|
|
Current Liabilities
|
|
|
|
|
|
|
|
Accounts Payable and Accrued Liabilities
|
|
$
|
1,442,895
|
|
$
|
688,095
|
|
Client Deposits
|
|
|
1,142,437
|
|
|
3,079,788
|
|
Bank Overdraft
|
|
|
—
|
|
|
15,830
|
|
Current Portion of Notes Payable
|
|
|
373,259
|
|
|
103,109
|
|
Loans from Related Parties
|
|
|
316,746
|
|
|
205,930
|
|
Current Portion of Line of Credit
|
|
|
22,307
|
|
|
21,839
|
|
Current Portion of Capital Leases
|
|
|
83,637
|
|
|
77,172
|
|
Convertible Notes Payable, Net of Discount
|
|
|
643,689
|
|
|
—
|
|
Judgement Payable
|
|
|
248,490
|
|
|
—
|
|
Derivative Liability
|
|
|
2,747,122
|
|
|
—
|
|
Total Current Liabilities
|
|
|
7,020,582
|
|
|
4,191,763
|
|
|
|
|
|
|
|
|
|
Long-Term Debt
|
|
|
|
|
|
|
|
Notes Payable, Less Current Portion
|
|
|
—
|
|
|
176,993
|
|
Capital Leases, Less Current Portion
|
|
|
157,346
|
|
|
233,244
|
|
Line of Credit, Less Current Portion
|
|
|
77,381
|
|
|
99,210
|
|
Total Long-Term Debt
|
|
|
234,727
|
|
|
509,447
|
|
|
|
|
|
|
|
|
|
Total Liabilities
|
|
|
7,255,309
|
|
|
4,701,210
|
|
|
|
|
|
|
|
|
|
Stockholders’ Equity/(Deficit)
|
|
|
|
|
|
|
|
Preferred Stock, $.0001 par value, 500,000,000 million authorized 500,000,000 and 0 shares issued and outstanding at December 31, 2016 and 2015, respectively
|
|
|
8,500
|
|
|
—
|
|
Common Stock, $.0001 par value, 500,000,000 million authorized 114,815,781 and 8,000,000 shares issued and outstanding at December 31, 2016 and 2015, respectively
|
|
|
11,482
|
|
|
800
|
|
Additional Paid-In Capital
|
|
|
(5,987,593
|
)
|
|
258,925
|
|
Retained Earnings(Deficit)
|
|
|
840,056
|
|
|
(1,198,205
|
)
|
Total Stockholders’ Equity/(Deficit)
|
|
|
(5,127,555
|
)
|
|
(938,480
|
)
|
|
|
|
|
|
|
|
|
Total Liabilities & Stockholders’ Equity/(Deficit)
|
|
|
2,127,754
|
|
|
3,762,730
|
|
The accompanying notes are an integral part
of these financial statements.
F- 2
ADAMA TECHNOLOGIES CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2016 and 2015
|
|
|
Year Ended December 31, 2016
|
|
|
Year Ended December 31, 2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
2,880,248
|
|
$
|
2,468,657
|
|
Cost of Goods Sold
|
|
|
2,082,662
|
|
|
2,107,697
|
|
Gross Profit
|
|
|
797,586
|
|
|
360,960
|
|
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and Administrative
|
|
|
404,451
|
|
|
335,414
|
|
Depreciation and Amortization
|
|
|
83,043
|
|
|
97,545
|
|
Other General and Administrative
|
|
|
—
|
|
|
—
|
|
Total Operating Expenses
|
|
|
487,494
|
|
|
432,959
|
|
|
|
|
|
|
|
|
|
Income(Loss) From Operations
|
|
|
310,092
|
|
|
(71,999
|
)
|
|
|
|
|
|
|
|
|
Other Income (Expenses)
|
|
|
|
|
|
|
|
Gain on Sale of Asset
|
|
|
228,018
|
|
|
—
|
|
Gain/(Loss) on Derivatives
|
|
|
1,718,507
|
|
|
—
|
|
Interest Expense
|
|
|
(218,356
|
)
|
|
(45,642
|
)
|
Total Other Income(Expenses)
|
|
|
1,728,169
|
|
|
(45,642
|
)
|
|
|
|
|
|
|
|
|
Net income/(loss) Before Income Taxes
|
|
|
2,038,261
|
|
|
(117,641
|
)
|
|
|
|
|
|
|
|
|
Income Tax Expense
|
|
|
—
|
|
|
—
|
|
Net Income/(Loss)
|
|
|
2,038,261
|
|
|
(117,641
|
)
|
|
|
|
|
|
|
|
|
Net Gain/(Loss) Per Share - Basic
|
|
$
|
0.11
|
|
$
|
(0.00
|
)
|
Net Gain/(Loss) Per Share - Diluted
|
|
$
|
0.04
|
|
$
|
(0.00
|
)
|
|
|
|
|
|
|
|
|
Weighted Average Number of Shares - Basic
|
|
|
18,110,021
|
|
|
8,000,000
|
|
Diluted
|
|
|
51,990,722
|
|
|
8,000,000
|
|
The accompanying notes are an integral part
of these financial statements.
F- 3
ADAMA TECHNOLOGIES CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015
|
|
|
2016
|
|
|
2015
|
|
|
|
|
|
|
|
|
|
Operating Activities:
|
|
|
|
|
|
|
|
Net Income (Loss)
|
|
|
2,038,261
|
|
|
(117,641
|
)
|
Adjustments to reconcile net income(loss) to cash used in operating activities:
|
|
|
|
|
|
|
|
Gain on Sale of Property and Equipment
|
|
|
(228,018
|
)
|
|
—
|
|
Depreciation and Amortization
|
|
|
83,043
|
|
|
97,545
|
|
Accretion of Debt Discount
|
|
|
67,047
|
|
|
—
|
|
Imputed interest
|
|
|
19,917
|
|
|
—
|
|
Gain on Derivative Liability
|
|
|
(1,718,507
|
)
|
|
—
|
|
Changes in operating assets and liabilities
|
|
|
|
|
|
|
|
Accounts Receivable
|
|
|
102,894
|
|
|
(17,813
|
)
|
Prepaid & Other Current Assets
|
|
|
1,109
|
|
|
|
|
Inventory
|
|
|
1,230,287
|
|
|
467,818
|
|
Accounts Payable and Accrued Liabilities
|
|
|
(201,692
|
)
|
|
410,007
|
|
Client Deposits
|
|
|
(1,937,351
|
)
|
|
(877,135
|
)
|
Net Cash Used in Operating Activities
|
|
|
(543,010
|
)
|
|
(37,219
|
)
|
|
|
|
|
|
|
|
|
Investing Activities
|
|
|
|
|
|
|
|
Proceeds from Sale of Property and Equipment
|
|
|
648,000
|
|
|
—
|
|
Purchase of Property and Equipment
|
|
|
—
|
|
|
(1,699
|
)
|
Net Cash Provided by (Used in) Investing Activities
|
|
|
648,000
|
|
|
(1,699
|
)
|
|
|
|
|
|
|
|
|
Financing Activities
|
|
|
|
|
|
|
|
Bank Overdraft
|
|
|
(15,830
|
)
|
|
15,830
|
|
Repayment on Note Payable
|
|
|
(281,843
|
)
|
|
(87,977
|
)
|
Repayment on Line of Credit
|
|
|
(21,361
|
)
|
|
(21,361
|
)
|
Repayment on Capital Leases
|
|
|
(69,433
|
)
|
|
(87,943
|
)
|
Proceeds from Related Parties
|
|
|
110,816
|
|
|
207,630
|
|
Repayment to Related Parties
|
|
|
—
|
|
|
(10,000
|
)
|
Capital Distribution
|
|
|
—
|
|
|
(11,000
|
)
|
Proceeds From Notes Payable
|
|
|
375,000
|
|
|
—
|
|
Net Cash Provided by Financing Activities
|
|
|
97,349
|
|
|
5,179
|
|
|
|
|
|
|
|
|
|
Net Increase(Decrease) in Cash
|
|
|
202,339
|
|
|
(33,739
|
)
|
Cash, Beginning of Period
|
|
|
—
|
|
|
33,739
|
|
Cash, End of Period
|
|
|
202,339
|
|
|
—
|
|
|
|
|
|
|
|
|
|
Supplemental Disclosure of Cash Flow Information
|
|
|
|
|
|
|
|
Cash Paid during the period for:
|
|
|
|
|
|
|
|
Income Taxes
|
|
|
—
|
|
|
—
|
|
Interest
|
|
|
55,855
|
|
|
43,308
|
|
Non-cash investing and financing activities
|
|
|
|
|
|
|
|
Stock Issued for Acquisitions
|
|
$
|
2,000,000
|
|
$
|
—
|
|
Liabilities Assumed in Recapitalization
|
|
$
|
1,903,992
|
|
$
|
—
|
|
Common Shares Issued Upon Conversion of Promissory Notes
|
|
$
|
412,500
|
|
$
|
—
|
|
Convertible Notes Issued to Settle Accounts Payable
|
|
$
|
535,000
|
|
$
|
—
|
|
The accompanying notes are an integral part
of these financial statements.
F- 4
ADAMA TECHNOLOGIES CORP.
CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY (DEFICIT)
FOR THE YEARS ENDED DECEMBER 31, 2015 AND 2016
|
|
|
Common Stock,
|
|
|
Preferred Stock,
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
$0.0001 Par Value
|
|
|
$0.0001 Par Value
|
|
|
Additional
|
|
|
Retained
|
|
|
Stockholders’
|
|
|
|
|
Number of Shares
|
|
|
Amount
|
|
|
Number of Shares
|
|
|
Amount
|
|
|
paid-in Capital
|
|
|
Earnings (Deficit)
|
|
|
Equity
(Deficit)
|
|
Balance, January 1, 2015
|
|
|
8,000,000
|
|
$
|
800
|
|
|
—
|
|
$
|
—
|
|
$
|
269,925
|
|
$
|
(1,080,564
|
)
|
$
|
(809,839
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distributions
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(11,000
|
)
|
|
—
|
|
|
(11,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss 2015
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(117,641
|
)
|
|
(117,641
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2015
|
|
|
8,000,000
|
|
|
800
|
|
|
—
|
|
|
—
|
|
|
258,925
|
|
|
(1,198,205
|
)
|
|
(938,480
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reverse merger recapitalization
|
|
|
90,315,781
|
|
|
9,032
|
|
|
500,000,000
|
|
|
8,500
|
|
|
(6,678,085
|
)
|
|
—
|
|
|
(6,660,553
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Imputed Interest
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19,917
|
|
|
|
|
|
19,917
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares issued for conversion of debt
|
|
|
16,500,000
|
|
|
1,650
|
|
|
—
|
|
|
—
|
|
|
410,850
|
|
|
—
|
|
|
412,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income 2016
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,038,261
|
|
|
2,038,261
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2016
|
|
|
114,815,781
|
|
$
|
11,482
|
|
|
500,000,000
|
|
$
|
8,500
|
|
$
|
(5,987,593
|
)
|
$
|
840,056
|
|
$
|
(5,127,555
|
)
|
F- 5
ADAMA TECHNOLOGIES CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1)
Summary of Significant Accounting Policies
Organization and Description of Business
Adama Technologies Corporation (“Adama Technologies” or the “Company”) was incorporated under the laws
of the State of Delaware on September 17, 2007.
On November 23, 2016, Adama Technologies
successfully completed its acquisition of Alpine Industries, LLC a defense contractor that manufactures a number of parts for the
United States government. With Alpine having substantial annual revenues, Adama Technologies underwent a reverse merger and ceased
to be a shell company at that time. The transaction has been treated as a recapitalization of the Company, with the Company, Adama
Technologies Corp. (the legal acquirer of Alpine Industries, Inc.) considered the accounting acquiree, and Alpine Industries, Inc.,
(the legal acquiree of the Company) considered the accounting acquirer. All costs related to the transaction are being charged
to operations as incurred. The historical financial statements presented as of December 31, 2015 are presented under predecessor
entity reporting wherein the prior historical information consists solely of Alpine Industries, LLC’s balance sheet and results
of operations and cash flows. The consolidated financial statements as of December 31, 2016 are presented under successor entity
reporting and include the balance sheets of Alpine Industries, LLC and Adama Technologies and the results of operations and cash
flows of Alpine Industries, LLC for the year end December 31, 2016 and the results of operations and cash flows of Adama Technologies
from November 23, 2016 through December 31, 2016.
Cash
For purposes of reporting within the statement of cash flows, the Company considers all cash on hand, cash accounts not subject
to withdrawal restrictions or penalties, and all highly liquid debt instruments purchased with an original maturity of three months
or less to be cash and cash equivalents. There were no cash and cash equivalents at December 31, 2016 and 2015.
Inventory
All inventory is work in process and consists of products, materials, parts and labor and is carried at the lower of cost or market.
The Company capitalizes costs on all contracts until the contract is completed. At December 31, 2016, the Company had $1,642,860
in inventory compared to $2,873,147 in December 31, 2015.
Shipping and Handling Costs
The Company includes shipping and handling costs as part of costs of goods sold.
Advertising and Marketing Costs
Advertising and marketing costs are expensed as incurred. The Company incurred $0 advertising or marketing costs during the years
ended December 31, 2016 and 2015.
Fixed Assets
Property and equipment are recorded at cost.
Depreciation
Depreciation is provided for on the straight-line method over the estimated useful lives of the assets as follows:
F- 6
Type
|
Life
|
Building & Improvements
|
15 to 39 years
|
Equipment
|
5 to 10 years
|
Equipment Leased
|
7 years
|
Furniture & Fixture
|
5 to 15 years
|
Office Equipment
|
5 to 10 years
|
Vehicle
|
5 years
|
The accumulated depreciation as of December
31, 2016 and 2015 was $1,394,379 and $1,495,612, respectively. Depreciation expense for the year ended December 31, 2016 and 2015
was $83,043 and $97,545, respectively.
Revenue Recognition
The Company recognizes revenue from sales at the time a contract is completed. Any payment received from customers before a contract
is completed is deferred and recorded as customer deposits until the contract is completed. At December 31, 2016 and 2015, we had
$1,142,437 and $2,873,147 in customer deposits, respectively.
Concentration of Revenue
A significant portion of the Company’s revenue comes from government contracts. Due to that fact, the Company received 95%
of its revenue from one company, LSI, a primary defense contract holder, in the year ended December 31, 2015. For the year ended
December 31, 2016 that same company, LSI, represented 90% of our revenue.
Earnings Per Share
Basic net income (loss) per share is calculated
pursuant to ASC Topic No. 260 whereby net income (loss) per share is divided by the weighted average number of common shares outstanding
during the period. Diluted net income (loss) per share incorporates the dilutive effect of common stock equivalent options, warrants,
and other convertible securities. As of December 31, 2016 and 2015, the Company had 326,363,170 and 0 potentially dilutive securities
related to convertible notes, respectively.
Accounts Receivable
Currently we have had no issues in collection on accounts receivables simply because the vast majority of our revenue is the result
of completed contracts with the United States government as we are a defense contractor. We have currently adopted the policy to
write off receivables after they have been uncollectable for 1 year. Currently we have no receivables more than 90 days old.
Basis of Presentation and Organization
The accompanying consolidated financial statements of the Company were prepared from the accounts of the Adama Technologies
and Alpine Industries, LLC under the accrual basis of accounting.
Income Taxes
Deferred tax assets and liabilities are
determined based on temporary differences between the bases of certain assets and liabilities for income tax and financial reporting
purposes. The deferred tax assets and liabilities are classified according to the financial statement classification of the assets
and liabilities generating the differences.
The Company maintains a valuation allowance
with respect to deferred tax assets. The Company establishes a valuation allowance based upon the potential likelihood of realizing
the deferred tax asset and taking into consideration the Company’s financial position and results of operations for the current
period. Future realization of the deferred tax benefit depends on the existence of sufficient taxable income within the carry-forward
period under the federal tax laws.
Changes in circumstances, such as the Company
generating taxable income, could cause a change in judgment about ability to realize the related deferred tax asset. Any change
in the valuation allowance will be included in income in the year of the change in estimate.
Fair Value of Financial Instruments
Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 820 “Fair Value Measurements and Disclosures”
(ASC 820) 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) a reporting 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 six broad
F- 7
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:
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.
The Company estimates the fair value of
financial instruments using the available market information and valuation methods. Considerable judgment is required in estimating
fair value. Accordingly, the estimates of fair value may not be indicative of the amounts the Company could realize in a current
market exchange. As of December 31, 2016 and December 31, 2015, the carrying value of accounts payable and loans that are required
to be measured at fair value, approximated fair value due to the short-term nature and maturity of these instruments.
Estimates
The preparation of financial statements
in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the
reported amounts of assets, liabilities and expenses. Actual results could differ from those estimates made by management.
Recent Accounting Pronouncements
In May 2014, the Financial Accounting Standards
Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, “Revenue from Contracts with
Customers (Topic 606)”. ASU No. 2014-09 supersedes the revenue recognition requirements in “Revenue Recognition (Topic
605),” and doubt is not alleviated, and (6) requires an assessment for a period of one year after the date that the financial
statements are issued (or available to be issued). The amendments in this update are effective for annual periods beginning after
December 15, 2017 and interim periods within those reporting periods. Earlier adoption is permitted. This ASU is not anticipated
to have a material impact on the Company’s financial statements and notes to the financial statements. The Company is evaluating
the effects of the adoption of this ASU to its consolidated financial statements.
In January 2016, the FASB issued ASU 2016-01,
Recognition and Measurement of Financial Assets and Financial Liabilities, which provides guidance for the recognition, measurement,
presentation, and disclosure of financial assets and liabilities. This ASU will be effective for the Company beginning in the first
quarter of fiscal year 2019. The Company is evaluating the effects of the adoption of this ASU to its consolidated financial statements.
In February 2016, the FASB issued Accounting
Standards Update (“ASU”) 2016-02, “Leases (Topic 842)”. Under this guidance, an entity is required to recognize
right-of-use assets and lease liabilities on its balance sheet and disclose key information about leasing arrangements. This guidance
offers specific accounting guidance for a lessee, a lessor and sale and leaseback transactions. Lessees and lessors are required
to disclose qualitative and quantitative information about leasing arrangements to enable a user of the financial statements to
assess the amount, timing and uncertainty of cash flows arising from leases. This guidance is effective for annual reporting periods
beginning after December 15, 2018, including interim periods within that reporting period, and requires a modified retrospective
adoption, with early adoption permitted. The Company is currently evaluating the impact that this standard will have on our consolidated
financial statements.
In May 2017, the FASB issued guidance to
clarify when to account for a change to the terms or conditions of a share-based payment award as a modification. Under the
new guidance, modification accounting is required only if the fair value, the vesting conditions, or the classification of the
award (as equity or liability) changes as a result of the change in terms or conditions. The guidance is effective prospectively
for all companies for annual periods and interim periods within those annual periods, beginning on or after December 15, 2017.
The Company is currently evaluating the impact that this standard will have on our consolidated financial statements.
In October 2016, the FASB issued new guidance
that requires a reporting entity to recognize the tax expense from intra-entity asset transfers of assets other than inventory
in the selling entity’s tax jurisdiction when the transfer occurs, even though the pre-tax effects of that transaction are
eliminated in consolidation. Any deferred tax asset that arises in the buying entity’s jurisdiction would also be recognized
at the time of the transfer. The Company is currently evaluating the impact that this standard will have on our consolidated financial
statements.
Note 2 Going Concern
The accompanying consolidated financial
statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which
contemplate continuation of the Company as a going concern. The Company has generated revenues,
F- 8
however, the Company has a negative working
capital deficit of $5,173,883. This and other factors raise substantial doubt about the Company’s ability to continue as
a going concern. The accompanying financial statements do not include any adjustments to reflect the possible future effects on
the recoverability and classification of assets or the amounts and classification of liabilities that may result from the possible
inability of the Company to continue as a going concern.
Note 3 Convertible Notes Payable
On November 18,
2011, the Company signed a $30,000 convertible promissory note with a third party. The note bears interest at 8% per annum and
was due on August 18, 2012. The note has conversion rights that allow the holder of the note to convert after 180 days all or any
part of the remaining principal balance into the Company’s common stock at a price equal to 58% of the average of the lowest
six trading prices for the Common Stock during the most recent ten-day period. The conversion feature was determined to exist and
was recorded at the time of issue as a derivative liability, but has been fully amortized in prior periods. This note is in default.
According to the terms of the note upon default the balance due is 150% of the unpaid principal balance. In addition, from the
date of default the notes bear interest at 22% per annum. The investor may in its sole discretion convert the default amount into
equity. During 2016, the Company issued 8,000,000 shares of common stock to convert $200,000 of the outstanding balance of this
note. The total balance outstanding on this note at December 31, 2016 was $273,650, which included $243,650 of accrued interest
and penalties.
In April 27, 2012, the Company signed a
$32,500 convertible promissory note with a third party. The note bears interest at 8% per annum and was due on January 27, 2013.
The note has conversion rights that allow the holder of the note to convert after 180 days all or any part of the remaining principal
balance into the Company’s common stock at a price equal to 58% of the average of the lowest six trading prices for the Common
Stock during the most recent ten-day period. The conversion feature was determined to exist and was recorded at the time of issue
as derivative liability, but has been fully amortized in prior periods. This note is in default. According to the terms of the
note upon default the balance due is 150% of the unpaid principal balance. In addition, from the date of default the notes bear
interest at 22% per annum. The investor may in its sole discretion convert the default amount into equity. During 2016, the Company
issued 8,500,000 shares of common stock to convert $212,500 of the outstanding balance on this note. The total balance outstanding
on this note at December 31, 2016 was $300,544, which included $268,544 of accrued interest and penalties.
On October 15, 2013, the Company converted
$30,000 of payables into a convertible promissory note with a third party. The note bears interest at 8% per annum and was due
on October 15, 2014. The note has conversion rights that allow the holder of the note at any time to convert all or any part of
the remaining principal balance into the Company’s common stock at a fixed price of $0.0015. This note is in default and
the total balance outstanding as of December 31, 2016 was $53,939.
On January 15, 2014, the Company converted
$30,000 of payables into a convertible promissory note with a third party. The note bears interest at 8% per annum and was due
on January 15, 2015. The note has conversion rights that allow the holder of the note at any time to convert all or any part of
the remaining principal balance into the Company’s common stock at a fixed price of $0.0015. This note is in default and
the total balance outstanding as of December 31, 2016 was $51,078.
On March 15, 2014, the Company converted
$30,000 of payables into a convertible promissory note with a third party. The note bears interest at 8% per annum and was due
on March 15, 2015. The note has conversion rights that allow the holder of the note at any time to convert all or any part of the
remaining principal balance into the Company’s common stock at a fixed price of $0.0015. This note is in default and the
total balance outstanding as of December 31, 2016 was $49,225.
On March 15, 2014, the Company converted
$30,000 of payables into a convertible promissory note with a third party. The note bears interest at 8% per annum and was due
on March 15, 2015. The note has conversion rights that allow the holder of the note at any time to convert all or any part of the
remaining principal balance into the Company’s common stock at a fixed price of $0.0015. This note is in default and the
total balance outstanding as of December 31, 2016 was $49,225.
On June 15, 2014, the Company converted
$30,000 of payables into a convertible promissory note with a third party. The note bears interest at 8% per annum and was due
on June 15, 2015. The note has conversion rights that allow the holder of the note at any time to convert all or any part of the
remaining principal balance into the Company’s common stock at a fixed price of $0.0015. This note is in default and the
total balance outstanding as of December 31, 2016 was $46,642.
On July 1, 2014, the Company converted
$60,000 of amounts due to officers into a convertible promissory note with a third party. The note bears interest at 8% per annum
and was due on July 31, 2015. The note has conversion rights that allow the holder of the note after six months to convert all
or any part of the remaining principal balance into the Company’s common stock at a fixed price of $0.0015. This note is
in default and the total balance outstanding as of December 31, 2016 was $93,285.
On September 15, 2014, the Company converted
$30,000 of payables into a convertible promissory note with a third party. The note bears interest at 8% per annum and was due
on September 15, 2015. The note has conversion rights that allow the holder of the note at any time to convert all or any part
of the remaining principal balance into the Company’s common stock at a fixed price of $0.0015. This note is in default and
the total balance outstanding as of December 31, 2016 was $44,168.
On December 15, 2014, the Company converted
$30,000 of payables into a convertible promissory note with a third party. The note bears interest at 8% per annum and was due
on December 15, 2015. The note has conversion rights that allow the holder of the note at any time to convert all or any part of
the remaining principal balance into the Company’s common stock at a fixed price of $0.0015. This note is in default and
the total balance outstanding as of December 31, 2016 was $41,826.
F- 9
On March 15, 2015, the Company converted
$30,000 of payables into a convertible promissory note with a third party. The note bears interest at 8% per annum and was due
on March 15, 2016. The note has conversion rights that allow the holder of the note at any time to convert all or any part of the
remaining principal balance into the Company’s common stock at a fixed price of $0.0015. This note is in default and the
total balance outstanding as of December 31, 2016 was $39,607.
On April 1, 2015, the Company converted
$52,500 of compensation owed into a convertible promissory note with a third party. The note bears interest at 8% per annum and
was due on March 31, 2016. The note has conversion rights that allow the holder of the note at any time to convert all or any part
of the remaining principal balance into the Company’s common stock at a fixed price of $0.0015. This note is in default and
the total balance outstanding as of December 31, 2016 was $69,312.
On April 1, 2015, the Company converted
$30,000 of compensation owed into a convertible promissory note with a third party. The note bears interest at 8% per annum and
was due on March 31, 2016. The note has conversion rights that allow the holder of the note at any time to convert all or any part
of the remaining principal balance into the Company’s common stock at a fixed price of $0.0015. This note is in default and
the total balance outstanding as of December 31, 2016 was $39,607.
On June 15, 2015, the Company converted
$30,000 of payables into a convertible promissory note with a third party. The note bears interest at 8% per annum and was due
on June 15, 2016. The note has conversion rights that allow the holder of the note at any time to convert all or any part of the
remaining principal balance into the Company’s common stock at a fixed price of $0.0015. This note is in default and the
total balance outstanding as of December 31, 2016 was $37,506.
On September 15, 2015, the Company converted
$30,000 of payables into a convertible promissory note with a third party. The note bears interest at 8% per annum and was due
on September 15, 2016. The note has conversion rights that allow the holder of the note at any time to convert all or any part
of the remaining principal balance into the Company’s common stock at a fixed price of $0.0015. This note is in default and
the total balance outstanding as of December 31, 2016 was $35,517.
On December 15, 2015, the Company converted
$30,000 of payables into a convertible promissory note with a third party. The note bears interest at 8% per annum and was due
on December 15, 2016. The note has conversion rights that allow the holder of the note at any time to convert all or any part of
the remaining principal balance into the Company’s common stock at a fixed price of $0.0015. This note is in default and
the total balance outstanding as of December 31, 2016 was $33,633.
On
October 7, 2016, the Company entered in convertible note agreement with a private and accredited investor, Vincent & Rees,
LC, in the amount of $74,000, unsecured, accruing interest at a 12% interest rate, with principal and interest amounts due and
payable upon maturity on October 7, 2017. After six months, the note holder has the option to convert any portion of the unpaid
principal balance into the Company’s common shares at any time at a 40% discount to the current market value. The Company
has determined that the conversion feature in this note is is considered to be a derivative. The Company calculated the fair value
of this conversion feature using the Black-Scholes model and the following assumptions: Risk-free interest rates of 1.21%; Dividend
rate of 0%; and, historical volatility rate of 435.56%. A debt discount amount of $74,000 was recorded upon issuance of the note
and as of December 31, 2016, the carrying amount of the convertible note is $17,233, the unamortized discount on the note is $56,767
and accrued interest is $2,096. Interest expense of $8,641 was recorded on the note since the date of the merger.
On
November 14, 2016, the Company entered in convertible note agreement with a private and accredited investor, Chienn Consulting,
LLC, in the amount of $35,000, unsecured, accruing interest at a 12% interest rate, with principal and interest amounts due and
payable upon maturity on November 14, 2017. After six months, the note holder has the option to convert any portion of the unpaid
principal balance into the Company’s common shares at any time at a 40% discount to the current market value. The Company
has determined that the conversion feature in this note is is considered to be a derivative. The Company calculated the fair value
of this conversion feature using the Black-Scholes model and the following assumptions: Risk-free interest rates of 1.21%; Dividend
rate of 0%; and, historical volatility rate of 435.56%. A debt discount amount of $35,000 was recorded upon issuance of the note
and as of December 31, 2016, the carrying amount of the convertible note is $4,507, the unamortized discount on the note is $30,493
and accrued interest is $529. Interest expense of $4,058 was recorded on the note since the date of the merger.
On
December 19, 2016, the Company entered in convertible note agreement with a private and accredited investor, Vertex Systems, Inc.,
in the amount of $535,000, unsecured, accruing interest at a 12% interest rate, with principal and interest amounts due and payable
upon maturity on December 19, 2017. After six months, the note holder has the option to convert any portion of the unpaid principal
balance into the Company’s common shares at any time at a 40% discount to the current market value. The Company has determined
that the conversion feature in this note is considered to be a derivative. The Company calculated the fair value of this conversion
feature using the Black-Scholes model and the following assumptions: Risk-free interest rates of 1.21%; Dividend rate of 0%; and,
historical volatility rate of 435.56%. A debt discount amount of $535,000 was recorded upon issuance of the note and as of December
31, 2016, the carrying amount of the convertible note is $55,699, the unamortized discount on the note is $479,301 and accrued
interest is $2,287. Interest expense of $57,986 was recorded on the note since the date of the merger.
As of December 31, 2016, and 2015, the
principle balance of convertible notes payable was $643,689 and $0, respectively. The accrued interest balance as of December 31,
2016 and 2015 was $697,486 and $0, respectively, and is recorded in accounts payable & accrued liabilities on the balance sheet.
F- 10
For the twelve months ended December 31,
2016 the Company has recognized $114,461 of interest expense related to the convertible notes payable, which includes accretion
of the debt discount of $67,047.
Note 4 Notes Payable
|
|
|
2016
|
|
|
2015
|
|
Mark Bergson
|
|
$
|
25,000
|
|
|
—
|
|
Lower Foods
|
|
|
348,259
|
|
|
—
|
|
Bank of Utah
|
|
|
—
|
|
|
280,102
|
|
|
|
$
|
373,2595
|
|
|
280,102
|
|
The following table discloses the terms, interest rate, and
balance of these notes:
Lender
|
|
Principal
Balance
|
|
Interest
Rate
|
|
Loan
Origination
|
|
Maturity
Date
|
|
Collateral
|
|
Mark Bergson (1)
|
|
$25,000
|
|
25.00%
|
|
May 12, 2016
|
|
May 26, 2016 (in default)
|
|
None
|
|
Lower Foods (2)
|
|
$350,000
|
|
6.00%
|
|
April 21,2016
|
|
April 21,2017 (in default)
|
|
Income on AR
|
|
Bank of Utah
|
|
$900,000
|
|
6.25%
|
|
June 25, 2008
|
|
July 1, 2018 (paid off March 2016)
|
|
Real Estate
|
|
|
(1)
|
As of December 31, 2016 and 2015, the note payable with Mark Bergson has a total balance outstanding of $52,550 and $0, respectively. These amounts include accrued interest and penalties of $27,550 and $0 as of December 31, 2016 and 2015, respectively, and are recorded in accounts payable and accrued liabilities on the balance sheet.
|
|
|
|
|
(2)
|
As of December 31, 2016 and 2015, the note payable with Lower Foods has a total balance outstanding of $357,815 and $0, respectively. These amounts include accrued interest of $9,556 and $0 as of December 31, 2016 and 2015, respectively, and are recorded in accounts payable and accrued liabilities on the balance sheet.
|
Note 5 Related Party Loans
During the years ending December 31, 2016
and 2015, the Company had related party loans of $316,746 and $205,930, respectively, The loans are non-interest bearing and were
to pay for the day-to-day operations of the Company. Imputed interest was calculated using a rate of 7.5% and $19,917 and $0 was
recorded for the years ending December 31, 2016 and 2015, respectively.
|
|
|
2016
|
|
|
2015
|
|
Wyn Ward
|
|
$
|
20,000
|
|
|
10,000
|
|
Erik Durrant
|
|
|
92,446
|
|
|
2,630
|
|
Kent Durrant
|
|
|
196,000
|
|
|
185,000
|
|
Lori Durrant
|
|
|
8,300
|
|
|
8,300
|
|
|
|
$
|
316,746
|
|
|
205,930
|
|
The following table discloses the terms, interest rate, and
balance of the related party loans:
Lender
|
|
Principal Balance
|
|
Interest
Rate
|
|
Loan
Origination
|
|
Maturity
Date
|
|
Collateral
|
|
Wyn Ward (Loan 1)
|
|
$10,000
|
|
0.00%
|
|
April 1, 2015
|
|
Paid off April 2015
|
|
None
|
|
Wyn Ward (Loan 2)
|
|
$10,000
|
|
0.00%
|
|
October 31, 2015
|
|
June 1, 2017
|
|
None
|
|
Wyn Ward (Loan 3)
|
|
$10,000
|
|
0.00%
|
|
February 29, 2016
|
|
June 1, 2017
|
|
None
|
|
Erik Durrant
|
|
$92,446
|
|
0.00%
|
|
March 30, 2015
|
|
June 1, 2017
|
|
None
|
|
Kent Durrant
|
|
$196,000
|
|
0.00%
|
|
July 1, 2016
|
|
June 1, 2017
|
|
None
|
|
Lori Durrant
|
|
$8,300
|
|
0.00%
|
|
April 23, 2011
|
|
June 1, 2017
|
|
Laser Printer
|
|
Each of the above notes except for the Wyn Ward Loan #1 is currently
in default as indicated above.
Note 6 Line of Credit
F- 11
The following table discloses the terms, interest rate, and
balance of the Company’s Line of Credit:
Lender
|
|
Principal Balance
|
|
Interest Rate
|
|
Loan Origination
|
|
Maturity Date
|
|
Balance as of Dec. 31, 2016
|
|
Balance as of Dec. 31, 2015
|
|
Monthly Payment
|
|
Chase Bank Line of Credit
|
|
$149,532
|
|
Prime Rate plus 3.50%
|
|
August 1, 2014
|
|
August 1,
2021
|
|
$99,688
|
|
$121,049
|
|
$1,780
|
|
Line of Credit Collateral is as follows:
This line of credit is secured by all accounts, chattel paper, equipment, general intangibles and inventory
The future minimum line of credit payments required are as follows:
Year ending December 31,
|
|
|
Amount
|
|
2017
|
|
$
|
22,307
|
|
2018
|
|
$
|
23,063
|
|
2019
|
|
$
|
24,094
|
|
2020
|
|
$
|
25,406
|
|
2021
|
|
$
|
4,818
|
|
Total minimum payments required
|
|
$
|
99,688
|
|
Note 7 Leases
Capital Leases
The Company has two separate equipment
leases with a total balance of $487,750 and accumulated amortization of $221,934 and $152,256 included in property and equipment
on the balance sheet as of December 31, 2016 and 2015, respectively. For the years ended December 31, 2016 and 2015, amortization
expense was $69,678 and $69,678, respectively.
The following table itemizes and details the Company’s
current lease obligations:
|
Lessor
|
|
Purpose of Lease
|
|
Date of Agreement
|
|
Length of Lease
|
|
Monthly Payment
|
|
1
|
M2 LEASING
|
|
MACHINE LEASE
|
|
9/20/2012
|
|
10/30/2017
|
|
$2,609
|
|
2
|
US BANK FINANCE
|
|
MACHINE LEASE
|
|
6/4/2014
|
|
6/4/2020
|
|
$5,012
|
|
The future minimum capital lease payments are as follows:
Year ending December 31,
|
|
|
Amount
|
|
2017
|
|
$
|
83,637
|
|
2018
|
|
$
|
53,162
|
|
2019
|
|
$
|
55,827
|
|
2020
|
|
$
|
48,357
|
|
Total minimum payments required
|
|
$
|
240,983
|
|
Operating Leases
The Company’s facilities located
in Richmond, Utah that are utilized for manufacturing are leased and the monthly payment for that lease is $5,879 per month.
|
Lessor
|
|
Purpose of Lease
|
|
Date of Agreement
|
|
Length of Lease
|
|
Monthly Payment
|
|
1
|
Lowers Foods
|
|
Building/Facility
|
|
4/21/2016
|
|
36 Months
|
|
$5,879
|
|
F- 12
The future minimum lease payments required are as follows:
Year ending December 31,
|
|
|
Amount
|
|
2017
|
|
$
|
70,548
|
|
2018
|
|
$
|
70,548
|
|
2019
|
|
$
|
23,516
|
|
Total minimum payments required
|
|
$
|
164,612
|
|
Note 8 Derivative Liabilities
The Company has various convertible instruments
outstanding more fully described in Note 3, some of which contain derivative features. As of December 31, 2016, the fair value
of the Company’ s derivative liabilities was $2,747,122.
The following table summarizes the derivative
liabilities included in the balance sheet:
|
|
|
Fair Value
|
|
|
|
|
Measurements
|
|
|
|
|
Using Significant
|
|
|
|
|
Unobservable
|
|
|
|
|
Inputs (Level 3)
|
|
Derivative Liabilities:
|
|
|
|
|
Balance at December 31, 2015
|
|
$
|
—
|
|
Derivative balances assumed in merger
|
|
|
3,930,629
|
|
Additions
|
|
|
2,621,096
|
|
Change in fair value
|
|
|
(3,804,603
|
)
|
Balance at December 31, 2016
|
|
$
|
2,747,122
|
|
The fair values of derivative instruments
were estimated using the Black Scholes valuation model based on the following weighted-average assumptions:
|
|
|
Convertible Debt
|
|
|
|
|
Instruments
|
|
Risk-free rate
|
|
|
1.21
|
%
|
Expected volatility
|
|
|
435.56
|
%
|
Expected life
|
|
|
1 year
|
|
Note 9 Stockholders ‘ Deficit
The total common shares outstanding as
of December 31, 2016 was 114,815,781 and total preferred shares outstanding as of December 31, 2016 was 500,000,000.
The preferred shares have voting power
equal to 51 percent of the total combined voting power of all classes of stock entitled to vote on any matter. These shares do
not hold any liquidation, dividend or conversion rights.
In the year ended December 31, 2016, the
Company issued 16,500,000 shares of common stock to convert $412,500 in outstanding convertible notes.
Note 10 Income Taxes
F- 13
The reconciliation of the provision (benefit)
for income tax expense for the years ended December 31, 2016 and 2015 with the expected income tax was as follows:
|
|
|
2016
|
|
|
2015
|
|
|
|
|
|
|
|
|
|
Current Tax Provision:
|
|
|
|
|
|
|
|
Federal income tax (benefit) at statutory rate (15%)
|
|
$
|
305,739
|
|
$
|
(17,646
|
)
|
State tax (benefit) at rate of 5%
|
|
|
101,913
|
|
|
(5,882
|
)
|
Pre-merger pass-through income of Alpine Industries, LLC
|
|
|
(107,400
|
)
|
|
—
|
|
Derivatives (net)
|
|
|
(343,701
|
)
|
|
—
|
|
Change in valuation allowance
|
|
|
43,449
|
|
|
23,528
|
|
|
|
|
|
|
|
|
|
Total current tax provision
|
|
$
|
—
|
|
$
|
—
|
|
The Company had deferred income tax assets as of December 31,
2016 and 2015, as follows:
|
|
|
2016
|
|
|
2015
|
|
|
|
|
|
|
|
|
|
Net operating loss carryforwards
|
|
$
|
981,566
|
|
$
|
938,117
|
|
Less - Valuation allowance
|
|
|
(981,566
|
)
|
|
(938,117
|
)
|
|
|
|
|
|
|
|
|
Total net deferred tax assets
|
|
$
|
—
|
|
$
|
—
|
|
The Company provided a valuation allowance
equal to the deferred income tax assets for the period ended December 31, 2016 and 2015, because it is not presently known whether
future taxable income will be sufficient to utilize the loss carryforwards.
As of December 31, 2016, the Company had
approximately $4,909,000 in tax loss carryforwards that can be utilized in future periods to reduce taxable income, and expire
by the year 2032.t
The Company did not identify any material
uncertain tax positions. The Company recognizes accrued interest related to unrecognized tax benefits in interest expense and penalties
in operating expenses. For the years ended December 31, 2016 and 2015, the Company did not recognize any interest or penalties
for unrecognized tax benefits.
The Company has elected to file consolidated
returns, in which the prior Net Operating Losses of Adama as the parent company for tax purposes survive the merger, but as the
accounting acquire, its other deferred tax assets do not. Prior to the reverse merger, Alpine was a pass-through entity whose losses
passed through to its members.
The Company has filed income tax returns
in the United States. The tax years of 2016, 2015 and 2014 are still open for examination by taxing authorities as the statute
of limitation is 3 years
Note 11 Pending Litigation
On October 25, 2012, JS Barkats PLLC filed
a breach of contract action against the Company and a former officer, Aviram Malik in the Supreme Court of New York, for breach
of contract relating to a funding transaction in June 2012. The Complaint, which was apparently served on former management but
was never answered or otherwise responded to by former management and which was never disclosed in our prior episodic filings,
seeks to recover $45,395 in a cash finders ‘ fee allegedly due plus 2.5 percent of our issued and outstanding common stock
as of the date the fee was earned, plus forfeiture of all of the common stock, warrants and options owned by Aviram Malik, individually.
As a result of the failure to respond to the action, the plaintiff has been awarded a default judgement which was entered on December
15, 2015 for a cash amount of $182,300 and 2.5% of the fully diluted common stock issued and outstanding of Adama Technologies
Corporation which is currently valued at $32,885 for a total amount of $248,490 which has been recorded as judgement payable on
the balance sheet.
There are no other known pending legal
proceedings to which the Company is a party or in which any director, officer or affiliate of the Company, any owner of record
or beneficially of more than 5% of any class of voting securities of the Company, or security holder is a party adverse to the
Company or has a material interest adverse to the Company. The Company’s property is not the subject of any other pending
legal proceedings.
Note 12 – Acquisition of Alpine Industries, LLC
On November 23, 2016, Adama Technologies
completed its acquisition of Alpine Industries, LLC.
Unaudited pro forma results of operations
data for the fiscal years ending December 31, 2016 and 2015 as if the companies had been combined as of January 1, 2015. The pro
forma results include estimates and assumptions which management believes are reasonable. However, pro forma results are not necessarily
indicative of the results that would have occurred if the reverse merger had been in effect on the date indicated or which may
result in the future.
F- 14
UNAUDITED PRO FORMA
STATEMENT OF OPERATIONS
|
|
Year Ended December 31,
2016
|
|
Year Ended December 31, 2015
|
|
Revenues
|
|
$
|
2,880,248
|
|
$
|
2,468,657
|
|
Cost of Goods Sold
|
|
|
2,082,662
|
|
|
2,107,697
|
|
Gross Profit
|
|
|
797,586
|
|
|
360,960
|
|
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and Administrative
|
|
|
14,957,282
|
|
|
351,001
|
|
Depreciation and Amortization
|
|
|
83,043
|
|
|
97,545
|
|
Consulting
|
|
|
8,526,000
|
|
|
180,000
|
|
Total Operating Expenses
|
|
|
23,566,325
|
|
|
628,546
|
|
|
|
|
|
|
|
|
|
Income(Loss) From Operations
|
|
|
(22,768,739
|
)
|
|
(267,586
|
)
|
|
|
|
|
|
|
|
|
Other Income (Expenses)
|
|
|
|
|
|
|
|
Gain on Sale of Asset
|
|
|
228,018
|
|
|
—
|
|
Forgiveness of debt
|
|
|
—
|
|
|
22,030
|
|
Judgment
|
|
|
—
|
|
|
(248,490
|
)
|
Loss of extinguishment of debt
|
|
|
—
|
|
|
(497,500
|
)
|
Convertible note premium
|
|
|
—
|
|
|
371,640
|
|
Gain/(Loss) on Derivatives
|
|
|
(1,956,894
|
)
|
|
25,333
|
|
Interest Expense
|
|
|
(1,059,042
|
)
|
|
(106,115
|
)
|
Total Other Income/(Expense)
|
|
|
(2,787,918
|
)
|
|
(433,102
|
)
|
|
|
|
|
|
|
|
|
Net Income/(Loss) before Income Taxes
|
|
|
(25,556,657
|
)
|
|
(700,688
|
)
|
|
|
|
|
|
|
|
|
Income Tax Expense
|
|
|
—
|
|
|
—
|
|
Net Income/(Loss)
|
|
|
(25,556,657
|
)
|
|
(700,688
|
)
|
Note 13 Subsequent Events
In the process of seeking merger and acquisition
opportunities, Adama has been able to successfully complete 3 additional transactions subsequent to the filing period of December
31, 2016. Each of these transactions gives Adama increased opportunity to earn revenue and increase shareholder value.
Transaction #1: On April 29, 2017, Adama
completed the asset purchase of SafeGuard PII in which Adama acquired the technology products within SafeGuard PII. Safeguard protects
families and businesses from identity theft which has become the number one crime in the nation.
The terms of the transaction with Safeguard
were an asset purchase of the technology in software for $2,000,000 payable in restricted shares of stock. Additionally, the Company
appointed the founder of Safeguard, Mr. Mark Brown, to an advisory position and named him the director of sales in order to help
better market and sale the assets acquired.
F- 15
Transaction #2 Subsequent to this filing
period, Adama Technologies negotiated and completed an asset acquisition of several technology platforms called Prenr, Trove and
Generation H.E.R.O. from Element 99, LLC. In this transaction, Adama Technologies acquired a 25% participation of these technologies
and platforms within their own sales environments. This transaction is pending the Company becoming current in their financial
reporting obligations with the SEC.
Transaction #3: Subsequent to this filing period, Adama Technologies negotiated the acquisition of EZ Mart Food Stores, Inc. This
acquisition included the assignment of two contracts to purchase convenience store operations in Cusseta, Alabama and Holiday,
Florida. These operations are currently generating $10 million and $8 million in annualized revenue respectively. Both properties
are set to close in the fourth quarter of 2017.
Common Stock Issuances
Subsequent to this filing period ending December 31, 2016, the Company issued 42,401,250 shares of stock for a variety of operational
and acquisition purposes. The following represents shares issued subsequent to this filing period:
Number
of Shares
|
|
Purpose
|
4,000,000
|
|
Consulting,
management and support services to support the Alpine Acquisition.
|
4,500,000
|
|
Legal services
from Lance Mays
|
10,500,000
|
|
Debt conversion
resulting in $475,000 reduction of convertible debt liability.
|
23,401,250
|
|
Issued for
the purpose of securing additional acquisitions as detailed in Transaction 1, 2
and 3 of Note 13 (subsequent events) above.
|
Total: 42,401,250
Shares
|
|
|
Convertible Notes Issued
Subsequent to this filing period ending December 31, 2016, the Company issued four additional convertible notes.
On
February 2, 2017, the Company entered in convertible note agreement with a private and accredited investor, Vincent & Rees,
LC, in the amount of $56,000, unsecured, accruing interest at a 12% interest rate, with principal and interest amounts due and
payable upon maturity on February 2, 2018. After six months, the note holder has the option to convert any portion of the unpaid
principal balance into the Company’s common shares at any time at a 40% discount to the current market value. The Company
has determined that the conversion feature in this note is indexed to the Company’s stock, and is considered to be a derivative
that requires bifurcation. The Company calculated the fair value of this conversion feature using the Black-Scholes model and the
following assumptions: Risk-free interest rates of 1.21%; Dividend rate of 0%; and, historical volatility rate of 435.56%.
On
February 22, 2017, the Company entered in convertible note agreement with a private and accredited investor, Power Up Lending Group
Ltd., in the amount of $35,000, unsecured, accruing interest at a 12% interest rate, with principal and interest amounts due and
payable upon maturity on February 22, 2018. After six months, the note holder has the option to convert any portion of the unpaid
principal balance into the Company’s common shares at any time at a 40% discount to the current market value. The Company
has determined that the conversion feature in this note is considered to be a derivative. The Company calculated the fair value
of this conversion feature using the Black-Scholes model and the following assumptions: Risk-free interest rates of 1.21%; Dividend
rate of 0%; and, historical volatility rate of 435.56%.
On
March 9, 2017, the Company entered in convertible note agreement with a private and accredited investor, Chienn Consulting, LLC.,
in the amount of $53,000, unsecured, accruing interest at a 12% interest rate, with principal and interest amounts due and payable
upon maturity on March 9, 2018. After six months, the note holder has the option to convert any portion of the unpaid principal
balance into the Company’s common shares at any time at a 40% discount to the current market value. The Company has determined
that the conversion feature in this note is considered to be a derivative. The Company calculated the fair value of this conversion
feature using the Black-Scholes model and the following assumptions: Risk-free interest rates of 1.21%; Dividend rate of 0%; and,
historical volatility rate of 435.56%.
On
May 1, 2017, the Company entered in convertible note agreement with a private and accredited investor, Marp, LLC., in the amount
of $30,000, unsecured, accruing interest at a 12% interest rate, with principal and interest amounts due and payable upon maturity
on May 1, 2018. After six months, the note holder has the option to convert any portion of the unpaid principal balance into the
Company’s common shares at any time at a 40% discount to the current market value. The Company has determined that the conversion
feature in this note is considered to be a derivative. The Company calculated the fair value of this conversion feature using the
Black-Scholes model and the following assumptions: Risk-free interest rates of 1.21%; Dividend rate of 0%; and, historical volatility
rate of 435.56%.
F- 16