1438 N. HIGHWAY 89, STE. 120
Notes to the Financial Statements
December 31, 2016 and 2015
NOTE 1 ORGANIZATION AND DESCRIPTION OF BUSINESS
Start Scientific, Inc. (the Company)
was formed in the state of Utah on February 4, 2004, with authorized common stock of 10,000,000 shares. The Company was subsequently
reincorporated in the State of Delaware on February 14, 2006 with authorized common stock of 5,000,000,000 shares and authorized
preferred stock of 100 shares. Both classes of stock have a par value of $0.00001 per share.
Prior to March 2012, we were a computer
and technology hardware reseller to businesses and other organizations. Most of our clients were small and medium sized organizations,
although we attempted to market our products and services to larger organizations. We also outsourced technology-related services
to provide a full solution basket of technology products and services including hardware, software, network development and services.
Our clients consisted of some retail purchasers and small to medium-sized organizations, operating mostly in North America, but
we did have occasional clients in Europe. Due to our recent acquisition of oil and gas interests, our future business is expected
to be based on the exploration, development, drilling, and production of various oil and gas properties. In particular, we intend
to look for oil and gas opportunities in international markets. Whether in respect to the development of oil and gas interests
in North America or overseas, we expect to align with industry partners in respect of the drilling and operation of these wells.
Our long-term focus is to grow and develop existing oil and gas leasehold interests and acquire new interests within and without
the continental United States. In addition, we intend to acquire interests in older wells that, with the application of newer technologies,
may increase production and reserves.
NOTE 2 SIGNIFICANT
ACCOUNTING POLICIES
This summary of significant accounting
policies of the Company is presented to assist in understanding the Company’s financial statements. The financial statements
and notes are representations of the Company’s management who are responsible for their integrity and objectivity. These
accounting policies conform to accounting principles generally accepted in the United States of America and have been consistently
applied in the preparation of the financial statements. The following policies are considered to be significant:
a. Accounting Method
The Company recognizes income and
expenses based on the accrual method of accounting. The Company has elected a calendar year-end.
b. Cash and Cash Equivalents
Cash equivalents are generally comprised
of certain highly liquid investments with original maturities of less than three months.
c. Use of Estimates in
the Preparation of Financial Statements
The preparation of financial statements
in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those
estimates.
START SCIENTIFIC, INC.
Notes to the Financial Statements
December 31, 2016 and 2015
d. Basic and Fully Diluted
Net Loss per Share of Common Stock
In accordance with Financial Accounting
Standards No. ASC 260, “Earnings per Share,” basic net loss per common share is based on the weighted average number
of shares outstanding during the periods presented. Diluted earnings per share is computed using the weighted average number of
common shares plus dilutive common share equivalents outstanding during the period.
|
|
December 31,
|
|
|
2016
|
|
2015
|
Net loss (numerator)
|
|
$
|
(331,231
|
)
|
|
$
|
(1,921,197
|
)
|
Weighted average shares outstanding (denominator)
|
|
|
495,270,990
|
|
|
|
163,139,514
|
|
Basic and fully diluted net loss per share amount
|
|
$
|
(0.00
|
)
|
|
$
|
(0.01
|
)
|
e. Accounts Receivable
Accounts receivable are recorded
net of the allowance for doubtful accounts. The Company generally offers 15-day credit terms on sales to its customers and requires
no collateral. The Company maintains an allowance for doubtful accounts which is determined based on a number of factors, including
each customer’s financial condition, general economic trends and management judgment. The Company had $-0- in accounts receivable
at December 31, 2016 and 2015.
f. Revenue Recognition
Revenue is recognized upon completion
of services or delivery of goods where the sales price is fixed or determinable and collectability is reasonably assured. Advance
customer payments are recorded as deferred revenue until such time as they are recognized. The Company recognized no revenue in
2016 or 2015.
g. Recent Accounting
Pronouncements
We have reviewed accounting pronouncements
issued during the past two years and have adopted any that are applicable to the Company. We have determined that none had a material
impact on our financial position, results of operations, or cash flows for the years ended December 31, 2016 and 2015.
h. Income Taxes
The Financial Accounting Standards
Board (FASB) has issued FASB ASC 740-10 (Prior authoritative literature: Financial Interpretation No. 48, "Accounting for
Uncertainty in Income Taxes - An Interpretation of FASB Statement No. 109 (FIN 48)). FASB ASC 740-10 clarifies the accounting
for uncertainty in income taxes recognized in an enterprise's financial statements in accordance with prior literature FASB Statement
No. 109, Accounting for Income Taxes. This standard requires a company to determine whether it is more likely than not that
a tax position will be sustained will be sustained upon examination based upon the technical merits of the position. If the
more-likely-than-not threshold is met, a company must measure the tax position to determine the amount to recognize in the financial
START SCIENTIFIC, INC.
Notes to the Financial Statements
December 31, 2016 and 2015
statements. As a result of
the implementation of this standard, the Company performed a review of its material tax positions in accordance with recognition
and measurement standards established by FASB ASC 740-10.
Deferred taxes are provided on a
liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit
carryforwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the
differences between the reported amounts of assets and liabilities and their tax basis. Deferred tax assets are reduced by
a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax
assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and
rates on the date of enactment.
At December 31, 2016, the
Company had net operating loss carryforwards of approximately $6,512,000 which may be offset against future taxable income
through 2036. No tax benefit has been reported in the financial statements because the potential tax benefits of the net
operating loss carryforwards are offset by a valuation allowance of the same amount.
Due to the change in ownership provisions
of the Tax Reform Act of 1986, net operating loss carry forwards for Federal income tax reporting purposes are subject to annual
limitations. Should a change in ownership occur, net operating loss carryforwards may be limited as to future use. In January 2018,
Congress enacted the Tax Cuts and Jobs Act which changed the Corporate income tax rate to a flat 21% for the tax year beginning
in 2018.
Net deferred tax assets consist
of the following components as of December 31, 2016 and 2015:
|
|
2016
|
|
2015
|
Deferred tax assets:
|
|
|
|
|
|
|
|
|
NOL Carryover (at 21% Federal, 5% State)
|
|
$
|
1,698,000
|
|
|
$
|
1,607,000
|
|
Valuation allowance
|
|
|
(1,698,000
|
)
|
|
|
(1,607,000
|
)
|
Net deferred tax asset
|
|
$
|
—
|
|
|
$
|
—
|
|
The income tax provision differs
from the amount of income tax determined by applying the current applicable U.S. federal and state income tax rates of 34% to pretax
income from continuing operations for the years ended December 31, 2016 and 2015 due to the following:
|
|
2016
|
|
2015
|
Federal tax benefit at 34%
|
|
$
|
(113,000
|
)
|
|
$
|
(653,000
|
)
|
Non-deductible stock-based compensation
|
|
|
—
|
|
|
|
340,000
|
|
State tax benefit at 5%
|
|
|
(16,000
|
)
|
|
|
(96,000
|
)
|
Change in Valuation allowance
|
|
|
91,000
|
|
|
|
226,000
|
|
Impact of rate changes on NOL
|
|
|
38,000
|
|
|
|
183,000
|
|
|
|
$
|
—
|
|
|
$
|
—
|
|
The Cumulative reduction in
deferred tax assets and resulting valuation allowance attributable to the tax rate changes in the Tax Cuts and Jobs Act of 2018
was $841,000.
START SCIENTIFIC, INC.
Notes to the Financial Statements
December 31, 2016 and 2015
A reconciliation of the beginning
and ending amount of unrecognized tax benefits is as follows:
|
|
|
Year ended December 31,
|
|
|
|
2016
|
|
|
|
2015
|
|
Beginning balance
|
|
$
|
—
|
|
|
$
|
—
|
|
Additions based on tax positions related to current year
|
|
|
—
|
|
|
|
—
|
|
Additions for tax positions of prior years
|
|
|
—
|
|
|
|
—
|
|
Reductions for tax positions of prior years
|
|
|
—
|
|
|
|
—
|
|
Reductions in benefit due to income tax expense
|
|
|
—
|
|
|
|
—
|
|
Ending balance
|
|
$
|
—
|
|
|
$
|
—
|
|
At December 31, 2016, the Company
had no unrecognized tax benefits that, if recognized, would affect the effective tax rate.
The Company did not have any
tax positions for which it is reasonably possible that the total amount of unrecognized tax benefits will significantly increase
or decrease within the next 12 months.
The Company includes interest
and penalties arising from the underpayment of income taxes in the consolidated statements of operations in the provision for income
taxes. As of December 31, 2016 and 2015, the Company had no accrued interest or penalties related to uncertain tax positions.
The tax years that remain subject
to examination by major taxing jurisdictions are those for the years ended December 31, 2016, 2015 and 2014, and since inception.
i. Concentrations of Credit Risk
Financial instruments that potentially
subject the Company to concentrations of credit risks consist of cash and cash equivalents. The Company places cash and cash equivalents
at well known quality financial institutions. Cash and cash equivalents at banks are insured by the Federal Deposit Insurance Corporation
for up to $250,000. The Company did not have any cash or cash equivalents in excess of this amount at December 31, 2016 and 2015.
j. Going Concern
The accompanying financial statements
have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and
satisfaction of liabilities in the normal course of business. At December 31, 2016 the Company had negative working capital of
$2,544,065 and an accumulated deficit of $16,834,065. These factors raise substantial doubt regarding the Company’s ability
to continue as a going concern.
To date the Company has funded its
operations through a combination of loans and sales of common stock. The Company anticipates another net loss for the fiscal year
ended December 31, 2017 and with the expected cash requirements for the coming year, there is substantial doubt as to the Company’s
ability to continue operations.
START SCIENTIFIC, INC.
Notes to the Financial Statements
December 31, 2016 and 2015
The financial statements do not
include any adjustments that might result from the outcome of this uncertainty.
k. Stock-based Compensation
The Company accounts for stock-based
compensation issued to non-employees and consultants in accordance with the provisions of ASC 505-50, “Equity-Based Payments
to Non-Employees”. Measurement of share-based payment transactions with non-employees is based on the fair value of whichever
is more reliably measurable: (a) the goods or services received; or (b) the equity instruments issued. The fair value of the share-based
payment transaction is determined on the earlier of performance commitment date or performance completion date.
Share-based expense totaled $-0-
and $1,050,000 as of December 31, 2016 and 2015, respectively.
l. Financial Instruments
The Company has adopted FASB ASC
820-10-50, “
Fair Value Measurements.
” This guidance defines fair value, establishes a three-level valuation
hierarchy for disclosures of fair value measurement and enhances disclosure requirements for fair value measures. The three
levels are defined as follows:
Level 1 inputs
to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.
Level 2 inputs
to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable
for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.
Level 3 inputs
to valuation methodology are unobservable and significant to the fair measurement.
The carrying amounts reported in
the balance sheets for the cash and cash equivalents, receivables and current liabilities (including derivative liabilities) each
qualify as financial instruments and are a reasonable estimate of fair value because of the short period of time between the origination
of such instruments and their expected realization and their current market rate of interest.
NOTE 3 RELATED
PARTY TRANSACTIONS
The Company issued certain promissory
notes to related individuals and/or their companies as disclosed in Note 7. The individuals consist of an officer of the Company
and a director of the Company. The Company received advances of $-0- and $2,126, respectively; and made payments on these advances
of $-0- and $32,300, respectively, during the years ended December 31, 2016 and 2015.
START SCIENTIFIC, INC.
Notes to the Financial Statements
December 31, 2016 and 2015
Accounts payable and accrued liabilities
– related parties consisted of the following as of December 31, 2016 and 2015:
|
|
2016
|
|
2015
|
Accounts payable
|
|
$
|
586,757
|
|
|
$
|
586,757
|
|
Accrued interest
|
|
|
98,395
|
|
|
|
100,462
|
|
Misc. loans and advances
|
|
|
82,154
|
|
|
|
82,154
|
|
Total
|
|
$
|
767,306
|
|
|
$
|
769,373
|
|
On October 1, 2015, the Company
issued to a former officer and director of the Company, 20,000,000 restricted shares of common stock. The shares were issued pursuant
to the conversion of $40,000 in outstanding debt held on the books and records of the Company. The 20,000,000 shares of common
stock were issued at $0.0048 resulting in a loss on conversion of debt of $56,000 which is included in the total loss on conversion
of debt in the amount of $147,724.
NOTE 4 CONVERTIBLE NOTES PAYABLE
Convertible notes payable
consisted of the following:
|
|
December 31,
2016
|
|
December 31,
2015
|
Convertible note payable to an entity, interest at 8%, due on February 25, 2016, in default, net of discount of $1,183 and $4,267, respectively (A)
|
|
$
|
22,447
|
|
|
$
|
23,058
|
|
Convertible note payable to an entity, interest at 10%, due on March 6, 2016, in default, net of discount of $-0- and $848, respectively (B)
|
|
|
—
|
|
|
|
3,853
|
|
Convertible note payable to an entity, interest at 10%, due on April 29, 2016, in default, net of discount of $-0- and $15,648, respectively (C)
|
|
|
47,487
|
|
|
|
32,078
|
|
Convertible note payable to an entity, interest at 10%, due on demand (D)
|
|
|
22,400
|
|
|
|
—
|
|
Total Notes Payable
|
|
|
92,334
|
|
|
|
58,989
|
|
Less: Current Portion
|
|
|
(92,334
|
)
|
|
|
(58,989
|
)
|
Long-Term Notes Payable
|
|
$
|
—
|
|
|
$
|
—
|
|
On February 10, 2015, the Company
issued a promissory note in the original principal amount of $33,000 to a lender. The Note matured on November 12, 2015 and carried
an interest rate of 8% per annum. The Note shall at the maturity date, be due and payable in full unless converted partially or
in its entirety upon the election of the lender into fully paid and non-assessable shares of common stock of the Company at a 55%
discount to the average of the three lowest daily trading prices as reported on the OTCQB for the twelve trading days previous
to the conversion date. During the year ended December 31, 2015, the entire principal amount of the note was converted into common
stock of the Company.
START SCIENTIFIC, INC.
Notes to the Financial Statements
December 31, 2016 and 2015
(A) On February 25, 2015, the Company
issued a promissory note in the original principal amount of $52,500 to a lender. The Note matured on February 25, 2016 and carries
an interest rate of 8% per annum. The Note shall at the maturity date, be due and payable in full unless converted partially or
in its entirety upon the election of the lender into fully paid and non-assessable shares of common stock of the Company at a 60%
discount to the lowest trading price as reported on the OTCQB for the fifteen trading days previous to the conversion date. During
the year ended December 31, 2015, $25,175 of the principal amount of the note was converted into common stock of the Company leaving
a balance of $27,325 as of December 31, 2015. During the year ended December 31, 2016, $3,695 of the principal amount of the note
was converted into common stock of the Company leaving a balance of $23,630 as of December 31, 2016, before discount of $1,183.
(B) On March 6, 2015, the Company
entered into a Note Purchase Agreement in respect of a credit line and associated convertible debenture in the original principal
amount up to $220,000. As of March 6, 2015, the Company recorded a $55,000 draw down and consideration in respect of the credit
line. The Debenture matured on March 6, 2016 and bears interest at the rate of 10% per annum. The Debenture, together with all
interest as accrued, is convertible into shares of the Company’s common stock at a price equal to the lower of $.10 or 58%
of the lowest trading price of the Company’s common stock during the 20 previous consecutive trading days. The Note Purchase
and the Debenture contain representations, warranties, conditions, restrictions, and covenants of the Company that are customary
in such transactions with smaller companies. During the year ended December 31, 2015, $50,299 of the principal amount of the note
was converted into common stock of the Company leaving a balance of $4,701 as of December 31, 2015. During the year ended December
31, 2016, $4,701 of the principal amount of the note was converted into common stock of the Company leaving a balance of $-0- as
of December 31, 2016.
(C) On April 29, 2015, the Company
issued a promissory note in the original principal amount of $53,500 to a lender. The Note matures on April 29, 2016 and carries
an interest rate of 10% per annum. The Note shall at the maturity date, be due and payable in full unless converted partially or
in its entirety upon the election of the lender into fully paid and non-assessable shares of common stock of the Company at a 55%
discount to the lowest trading price as reported on the OTCQB for the fifteen trading days previous to the conversion date. During
the year ended December 31, 2015, $5,774 of the principal amount of the note was converted into common stock of the Company leaving
a balance of $47,726 as of December 31, 2015. During the year ended December 31, 2016, $239 of the principal amount of the note
was converted into common stock of the Company leaving a balance of $47,487 as of December 31, 2016.
(D) On January 12, 2016, the Company
issued a promissory note in the original principal amount of $25,000 to a unrelated lender. The Note matured on demand and carried
an interest rate of 10% per annum. The Note shall at the maturity date, be due and payable in full unless converted partially or
in its entirety upon the election of the lender into fully paid and non-assessable shares of common stock of the Company at a conversion
price equal to $0.00005. During the year ended December 31, 2016, $2,600 of the principal amount of the note was converted into
common stock of the Company leaving a net balance of $22,400 as of December 31, 2016.
The Company recognized amortization
expense related to the debt discount of $19,580 and $136,814 for the years ended December 31, 2016 and 2015, respectively.
START SCIENTIFIC, INC.
Notes to the Financial Statements
December 31, 2016 and 2015
For the years ended December 31,
2016 and 2015, interest expense on convertible notes was $38,010 and $11,160, respectively. As of December 31, 2016 and 2015, the
accrued interest payable was $16,468 and $8,405, respectively.
NOTE 5 DERIVATIVE LIABILITY
The Company analyzed the conversion
option for derivative accounting consideration under ASC 815, “
Derivatives and Hedging,”
and
determined
that the convertible notes should be classified as a liability since the conversion option becomes effective at issuance resulting
in there being no explicit limit to the number of shares to be delivered upon settlement of the above conversion options. The Company
accounts for warrants as a derivative liability due to there being no explicit limit to the number of shares to be delivered upon
settlement of all conversion options.
The Company determined our derivative
liabilities to be a Level 2 fair value measurement and used the Black-Scholes pricing model to calculate the fair value as of December
31, 2016. The Black-Scholes model requires six basic data inputs: the exercise or strike price, time to expiration, the risk free
interest rate, the current stock price, the estimated volatility of the stock price in the future, and the dividend rate. Changes
to these inputs could produce a significantly higher or lower fair value measurement. The fair value of each convertible note and
warrant is estimated using the Black-Scholes valuation model. Assumptions used for the calculation of the derivative liability
of the notes at December 31, 2016 include (1) stock price of $0.0003 per share, (2) exercise price of $0.0001 per share, (3) term
between 28 and 310 days, (4) expected volatility between 177.91% and 368.72% and (5) risk free interest rate of between 0.15% and
27%.
The derivative liability at December
31, 2016 consisted of the following:
|
|
Note
Face Value
|
|
Derivative Liability
|
Convertible note payable to an entity, interest at 8%, due on February 25, 2016, in default, net of discount of $1,183 and $4,267, respectively (A)
|
|
$
|
52,500
|
|
|
$
|
84,744
|
|
Convertible note payable to an entity, interest at 10%, due on April 29, 2016, in default, net of discount of $-0- and $15,648, respectively (C)
|
|
|
53,500
|
|
|
|
239,145
|
|
Totals
|
|
$
|
106,000
|
|
|
$
|
323,889
|
|
The
above convertible notes contain a variable conversion feature based on the future trading price of the Company common stock. Therefore,
the number of shares of common stock issuable upon conversion of the note is indeterminate.
Due to the convertible notes
described in Note 5 above, it was determined at December 31, 2016 that there was a derivative liability associated with these notes.
The amount of the derivative liability at December 31, 2016 was $323,889, which is reported on the balance sheet. The Company also
recorded a loss on the change in the fair value of the derivative liability of $184,803 on the statement of operations for the
year ended December 31, 2016.
START SCIENTIFIC, INC.
Notes to the Financial Statements
December 31, 2016 and 2015
The derivative liability at December
31, 2015 consisted of the following:
|
|
Note
Face Value
|
|
Derivative Liability
|
Convertible note payable to an entity, interest at 8%, due on February 25, 2016, in default, net of discount of $4,267 and $-0-, respectively (A)
|
|
$
|
52,500
|
|
|
$
|
46,656
|
|
Convertible note payable to an entity, interest at 10%, due on March 6, 2016, in default, net of discount of $848 and $-0-, respectively (B)
|
|
|
55,000
|
|
|
|
8,343
|
|
Convertible note payable to an entity, interest at 10%, due on April 29, 2016, in default, net of discount of $15,648 and $-0-, respectively (C)
|
|
|
53,500
|
|
|
|
96,345
|
|
Totals
|
|
$
|
161,000
|
|
|
$
|
151,344
|
|
The
above convertible notes contain a variable conversion feature based on the future trading price of the Company common stock. Therefore,
the number of shares of common stock issuable upon conversion of the note is indeterminate.
Due to the convertible notes
described in Note 5 above, it was determined at December 31, 2015 that there was a derivative liability associated with these notes.
The amount of the derivative liability at December 31, 2015 was $151,344, which is reported on the balance sheet. The Company also
recorded a loss on the change in the fair value of the derivative liability of $17,986 on the statement of operations for the year
ended December 31, 2015.
NOTE 6 NOTES PAYABLE
Notes payable consisted of the following:
|
|
December 31,
2016
|
|
December 31,
2015
|
Note payable to a company, interest at 24% per annum, due on demand, unsecured
|
|
$
|
32,100
|
|
|
$
|
7,100
|
|
Notes payable to individuals, interest at 10% per annum, due on demand, unsecured
|
|
|
15,760
|
|
|
|
40,760
|
|
Note payable to an individual, default interest at 24% per annum, due on August 27, 2012, unsecured, in default
|
|
|
100,000
|
|
|
|
100,000
|
|
Notes payable to an individual, interest at 6% per annum, due on July 13, 2013, unsecured, in default
|
|
|
100,000
|
|
|
|
100,000
|
|
Notes payable to individuals, interest at 8% per annum, due on August 30, 2013 and September 9, 2013, unsecured, in default
|
|
|
300,000
|
|
|
|
300,000
|
|
Total Notes Payable
|
|
|
547,860
|
|
|
|
547,860
|
|
Less: Current Portion
|
|
|
(547,860
|
)
|
|
|
(547,860
|
)
|
Long-Term Notes Payable
|
|
$
|
—
|
|
|
$
|
—
|
|
Accrued interest at December
31, 2016 and 2015 was $220,516 and $138,826, respectively. These amounts are included in accrued expenses on the balance sheet.
START SCIENTIFIC, INC.
Notes to the Financial Statements
December 31, 2016 and 2015
NOTE 7 NOTES PAYABLE – RELATED PARTIES
Notes payable – related parties consisted of the following:
|
|
December 31,
2016
|
|
December 31,
2015
|
Note payable to a related individual, interest at 24% per annum, due on demand, unsecured
|
|
$
|
60,901
|
|
|
$
|
60,901
|
|
Note payable to a related individual, interest at 10% per annum, due on demand, unsecured
|
|
|
16,578
|
|
|
|
16,578
|
|
Note payable to a related individual, interest at 10% per annum, due on demand, unsecured
|
|
|
4,145
|
|
|
|
4,145
|
|
Note payable to a related individual, interest at 10% per annum, due on demand, unsecured
|
|
|
—
|
|
|
|
16,578
|
|
Notes payable to a company, non-interest bearing, due on demand, unsecured
|
|
|
5,032
|
|
|
|
3,454
|
|
Total Notes Payable – Related Parties
|
|
|
86,656
|
|
|
|
101,656
|
|
Less: Current Portion
|
|
|
(86,656
|
)
|
|
|
(101,656
|
)
|
Long-Term Notes Payable – Related Parties
|
|
$
|
—
|
|
|
$
|
—
|
|
Accrued interest at December
31, 2016 and 2015 was $98,395 and $100,462, respectively which is included in accounts payable and accrued liabilities –
related parties.
NOTE 8 EQUITY TRANSACTIONS
On July 6, 2011,the
Company issued 100 shares of Series “A” Preferred Stock in exchange for the forgiveness of $25,000 in debt. The Series
A Preferred Stock carries no dividend, distribution, liquidation, or rights of conversion into common stock, but holds 10,000,000
votes per share.
On October 1, 2015, the Company
issued to a former officer and director of the Company, 20,000,000 restricted shares of common stock. The shares were issued pursuant
to the conversion of $40,000 in outstanding debt held on the books and records of the Company. The 20,000,000 shares of common
stock were issued at $0.0048, resulting in a loss on conversion of debt of $56,000.
During the year ended December 31,
2015, the Company issued 6,000,000 shares of its common stock for consulting and legal services rendered to the Company. The stock
was valued at the market price on the date of issuance which totaled $1,050,000. This amount is included in salaries and consulting
expenses on the statement of operations.
During the year ended December 31,
2015, the Company issued 172,123,218 shares of its common stock for the conversion of notes payable and accrued interest in the
amount of $498,680. This is exclusive of the issuance on October 1, 2015 described above.
START SCIENTIFIC, INC.
Notes to the Financial Statements
December 31, 2016 and 2015
On January 8, 2016, the Company
amended and restated its Certificate of Incorporation to increase the number of authorized shares of common stock to be issued
to 5,000,000,000. The par value of both the Preferred Stock and common stock was also changed from $0.0001 to $0.00001.
During the year ended December 31,
2016, the Company issued 188,311,135 shares of its common stock for the conversion of notes payable and accrued interest in the
amount of $52,856.
NOTE 9 OPTIONS AND WARRANTS
The Company has adopted FASB ASC
718, “Share-Based Payments” (“ASC 718”) to account for its stock options. The Company estimates the fair
value of each stock award at the grant date by using the Black-Scholes option pricing model. The assumptions used to calculate
the fair value of options granted are evaluated and revised, as necessary, to reflect market conditions and our experience. Compensation
expense is recognized only for those options expected to vest, with forfeitures estimated at the date of grant based on our historical
experience and future expectations.
On July 25, 2014, the board of
directors cancelled all of the vested and unvested options that it had granted pursuant to the Company's 2012 Equity
Incentive Plan. 10,500,000 options were granted on May 4, 2012 to certain directors, and cancelled on July 25,
2014. Each grantee of active options consented to this cancellation. As of the date of this report, the Company
has no outstanding options. In addition, no options have ever been exercised by any option holder of the Company. The
cancellation also revoked any shares that would have vested in 2014 under the same plan. However, shares vested prior to
cancellation remain expensed amounting to $-0- in 2016 and 2015.
NOTE 10
GOING CONCERN
The accompanying financial statements
have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and
satisfaction of liabilities in the normal course of business. The Company has a working capital deficit, negative cash flows from
operations and has sustained net losses from inception which have resulted in an accumulated deficit at December 31, 2016 of $16,834,065
and has experienced periodic cash flow difficulties, all of which raise substantial doubt regarding the Company’s ability
to continue as a going concern.
To date the Company has funded its
operations through a combination of loans, related party notes and through the issuance of common stock for services. The Company
had a net loss of $331,231 for the year ended December 31, 2016 and with the expected cash requirements for the coming year, there
is substantial doubt as to the Company’s ability to continue operations.
The Company is attempting to improve
these conditions by way of financial assistance through issuances of additional equity and by generating revenues through sales
of products and services.
NOTE 11 SUBSEQUENT EVENTS
Subsequent to December 31, 2016,
the Company issued 140,800,000 shares of its common stock for the conversion of notes payable, convertible debentures and accrued
interest.