UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

 

FORM 10-Q

 

[X] Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the quarterly period ended August 31, 2015
[  ] Transition Report pursuant to 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period from __________ to __________
Commission File Number:  333-179028

 

Avalanche International, Corp.

(Exact name of registrant as specified in its charter)

 

Nevada   38-3841757
(State or other jurisdiction of incorporation or organization) (IRS Employer Identification No.)

 

5940 S. Rainbow Blvd, Las Vegas, NV 89118
(Address of principal executive offices)

 

(888) 863-9490
(Registrant’s telephone number)
_______________________________________________________________
(Former name, former address and former fiscal year, if changed since last report)

 

Indicated by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days [X] Yes [ ] No

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.

 

[ ] Large accelerated filer

[ ] Non-accelerated filer

[ ] Accelerated filer

[X] Smaller reporting company

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). [ ] Yes [X] No

 

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 (§ 229.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [X] No [ ]

 

State the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 6,314,248 common shares as of January 20, 2016.

   

 

TABLE OF CONTENTS

 

Page

 
PART I – FINANCIAL INFORMATION
Item 1: Consolidated Financial Statements 3
Item 2: Management’s Discussion and Analysis of Financial Condition and Results of Operations 15
Item 3: Quantitative and Qualitative Disclosures About Market Risk 19
Item 4: Controls and Procedures 19
 
PART II – OTHER INFORMATION
Item 1: Legal Proceedings 20
Item 1A: Risk Factors 20
Item 2: Unregistered Sales of Equity Securities and Use of Proceeds 20
Item 3: Defaults Upon Senior Securities 20
Item 4: Mine Safety Disclosures 20
Item 5: Other Information 20
Item 6: Exhibits 20
 2 

PART I - FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

Our condensed consolidated financial statements included in this Form 10-Q are as follows:

 

Condensed Consolidated Balance Sheets as of August 31, 2015 and November 30, 2014 4

Condensed Consolidated Statements of Operations for the Three and Nine Months ended August 31, 2015 and 2014

5
Condensed Consolidated Statements of Cash Flows for the Three and Nine Months ended August 31, 2015 and 2014 6
Notes to Condensed Consolidated Financial Statements 7

 

 3 

Avalanche International, Corp. and Subsidiary

Condensed Consolidated Balance Sheets

(unaudited)

 

ASSETS August 31, 2015  November 30, 2014
Current Assets:       (Restated) 
  Cash $656   $2,247 
  Accounts receivable, related party  17,190    —   
  Loan and interest receivable  12,798    —   
  Loan and interest receivable, related party  167,326    —   
  Inventory  2,680    25,900 
Total current assets  200,650    28,147 
  Other assets  705    526 
     Total assets $201,355   $28,673 
          
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)         
Current Liabilities:         
  Accounts payable and accrued expenses $129,731   $87,217 
  Accounts payable, related party  —      88,572 
  Due to related parties  12,709    6,927 
  Derivative liability  717,796    —   
Convertible notes payable, net of discount of $328,700 and $9,040, respectively  239,085    54,210 
  Loans payable  33,934    18,300 
Total current liabilities  1,133,255    255,226 
Long Term Liabilities         
Convertible note payable, net of discount of $23,300  37,227    —   
     Total liabilities  1,170,482    255,226 
          
Stockholders' Equity (Deficit):         
Common stock, $0.001 par value; 75,000,000 shares authorized; 5,703,816 and 5,144,400 shares issued and outstanding, respectively  5,705    5,144 
Preferred stock, $0.001 par value; 10,000,000 shares authorized  —      —   
Class A Preferred stock, $0.001 par value; 50,000 shares designated, 29,380 and 14,000 shares issued and outstanding, respectively  29    14 
  Additional paid-in capital  966,775    203,445 
  Accumulated deficit  (1,941,636)   (435,156)
Total stockholders’ equity (deficit)  (969,127)   (226,553)
      Total liabilities and stockholders’ equity $201,355   $28,673 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 4 

Avalanche International, Corp. and Subsidiary

Condensed Consolidated Statements of Operations

(unaudited)

 

For the Three Months Ended
August 31,

For the Nine Months Ended
August 31,

2015 2014 2015 2014
(Restated) (Restated)
Revenue $ 169 $ 6,431 $ 38,831 $ 10,172
Cost of revenue 258 1,098 29,550 3,279
Gross margin (89) 5,333 9,281 6,893
Operating Expenses:
Advertising and marketing - 61,193 6,364 61,193
General and administrative 488,466 84,406 1,050,951 123,538
  Total operating expense 488,466 145,599 1,057,315 184,731
Net loss from operations (488,555) (140,266) (1,048,034) (177,838)
Other income (expense):
Interest income 6,074 - 6,074 -
      Interest expense (28,208) - (39,063) -
Interest expense – debt discount (164,685) - (248,863) -
Loss on issuance of convertible debt (55,093) - (356,402) -
Change in fair value on derivative liability (2,968) - 179,808 -
Total other expense (244,880) - (458,446) -
Loss before income tax (733,435) (140,266) (1,506,480) (177,838)
Provision for income taxes - - - -
Net Loss $ (733,435) (140,266) $ (1,506,480) $ (177,838)
Loss per common share
      Basic and diluted $ (0.13) $ (0.03) $ (0.28) $ (0.04)
Weighted average common shares
      Basic and diluted 5,651,549 5,075,478 5,442,147 5,071,839

  

The accompanying notes are an integral part of these condensed consolidated financial statements.

 5 

Avalanche International, Corp. and Subsidiary

Condensed Consolidated Statements of Cash Flows

(unaudited) 

 

For the Nine Months Ended
August 31,
  2015  2014
Cash flows from operating activities:      (restated)  
Net loss for the period $(1,506,480)  $(177,838)
Adjustments to reconcile net loss to net cash used by operating activities:         
    Share based compensation  680,487    —   
    Debt discount amortization  248,863    —   
    Loss on issuance of convertible debt  356,402    —   
    Gain on derivative liability  (179,808)   —   
Changes in operating assets and liabilities:         
Accounts receivable  (17,190)   (154)
Inventory  23,220    (13,180)
Other assets  8,860    —   
Accounts payable and accrued expense  37,696    67,469 
Accounts payable – related party  (88,572)   41,240 
Other liabilities  —      4,771 
Accrued interest  28,401    —   
Accrued compensation  (2,412)   1,860 
    Net cash used in operating activities  (410,533)   (75,832)
Cash flows from investing activities:         
          Loan and interest receivable  (12,798)   —   
         Loan and interest receivable, related party  (160,197)   —   
              Net cash used by investing activities  (172,995)   —   
Cash flows from financing activities:         
Proceeds from convertible notes payable  508,000    —   
Proceeds from other loans  21,305    —   
Payments of note payable  (32,050)   —   
Advances from related parties  58,366    —   
Repayment of related party advances  (52,584)   —   
Proceeds from issuance of common stock  2,000    28,000 
Proceeds from issuance of preferred stock  76,900    60,000 
       Net cash provided by financing activities  581,937    88,000 
Increase (decrease) in cash  (1,591)   12,168 
Cash, beginning of period  2,247    —   
Cash, end of period $656   $12,168 
Supplemental Disclosures:         
Cash paid for interest $—     $—   
Cash paid for income tax $—     $—   
Non-Cash Investing and Financing Information:         
Common stock issued for conversion of debt $4,518   $—   
Derivative liability recorded in connection with convertible debt $717,796   $—   

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 6 

Avalanche International, Corp. and Subsidiary

Notes to the Condensed Consolidated Financial Statements

August 31, 2015

(Unaudited)

 

NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS

 

Avalanche International, Corp. (“the Company”) was incorporated under the laws of the State of Nevada on April 14, 2011. The company had plans to distribute crystallized glass tile in the North American markets to wholesale customers. On May 14, 2014, the Company entered into an Agreement of Conveyance, Transfer and Assignment of Assets and Assumption of Obligations (the “Agreement”) with our sole officer and director, John Pulos. Pursuant to the Agreement, the Company transferred all assets to Mr. Pulos. In exchange for this assignment of assets, Mr. Pulos agreed to assume and cancel all liabilities due to him. In conjunction with the change in management, it was decided to abandon this line of business and become a holding company with operations at the subsidiary levels only. The Company formed its first wholly owned subsidiary, Smith and Ramsay Brands, LLC (“SRB”), on May 19, 2014. The Company acquired certain perpetual license, know how, product, name license and other capabilities from Smith and Ramsay, LLC, a Nevada company. Smith and Ramsay Brands, LLC is a manufacturer and distributor of flavored liquids for electronic vaporizers and eCigarettes and distributor of vape accessories. SRB manufactures its premium signature brand of eLiquid, Smith and Ramsay, a line that features all natural flavors produced in the United States. SRB rolled out its flagship product to targeted areas in the fall of 2014, following its pre-launch phase. The Smith and Ramsay line was manufactured, packaged and strategically distributed on a limited basis to generate revenue in test markets. The Company’s goal is to maintain a high standard of quality and to insure the production and warehouse environments, processes and procedures continue to meet or exceed guidelines of the FDA, and are in line with International Organization for Standardization (“ISO”) and Current Good Manufacturing Practices (“cGMP”).

 

Basis of Unaudited Interim Financial Information

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and the rules of the Securities and Exchange Commission ("SEC") for interim financial information and the SEC instructions to Form 10-Q, accordingly, they do not include all of the information and footnotes required by U.S. GAAP for completed financial statements. In the opinion of management, all adjustments necessary in order for the financial statements to not be misleading have been reflected herein. Operating results for the interim period ended August 31, 2015 are not necessarily indicative of the results that can be expected for the full year. These unaudited interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements of the Company for the year ended November 30, 2014.

 

Use of Estimates

In preparing financial statements in conformity with U.S. GAAP, management is required 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, as well as the reported amounts of expenses during the reporting period. Due to inherent uncertainty involved in making estimates, actual results reported in future periods may be affected by changes in these estimates. On an ongoing basis, the Company evaluates its estimates and assumptions. These estimates and assumptions include valuing equity securities in share-based payment arrangements, estimating the fair value of equity instruments recorded as derivative liabilities, and estimating the useful lives of amortizable assets and whether impairment charges may apply.

 

Principles of Consolidation

The consolidated financial statements include the accounts of Avalanche International, Corp. and its wholly-owned subsidiary Smith and Ramsay Brands, LLC. All significant intercompany accounts and transactions have been eliminated.

 

Reclassification

The Company reclassified debt issuance costs from current assets to short-term debt, net on the condensed consolidated balance sheets for all periods presented pursuant to early adoption of Accounting Standards Update ("ASU") No. 2015-03 - Simplifying the Presentation of Debt Issuance Costs.

 

Convertible Instruments

The Company bifurcates conversion options from their host instruments and account for them as free standing derivative financial instruments if certain criteria are met. The criteria include circumstances in which (a) the economic characteristics and risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics and risks of the host contract, (b) the hybrid instrument that embodies both the embedded derivative instrument and the host contract is not re-measured at fair value under otherwise applicable generally accepted accounting principles with changes in fair value reported in earnings as they occur and (c) a separate instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument. An exception to this rule is when the host instrument is deemed to be conventional, as that term is described under applicable GAAP.

 7 

 

When the Company has determined that the embedded conversion options should not be bifurcated from their host instruments, the Company records, when necessary, discounts to convertible notes for the intrinsic value of conversion options embedded in debt instruments based upon the differences between the fair value of the underlying common stock at the commitment date of the note transaction and the effective conversion price embedded in the note. Debt discounts under these arrangements are amortized over the term of the related debt to their stated date of redemption. The Company also records, when necessary, deemed dividends for the intrinsic value of conversion options embedded in preferred shares based upon the differences between the fair value of the underlying common stock at the commitment date of the transaction and the effective conversion price embedded in the preferred shares.

 

Recent Accounting Pronouncements

The Company has implemented all new accounting pronouncements that are in effect.  These pronouncements did not have any material impact on the financial statements unless otherwise disclosed, and the Company does not believe that there are any other new accounting pronouncements that have been issued, that might have a material impact on its financial position or results of operations.

 

NOTE 2 – GOING CONCERN

 

The consolidated financial statements have been prepared on a going concern basis which assumes the Company will be able to realize its assets and discharge its liabilities in the normal course of business for the foreseeable future. The Company has an accumulated deficit of $1,941,636 as of August 31, 2015 and a net loss of $1,506,480 for the nine months ended August 31, 2015, raising substantial doubt about the Company’s ability to continue as a going concern. The ability to continue as a going concern is dependent upon the Company generating profitable operations in the future and/or to obtain the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due. Management intends to finance operating costs over the next twelve months with loans and/or private placement of common stock.

 

NOTE 3 – LOAN RECEIVABLE

 

On June 5, 2015, the Company executed a Promissory Note Sale Agreement with Black Mountain Equities, Inc. The agreement transferred and assigned the Convertible Note, dated March 5, 2014 issued by IDS Industries, Inc. (now Aja Cannafacturing, Inc.) to Black Mountain Equities, Inc. The Note was transferred in consideration of payment of $12,500. On the same day the Company executed a Promissory Note with Aja Cannafacturing, Inc. for $12,500. The note is unsecured, accrues interest at 10% and is due December 31, 2015. This loan is currently in default and being renegotiated.

 

 8 

 

NOTE 4 - RELATED PARTY TRANSACTIONS

 

During the nine months ended August 31, 2015, the Company sold $34,017 in products to Vape Nation, generating 87.6% of its revenue. Vape Nation, is 50% owned by MCKEA Holdings, LLC. MCKEA Holdings, LLC is the majority member of Philou Ventures, LLC, which is our controlling shareholder. Kristine L. Ault is the Manager of MCKEA Holdings, LLC and the wife to the Chairman of Avalanche International, Corp.

 

Cross Click Media, Inc. (“Cross Click”) performs sales, marketing, and investor relation services for the Company. MCKEA Holdings, LLC is the controlling shareholder of Cross Click Media, Inc. MCKEA Holdings, LLC is also the majority member of Philou Ventures, LLC, which is our controlling shareholder.

 

Cross Click performed services on behalf of the Company in the amount of $53,679 and $60,000 for the three months ended August 31, 2015 and 2014 and $97,000 and $60,000 for the nine months ended August 31, 2015 and 2014, which are included in advertising and marketing expense in the statement of operations.

 

Loan receivable, related party

 

On June 5, 2015, the Company executed a Promissory Note Sale Agreement with Black Mountain Equities, Inc. The agreement transferred and assigned the Convertible Note, dated March 5, 2014 issued by Cross Click Media, Inc. to Black Mountain Equities, Inc. The Note was transferred in consideration of payment of $12,500. On the same day the Company executed a Promissory Note with Cross Click Media, Inc. for $12,500. The note is unsecured, accrues interest at 10% and is due December 31, 2015.

 

In addition, the Company loaned Cross Click approximately $202,500.  Approximately $54,000 of accounts payable for services performed by Cross Click Media, Inc. was used to reduce to the loan receivable.  The loan is due in one year and bears interest at 12%.  As of August 31, 2015 principal and interest of approximately $161,000 was outstanding.  Principal and interest from the loan of approximately $167,000 are included in Loan Receivable, related party on the balance sheet. This loan is currently in default and being renegotiated.

 

Interest income of $6,062 was included in the statement of operations for the three and nine months ended August 31, 2015. This loan is currently in default and being renegotiated.

 

NOTE 5 – LOANS PAYABLE

 

On November 26, 2014, the Company executed a Promissory Note with Argent Offset, LLC for $12,500. The note included a $500 loan fee, accrued interest at 10%, compounded monthly, and was due December 5, 2014. A late payment fee of $500 per day was to be incurred from December 6, 2014 through December 7, 2014 and then increases to $1,000 per day. On February 1, 2015, the Company entered into a Temporary Forbearance Agreement with Argent. Under the forbearance agreement, the Company agreed to pay a forbearance fee of $7,500. The new loan will bear interest at an annual rate of 10% until due on August 1, 2015. Further, we have agreed to pay 12.5% of any new funds invested in the company until the amount due is paid in full. As of August 31, 2015, $11,500 has been repaid on this loan and an additional $8,129 added, leaving a balance of $17,129 and accrued interest of $1,301. This loan is currently in default and being renegotiated.

 

During the third quarter of fiscal year 2015 Argent Offset, LLC advanced the Company $4,305 to pay for certain operating expenses. The advances are unsecured, non-interest bearing and due on demand.

 

On March 17, 2015, the Company executed a Promissory Note for $10,750 with Strategic IR, Inc. The note bears interest at 10% per annum and is due on or before April 16, 2015. The note includes a one-time loan fee of $1,750 for a total due of $12,500. On April 16, 2015, the interest increased to 21% since the note has not yet been repaid. Accrued interest as of August 31, 2015, is $936. This note is currently in default.

 

On August 10, 2015, the Company executed a Short Term Promissory Note for $5,000 with a third party. The note required a $250 loan fee, was unsecured, accrued interest at 10% and was due August 19, 2015. The note and $23 of accrued interest was repaid in full on August 27, 2015.

 

  Issue Date  Maturity Date  Stated Interest Rate  Principle Balance Outstanding 8/31/2015
Argent Offset, LLC 11/26/14  8/1/15   10%  $17,129 
Argent Offset, LLC various  demand   n/a    4,305 
Strategic IR, Inc. 3/17/15  4/16/2015   21%   12,500 
             $33,934 

 

 9 

  

NOTE 6 – CONVERTIBLE NOTES PAYABLE

 

The following is a summary of outstanding convertible promissory notes as of November 30, 2014:

 

Issue Date Maturity Date Stated Interest Rate Conversion Terms Principle Balance Outstanding 11/30/2014
LG Capital Funding, LLC 11/3/2014 11/3/2015 8% Not yet convertible 63,250

 

Face Value Initial Discount Accumulated Amortization Carrying Value
LG Capital Funding, LLC 63,250 9,040 - 54,210

  

The following is a summary of outstanding convertible promissory notes as of August 31, 2015:

 

   Issue Date  Maturity Date  Stated Interest Rate  Conversion Terms (1)  Principle Balance Outstanding 8/31/2015
LG Capital Funding, LLC   11/3/2014   11/3/2015   8%  $0.24    $                 59,000 (2) 
Dr. Gary Gelbfish   3/27/2015   9/23/2015   10%   0.37    100,000 
JMJ Financial   4/29/2015   4/29/2017   12%   0.24    33,000 
Union Capital, LLC   5/11/2015   5/11/2016   8%   0.24    115,000 
Adar Bays, LL   5/12/2015   5/12/2016   8%   0.24    115,000 
Typenex Co-Investment, LLC   5/29/2015   6/29/2016   10%   0.50    87,500 
Black Mountain Equities, Inc.   6/4/2015   6/4/2016   8%   0.28    55,000 
Lord Abstract, LLC   6/30/2015   6/30/2016   10%   0.24    8,800 
GCEF Opportunity Fund, LLC   6/30/2015  6/30/2016   10%   0.24    27,500 
JMJ Financial   8/27/2015   8/27/2017   12%   0.24    27,500 
                     $628,300 

 

(1)Conversion terms vary between a 30% - 40% discount on lowest or closing prices for a specified time period preceding conversion.
(2)Converted $4,250 of principle to common stock.

 

Accrued interest on the above notes was $26,285 and $374 as of August 31, 2015 and November 30, 2014, respectively.

 

Debt discount expense including original issue discounts for the three and nine months ended August 31, 2015 was $164,685 and $248,863, respectively. Carrying value, of all convertible notes, net of debt discounts as of August 31, 2015 is $276, 312.

 

Based on the fair value of the embedded conversion options on the day of issuance a loss of $55,093 and $356,402 for the three months and nine months ended August 31, 2015 was recorded in the statement of operations.

 10 

  

Principal amounts payable for convertible notes payable and due to related parties for the following fiscal years is as follows:

 

Twelve months ended November 30,   
 2015   $205,655 
 2016    408,800 
 2017    60,500 
 2018    —   
 2019    —   
 Total Future Maturities   $674,955 

 

NOTE 7 – FAIR VALUE MEASUREMENTS

 

The following table classifies the Company’s liabilities measured at fair value on a recurring basis into the fair value hierarchy as of August 31, 2015:

 

 

 

   Fair value measured at August 31, 2015
         Quoted prices in active    Significant other    Significant 
    Fair value at    markets    observable inputs    unobservable inputs 
    August 31, 2015    (Level 1)    (Level 2)    (Level 3) 
Derivative liability  $717,796   $—     $—     $717,796 

 

 There were no transfers between Level 1, 2 or 3 during the nine month period ended August 31, 2015.

 

The following table presents changes in Level 3 liabilities measured at fair value for the nine month period ended August 31, 2015. Both observable and unobservable inputs were used to determine the fair value of positions that the Company has classified within the Level 3 category. Unrealized gains and losses associated with liabilities within the Level 3 category include changes in fair value that were attributable to both observable (e.g., changes in market interest rates) and unobservable (e.g., changes in unobservable long-dated volatilities) inputs.

 

 

 Derivative Liability 
Balance – November 30, 2014 $—   
Initial valuation  627,559 
Change in fair value on derivative  (182,776)
Balance – May 31, 2015  444,783 
     Initial valuation  270,045 
     Change in fair value on derivative  2,968 
Balance – August 31, 2015 $717,796 

 

A summary of quantitative information about significant unobservable inputs (Level 3 inputs) used in measuring the Company’s derivative liabilities that are categorized within Level 3 of the fair value hierarchy for the nine months ended August 31, 2015 is as follows:

 

 

Date of valuation August 31, 2015  Inception
Stock price $0.50    $2.46 – 0.50  
Conversion price  .24 – 0.28    .24 – 1.20 
Volatility (annual)  116% - 373%    111% - 159% 
Risk-free rate  .05% - .75%    .08% - .56% 
Years to maturity  .18 - 2    .5 - 2 

The development and determination of the unobservable inputs for Level 3 fair value measurements and fair value calculations are the responsibility of the Company’s management.

 11 

 

NOTE 8 - COMMON STOCK

 

The Company is authorized to issue 75,000,000 common shares with a par value of $0.001 per share.

 

Private placements

On December 15, 2014, the Company issued 1,600 shares of common stock at a price of $1.25 per share for total cash proceeds of $2,000.

 

Share based compensation

On March 27, 2015, we issued 50,000 shares of common stock to Dr. Gary Gelbfish in connection with the issuance of a convertible promissory note. The fair value of the common stock issued was determined to be $41,349 based its fair value relative to the fair value of the debt issued.

 

During the nine months ended August 31, 2015, the Company issued 440,000 shares of common stock to service providers for total non-cash compensation of $583,125. All shares were valued based on the closing price of the stock on the date of grant.

 

During the nine months ended August 31, 2015, the Company issued 48,990 shares of common stock, in connection with the issuance of convertible promissory notes, for total non-cash compensation of $56,063. All shares were valued based on the closing price of the stock on the date of grant.

 

Convertible debt conversion

On August 19, 2015, the Company issued 18,826 shares of common stock to LG Capital Funding, LLC in conversion of $4,250 of principal and $268 of accrued interest.

 

NOTE 9 - PREFERRED STOCK

 

The Company is authorized to issue 10,000,000 preferred shares with a par value of $0.001 per share.

 

On July 31, 2014, the Board of Directors designated a series of preferred stock titled Class A Convertible Preferred Stock consisting of 50,000 shares. Each share of Class A Convertible Preferred Stock (“preferred stock”) has a stated value of $5.00 per share. The holders of preferred stock have no voting rights. The holders are entitled to receive cumulative dividends at a rate of 10% of the stated value per annum, payable twice a year, subject to the availability of funds and approval by the Board of Directors. In the discretion of the Board of Directors dividends may be paid with common stock. In the event of liquidation or dissolution of the Company each holder of preferred stock shall be entitled to be paid in cash $5 per share plus cumulative dividends if any

 

On January 30, 2015, the Company issued 15,380 shares of preferred stock at a price of $5.00 per share for total cash proceeds of $76,900.

 12 

 

NOTE 10 – LOSS PER SHARE APPLICABLE TO COMMON SHAREHOLDERS

 

The following table sets forth the computations of loss per share amounts applicable to common stockholders for the three and nine months ended August 31, 2015 and 2014. Potentially dilutive shares were excluded from the computation as of August 31, 2015 and 2014 since they would have been anti-dilutive.

 

 

Three Months Ended

August 31,

 

Nine Months Ended

August 31,

  2015  2014  2015  2014
Loss applicable to common stockholders $(733,435)  $(140,266)  $(1,506,480)  $(177,838)
                    
Basic and diluted loss per common share $(0.13)  $(0.03)  $(0.28)  $(0.04)
                    
Weighted average common shares outstanding (1):                   
Basic and diluted shares  5,651,549    5,075,478    5,442,147    5,071,839 
                    
Potentially dilutive securities (2):                   
Convertible notes (3)  2,254,942    —      2,254,942    —   
Convertible preferred stock (3)  528,193    —      528,193    —   

 

(1) Excludes nonvested restricted stock and restricted stock units.
(2) Excludes grants with performance and market conditions as the necessary conditions have not been satisfied.
(3) The impact of the convertible notes and the convertible preferred stock on earnings per share is antidilutive in a period of loss.

 

NOTE 11 – LETTER OF INTENT AND COMMITMENTS

 

On June 12, 2015, we entered into a binding Letter of Intent (the “LOI”) for the purchase of all of the issued and outstanding capital stock of J.S. Technologies, Inc., a California corporation (“JS”).  JS is the manufacturer of Suhr brand guitars and related electronics and accessories.  Under the LOI, we have agreed to purchase all of the issued and outstanding capital stock in JS for a total purchase price of $11,000,000.  The purchase price will be paid, at the option of the individual JS stockholders, in either cash, new convertible preferred stock, or a combination of both.  The new convertible preferred stock to be issued as payment toward the purchase price will have a stated value of $4.00 per share, will accrue dividends at a rate of six percent per year, and will be convertible to common stock at a price of $1.00 per share of common stock.  All shares of the new preferred stock issued and outstanding at thirty-six months after closing will be automatically converted to common stock.  

 

The anticipated closing date of the acquisition will be in in 120 days from the date of the LOI and will be documented by a definitive agreement to be prepared by the parties.  The transaction must close by the later of: (i) 120 days from the date of the LOI, or (ii) 60 days after delivery of audited financial statements and auditor reviewed subsequent quarters for JS, which is a condition to closing.  There are numerous additional conditions to closing of the acquisition, including, but not limited to: (i) execution of the definitive agreement by not less than 65% of JS’s stockholders and compliance with JS’s bylaws and a buy/sell agreement governing its common stock, (ii) our readiness and ability to pay the required portion of the purchase price to each JS stockholder who is ready and willing to sell its shares, and (iii) concurrent closing of an additional agreement under which we will purchase S&J Design Labs, LLC, the affiliated company which owns the building and equipment used in JS’s operations.  As of the date of this filing the auditor reviews of the subsequent quarters have not yet been completed. Both parties have agreed to extend the closing until all conditions have been met.

 

The LOI also contains a “no-shop” provision for the time between the date of the LOI and the defined closing date.  In addition, if we or any of the JS stockholders signing the LOI fail and refuse to close the acquisition on the defined closing date, and the other parties are ready and able to close, the breaching party will be assessed a $250,000 break-up fee. Extensive additional covenants, conditions, representations, and warranties between the parties are included in the LOI. The foregoing is a brief summary of the material terms of the LOI, which should be reviewed in its entirety for additional information.

 

On August 4, 2015, we entered into a Secured Promissory Note (the “Note”) with JS. Under the Note, we intend to lend up to $400,000 to JS in order to provide short-term financing pending our intended acquisition of JS. The Note calls for an initial advance in the amount of $200,000 to be made as soon as practicable. Up to two additional advances of $100,000 each may be made thirty and sixty days, respectively, from the date of the Note. The Note bears interest at a rate of ten percent per year and is due in one year. Monthly payment of interest only are due beginning September 1, 2015. The Note is secured by substantially all of the assets of JS.  Through the date of this filing we have not provided financing associated with this commitment. 

Also on August 4, 2015, we executed an Amendment to the LOI. The original LOI required that the parties settle on a purchase price for affiliated company S&J Design Labs, LLC within thirty days of the LOI. The Amendment allows the parties until the closing date of the acquisition to set a purchase price for S&J Design Labs, LLC.

Our ability to close the acquisition of JS as contemplated by the LOI will be dependent upon us obtaining additional financing through debt and/or equity financing arrangements.  Although management is working to secure the additional capital required to close the transaction, there is a risk that such additional financing will not be available to us on acceptable terms or in the amounts required to close the planned acquisition.

 13 

NOTE 12 – RESTATEMENT

The consolidated financial statements for the year ended November 30, 2014 and for the three and nine months ended August 31, 2014 have been amended to expense the previously capitalized licensing fee. An analysis of those restated numbers are as follows.

November 30, 2014
As Reported Adjustment As Restated
Product license $ 29,250  $ (29,250) $ -
Total assets 66,963 (29,250) 37,713
Accumulated deficit (405,906) (29,250) (435,156)
Total stockholders’ equity (deficit) (197,303) (29,250) (226,553)
Total liabilities and stockholders’ equity 66,963 29,250 37,713

  

For the Three Months Ended

August 31, 2014

For the Nine Months Ended

August 31, 2014

As Reported Adjustment As Restated As Reported Adjustment As Restated
General and administrative $ 70,906 $ 13,500 $ 84,406 $ 107,788 $ 15,750 $ 123,538
Total Operating Expenses 132,099 13,500 145,599 168,981 15,750 184,731
Net loss from operations $ (126,766) $ (13,500) $ (140,266) $ (162,088) $ (15,750) $ (177,838)

 

 

For the Three Months Ended

May 30, 2015

For the Six Months Ended

May 30, 2015

As Reported Adjustment As Restated As Reported Adjustment As Restated
General and administrative $ 363,769 $ 11,250 $ 375,019 $ 537,735 $ 24,750 $ 562,485
Total Operating Expenses 363,769 11,250 375,019 544,099 24,750 568,849
Net loss from operations $ (570,226) $ (11,250) $ (581,476) $ (748,295) $ (24,750) $ (773,045)

  

NOTE 13 - SUBSEQUENT EVENTS

 

On September 8, 2015, the Company issued 22,239 shares of common stock to LG Capital Funding, LLC in conversion of $5,000 of principal and $338 of accrued interest.

 

On September 21, 2015, pursuant to individual Notices of Conversion executed by each of the holders of its Class A Convertible Preferred Stock, the Corporation exchanged all 29,380 shares of its issued and outstanding Class A Convertible Preferred Stock, as well as accrued dividends thereon in the amount of $11,556, for a total of 528,193 shares common stock.

 

On October 8, 2015, the Company entered into a Promissory Note (the “Note”) with Studio Capital, LLC. (“Studio”). Under the Note, the Company borrowed the sum of $125,000. The Note featured an original issue discount of $25,000, resulting in net funding to the Company of $100,000. The Note is due in six (6) months and does not bear interest. As additional consideration to Studio, the Company agreed to issue it five thousand (5,000) shares of common stock.

 

On October 8, 2015, the Company issued 30,000 shares of common stock to an individual for consideration of personally guaranteeing the Promissory Note to Studio Capital, LLC.

 

On December 2, 2015, the Company entered into a Promissory Note (the “Note”) with a third party. Under the Note, the Company borrowed the sum of $125,000. The Note featured an original issue discount of $25,000, resulting in net funding to the Company of $100,000. The Note is due in sixty (60) days and does not bear interest. As additional consideration to the investor, the Company agreed to issue a warrant to purchase up to 100,000 shares of the Company’s common stock at a price of $0.01 per share, exercisable for a period of one year.

 

On December 2, 2015, the Company entered into a Promissory Note (the “Note”) with a third party. Under the Note, the Company borrowed the sum of $125,000. The Note featured an original issue discount of $25,000, resulting in net funding to the Company of $100,000. The Note is due in sixty (60) days and does not bear interest. As additional consideration to the investor, the Company agreed to issue a warrant to purchase up to 100,000 shares of the Company’s common stock at a price of $0.01 per share, exercisable for a period of one year.

 

December 10, 2015, the Company entered into a Subscription Agreement with a third party, whereby it sold 25,000 shares of common stock for $5,000.

 

In January of 2016, the Company entered into Amendments to its promissory notes with Adar Bays, Union Capital, LG Capital, and Typenex (the “Amendments”).In general, each of the Amendments stipulates that the lender will, for a period of ninety (90) days, convert no more than ten percent (10%) of the principal amount due under their notes in any thirty (30) day period. In addition, the specific Amendments also provide as follows:

 

·The Adar Bays and Union Capital Amendments each provide that the conversion discount shall be increased by 5%, such that these notes are convertible at 55%, rather than 60%, of market price as defined in the notes. Further, the pricing period, or “look-back” for determining the conversion price has been extended from 20 days to 25 days, and the pre-payment penalty has been increased to 150%.

 

·The LG Capital Amendment also calls for additional consideration to LG Capital in the form of warrants to purchase 75,000 shares of our common stock at a price of $0.30 per share, exercisable for 3 years. Also, we will be permitted to re-pay the LG Capital note with the applicable penalty set forth in the note for a pre-payment made between 91 and 180 days after issue.

 

 

 14 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

Forward-Looking Statements

 

Certain statements, other than purely historical information, including estimates, projections, statements relating to our business plans, objectives, and expected operating results, and the assumptions upon which those statements are based, are “forward-looking statements.” These forward-looking statements generally are identified by the words “believes,” “project,” “expects,” “anticipates,” “estimates,” “intends,” “strategy,” “plan,” “may,” “will,” “would,” “will be,” “will continue,” “will likely result,” and similar expressions. Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties which may cause actual results to differ materially from the forward-looking statements. Our ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Factors which could have a material adverse effect on our operations and future prospects on a consolidated basis include, but are not limited to: changes in economic conditions, legislative/regulatory changes, availability of capital, interest rates, competition, and generally accepted accounting principles. These risks and uncertainties should also be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements.

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

Company Overview and Description of Business

 

Avalanche International Corp., a Nevada corporation, is a holding company with one subsidiary, Smith and Ramsay Brands, LLC. We have acquired certain intellectual property, knowhow, product and capability from Smith and Ramsay, LLC, a Nevada company. Smith and Ramsay Brands, LLC (SRB) is a manufacturer and distributor of flavored liquids for electronic vaporizers and eCigarettes and accessories. SRB currently has a single brand of premium vape liquid, its signature brand Smith and Ramsay, which began a targeted rollout mid-Fall of 2014 following its pre-launch phase. The Smith and Ramsay line was manufactured, packaged and strategically distributed on a limited basis to generate revenue in test markets. Due to the feedback we received during our test marketing, from our observations of the changing consumer demand in the marketplace and our direct experience with our customers, the Company sought and received Board approval to establish Puff Systems. Puff Systems is a new business unit focused on the manufacturing and distribution of vape devices including pens and vape accessories. Puff Systems was launched as a department of Smith and Ramsay Brands so it could minimize costs while developing its business model and proving concept. The efforts and success of Puff Systems are being evaluated by the Company’s management to determine the unit’s future path. While the Company has chosen to focus primarily on its subsidiary’s business model, it reserves the right to explore other opportunities that either may leverage its current activities, expand organically into new revenue streams or enter new industries that will provide added value for its shareholders. This includes the pursuit of a merger or acquisition of existing businesses from other industries with proceeds from new capital raised.

 

“Vape” is the common term used to refer to the use of vaporizers by consumers which has grown out of the increasing popular use of electronic cigarettes as an alternative to traditional cigarette and other tobacco uses. The use of electronic cigarettes and vaporizers has been accelerated by state and local legislation outlawing the smoking of tobacco products in public places. In 2012, Goldman Sachs declared electronic cigarettes one of the top 10 disruptive technologies to watch.

 

This highly competitive and innovative marketplace has made its mark and set a consumer standard by offering a wide and colorful array of varying flavors, nicotine levels and other attributes to produce a truly unique and customized experience. We believe that, as this market matures, there will be a natural rising demand for better quality products and wider range of varying flavors that is appetizing to an even more diverse consumer base. Through Smith and Ramsay Brands, we plan to provide a wide variety of high quality vapor liquids to anticipate and lead this demand in a commercial manner to assure product integrity and consistency.

 

It is the plan of SRB to move into the market place during 2015 and over the next twenty four (24) months following its launch mid-Fall of 2014 of its Smith and Ramsay signature brand upon threshold funding being reached. Management’s goal is to expand aggressively with additional flavors in the signature brand, and expanding through additional new brands and the acquisition and distribution of signature and non-signature accessories. The signature line of premium vape liquid will focus on the Vape store and traditional smoke shop markets, while another brand product line and offerings will focus on the convenience store and gas station marketplace, and other lines will target ethnic-specific markets, etc. Additional products within these brand lines as well as external to these lines will focus on combination hardware/liquid market that includes disposable devices with preloaded liquid, and/or preloaded cartridges for use in specific types of devices.

 15 

 

Intellectual Property

 

We have purchased the following intellectual property from Smith and Ramsay, LLC:

 

Patent / Trademark/knowhow Patent Title / Trademark
Recipe for Toasty Monkey Trademark currently in filing process
Recipe for Tricky Trademark currently in filing process
Recipe for Java Hopper Trademark currently in filing process
Recipe for Peaches and Mango Trademark currently in filing process
Recipe for Berries and Cream Trademark currently in filing process
Smith and Ramsay Trademark currently in filing process
Smith and Ramsay Brands Trademark currently in filing process

 

Domain Names

 

www.AvalancheInternationalCorp.com

www.Smith AndRamsay.co

www.SmithAndRamsay.com

www.SmithAndRamsayBrands.co

www.SmithAndRamsayBrands.com

www.SmithAndRamsayBrands.info

www.SmithAndRamsayBrands.net

www.SmithAndRamsayBrands.org

www.SmithNRamsay.com

www.SmithAndRamsay.com

 

Employees

 

As of August 31, 2015, we employed two permanent management level personnel and work with outside labor and consultants to complete the tasks at hand. We may require additional employees in the future. There is intense competition for capable, experienced personnel and there is no assurance the Company will be able to obtain new qualified employees when required.

 

Letter of Intent for Acquisition of J.S. Technologies, Inc.

 

On June 12, 2015, we entered into a binding Letter of Intent (the “LOI”) for the purchase of all of the issued and outstanding capital stock of J.S. Technologies, Inc., a California corporation (“JS”).  JS is the manufacturer of Suhr brand guitars and related electronics and accessories.  Under the LOI, we have agreed to purchase all of the issued and outstanding capital stock in JS for a total purchase price of $11,000,000.  The purchase price will be paid, at the option of the individual JS stockholders, in either cash, new convertible preferred stock, or a combination of both.  The new convertible preferred stock to be issued as payment toward the purchase price will have a stated value of $4.00 per share, will accrue dividends at a rate of six percent per year, and will be convertible to common stock at a price of $1.00 per share of common stock.  All shares of the new preferred stock issued and outstanding at thirty-six months after closing will be automatically converted to common stock.  

 

The anticipated closing date of the acquisition will be in in 120 days from the date of the LOI and will be documented by a definitive agreement to be prepared by the parties.  The transaction must close by the later of: (i) 120 days from the date of the LOI, or (ii) 60 days after delivery of audited financial statements and auditor reviewed subsequent quarters for JS, which is a condition to closing.  There are numerous additional conditions to closing of the acquisition, including, but not limited to: (i) execution of the definitive agreement by not less than 65% of JS’s stockholders and compliance with JS’s bylaws and a buy/sell agreement governing its common stock, (ii) our readiness and ability to pay the required portion of the purchase price to each JS stockholder who is ready and willing to sell its shares, and (iii) concurrent closing of an additional agreement under which we will purchase S&J Design Labs, LLC, the affiliated company which owns the building and equipment used in JS’s operations.  As of the date of this filing the auditor reviews of the subsequent quarters have not yet been completed. Both parties have agreed to extend the closing until all conditions have been met.

 16 

 

The LOI also contains a “no-shop” provision for the time between the date of the LOI and the defined closing date.  In addition, if we or any of the JS stockholders signing the LOI fail and refuse to close the acquisition on the defined closing date, and the other parties are ready and able to close, the breaching party will be assessed a $250,000 break-up fee. Extensive additional covenants, conditions, representations, and warranties between the parties are included in the LOI. The foregoing is a brief summary of the material terms of the LOI, which should be reviewed in its entirety for additional information.

 

On August 4, 2015, we entered into a Secured Promissory Note (the “Note”) with JS. Under the Note, we intend to lend up to $400,000 to JS in order to provide short-term financing pending our intended acquisition of JS. The Note calls for an initial advance in the amount of $200,000 to be made as soon as practicable. Up to two additional advances of $100,000 each may be made thirty and sixty days, respectively, from the date of the Note. The Note bears interest at a rate of ten percent per year and is due in one year. Monthly payment of interest only are due beginning September 1, 2015. The Note is secured by substantially all of the assets of JS. Through the date of this filing we have not provided financing associated with this commitment. Through the date of this filing we have not provided financing associated with this commitment. 

 

Also on August 4, 2015, we executed an Amendment to the LOI. The original LOI required that the parties settle on a purchase price for affiliated company S&J Design Labs, LLC within thirty days of the LOI. The Amendment allows the parties until the closing date of the acquisition to set a purchase price for S&J Design Labs, LLC.

 

Our ability to close the acquisition of JS as contemplated by the LOI will be dependent upon us obtaining additional financing through debt and/or equity financing arrangements.  Although management is working to secure the additional capital required to close the transaction, there is a risk that such additional financing will not be available to us on acceptable terms or in the amounts required to close the planned acquisition.

 

Results of Operations for the three months ended August 31, 2015 compared to the three months ended August 31, 2014.

 

Revenue

For the three months ended August 31, 2015, revenue was $169 compared to $6,431 for the three months ended August 31, 2014. In the current period sales have been largely put on hold while the Company focuses its efforts in other areas.

 

Advertising and marketing – while there were no costs incurred in the current period ended August 31, 2015, for advertising and marketing, in the prior period for the three months ended August 31, 2014 we incurred $61,193 of advertising and marketing costs in connection with the promotion of our new line of business and products.

 

General and administrative - for the three months ended August 31, 2015 general and administrative expense were $488,466 compared to $84,406 for the three months ended August 31, 2014.

 

Major components of G&A expense consists of the following:

Compensation expense – for the three months ended August 31, 2015, compensation expense for our CFO and CEO totaled $28,858 compared to $18,360 for the three months ended August 31, 2014. Compensation is determined by the amount of time our officers spend working directly on Company matters. In the current period that time has increased due to reporting requirements and efforts to acquire J.S. Technologies, Inc.

 

Professional fees – Professional fees for the three months ended August 31, 2015 were $28,974 compared to $16,424 for the three months ended August 31, 2014. The increase is due to increased legal and audit fees associated with compliance and filing obligations.

 

Stock for services – Stock is issued for various services by the company in lieu of cash compensation. For the three months ended August 31, 2015 the Company incurred $331,292 of total non-cash expense as a result of issuing stock for services. No stock was issued for services in the prior period.

 

Other income and expense

During the three months ended August 31, 2015 we incurred $28,208 of interest expense on loans, $164,685 of expense for amortization of debt discount, expense for loss on issuance of convertible debt of $55,093, had a loss on the change in fair market value of our derivative liability of $2,968 and interest revenue of $6,074, none of which we had in the prior year. With the exception of the interest revenue these new revenues and expenses are a result of the convertible debt acquired.

 

Net loss

The Company had a net loss of $733,435 for the three months ended August 31, 2015 compared to a net loss of $140,266 for the three months ended August 31, 2014. The increase in net loss is mainly due to the increases in non-cash expense for stock for services and our other expenses associated with the convertible debt.

 17 

 

Results of Operations for the nine months ended August 31, 2015 compared to the nine months ended August 31, 2014.

 

Revenue

For the nine months ended August 31, 2015, revenue was $38,831 compared to $10,172 for the nine months ended August 31, 2014. For the nine months ended August 31, 2014 we had just started to sell our new vape liquid. Revenue in the current period consists of sales of our vape liquid as well as vape pens and accessories.

 

Advertising and marketing – for the nine months ended August 31, 2015 advertising and marketing expense was $6,364 compared to $61,193 for the nine months ended August 31, 2014. In the prior year more funds were allocated to the promotion of our new vape business and products. In the current year efforts and funds are being redirected to other areas of growing the business such as the pending acquisition of J.S. Technologies, Inc.

 

General and administrative - for the nine months ended August 31, 2015 general and administrative expense were $1,050,951 compared to $123,538 for the nine months ended August 31, 2014.

 

Major components of G&A expense consists of the following:

Compensation expense – for the nine months ended August 31, 2015, compensation expense for our CFO and CEO totaled $65,593 compared to $18,360 for the nine months ended August 31, 2014. Compensation is determined by the amount of time our officers spend working directly on Company matters. In the current period that time has increased due to reporting requirements and efforts to acquire J.S. Technologies, Inc.

 

Professional fees – Professional fees for the nine months ended August 31, 2015 were $85,467 compared to $28,617 for the nine months ended August 31, 2014. The increase is due to increased legal and audit fees associated with compliance and filing obligations.

 

Stock for services – Stock is issued for various services by the company in lieu of cash compensation. For the nine months ended August 31, 2015 the Company incurred $583,125 of total non-cash expense as a result of issuing stock for consulting services. No stock was issued for services in the prior period.

 

Other income and expense

During the nine months ended August 31, 2015 we incurred $39,063 of interest expense on loans, $248,863 of expense for amortization of debt discount, expense for loss on issuance of convertible debt of $356,402 and had a gain on the change in fair market value of our derivative liability of $179,808 and interest revenue of $6,074, none of which we had in the prior year. With the exception of the interest revenue these new revenues and expenses are a result of the convertible debt acquired.

 

Net loss

The Company had a net loss of $1,506,480 for the nine months ended August 31, 2015 compared to a net loss of $177,838 for the nine months ended August 31, 2014. The increase in net loss is mainly due to the increases in non-cash expense for stock for services and our other expenses associated with the convertible debt.

 

Liquidity and Capital Resources

 

Our management currently believes that we may not have sufficient working capital needed to meet our current fiscal obligations. In order to continue to meet our fiscal obligations beyond the next twelve months, we plan to pursue various financing alternatives including, but not limited to, raising capital through the equity markets and debt financing.

 

Should we not be successful at raising capital through the issuance of capital stock, we may consider raising capital by the issuance of debt. However, unless the appropriate features, such as convertible options, are attached to the debt instruments, this form of financing is less desirable until such time as we may be in a position to reasonably foresee the generation of cash flow to service and repay debt.

 

As of August 31, 2015, we had an accumulated deficit of $1,941,636 and a net loss for the nine months ended August 31, 2015 of $1,506,480. For the nine months ended August 31, 2015, net cash used in operating activities was $410,533, net cash used for investing activities was $172,995 and we had net cash from financing activities of $581,937. 

 

On October 8, 2015, we entered into a Promissory Note (the “Note”) with Studio Capital, LLC. (“Studio”). Under the Note, we borrowed the sum of $125,000. The Note featured an original issue discount of $25,000, resulting in net funding to us of $100,000. The Note is due in six (6) months and does not bear interest. As additional consideration to Studio, we have agreed to issue it five thousand (5,000) shares of our common stock. Our liability under the Note has been guaranteed by our Chairman, Milton C. Ault III and by one of our shareholders, Steven Jon Smith.

 18 

 

Going Concern

 

These interim unaudited consolidated financial statements have been prepared on the going concern basis which assumes that adequate sources of financing will be obtained as required and that our assets will be realized and liabilities settled in the ordinary course of business. Accordingly, the interim unaudited consolidated financial statements do not include any adjustments related to the recoverability of assets and classification of assets and liabilities that might be necessary should we not be unable to continue as a going concern.

 

Off Balance Sheet Arrangements

 

As of August 31, 2015, there were no off balance sheet arrangements.

 

Critical Accounting Policies

 

In December 2001, the SEC requested that all registrants list their most “critical accounting polices” in the Management Discussion and Analysis. The SEC indicated that a “critical accounting policy” is one which is both important to the portrayal of a company’s financial condition and results, and requires management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. Currently, we do not believe that any accounting policies fit this definition.

 

Recently Issued Accounting Pronouncements

 

We do not expect the adoption of recently issued accounting pronouncements to have a significant impact on our results of operations, financial position or cash flow.

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk

 

A smaller reporting company is not required to provide the information required by this Item.

 

Item 4. Controls and Procedures

 

Management has evaluated the effectiveness of our internal control over financial reporting as of August 31, 2015 based on the control criteria established in a report entitled Internal Control – Integrated Framework published by the Committee of Sponsoring Organizations of the Treadway Commission, known as COSO. Based on our assessment and those criteria, our management has concluded that the Company has inadequate controls and procedures over financial reporting due to the lack of segregation of duties and lack of a formal review process that includes multiple levels of review. Management believes that the material weakness in its controls and procedures did not have an effect on our financial results.

 

Internal control over financial reporting cannot provide absolute assurance of achieving financial reporting objectives because of its inherent limitations. It is a process that involves human diligence and compliance and is subject to lapses in judgment and breakdowns resulting from human failures. It also can be circumvented by collusion or improper management override.

 

Because of such limitations, there is a risk that material misstatements may not be prevented or detected on a timely basis by internal control over financial reporting. However, these inherent limitations are known features of the financial reporting process. Therefore, it is possible to design into the process certain safeguards to reduce, though not eliminate, this risk. Management is responsible for establishing and maintaining adequate internal control over our financial reporting.

 

This report does not include an attestation of our registered public accounting firm regarding internal control over financial reporting, pursuant to temporary rules of the Securities and Exchange Commission that permit us to provide only management’s report in this annual report.

 

There have not been any changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the third quarter of FY 2015 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

Changes in Internal Control over Financial Reporting

 

We have not had any changes or disagreements with our accountants required to be disclosed pursuant to Item 304 of Regulation S-K.

 19 

 

PART II – OTHER INFORMATION

 

Item 1. Legal Proceedings

 

We are not a party to any pending legal proceeding. We are not aware of any pending legal proceeding to which any of our officers, directors, or any beneficial holders of 5% or more of our voting securities are adverse to us or have a material interest adverse to us.

 

Item 1A. Risk Factors

 

A smaller reporting company is not required to provide the information required by this Item.

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds -

 

December 10, 2015, the Company entered into a Subscription Agreement with a third party, whereby it sold 25,000 shares of common stock for $5,000. Proceeds from the sale were used for general operating expenses.

 

Item 3. Defaults upon Senior Securities

 

None

 

Item 4. Mine Safety Disclosures

 

Not applicable.

 

Item 5. Other Information

 

None

 

Item 6. Exhibits

 

Exhibit Number Description of Exhibit
10.1 Secured Promissory Note issued to Lori Livingston
10.2 Amendment to Secured Convertible Promissory Note with Typenex Co-Investment, Inc.
10.3 First Amendment to 8% Convertible Redeemable Note with LG Capital Funding, LLC
10.4 First Amendment to 8% Convertible Redeemable Notes with Union Capital, LLC
10.5 First Amendment to 8% Convertible Redeemable Notes with Adar Bays, LLC
31.1 Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2 Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1 Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101 The following materials from the Company’s Quarterly Report on Form 10-Q for the quarter ended August 31, 2015 formatted in Extensible Business Reporting Language (XBRL).

 

 20 

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

Avalanche International, Corp.
Date: January 25, 2016
   
By:

/s/ Philip Mansour

Philip Mansour

Title: Chief Executive Officer and Director

 

Date: January 25, 2016
   
By:

/s/ Rachel Boulds

Rachel Boulds

Title: Chief Financial Officer
 21 
   

 



AVALANCHE INTERNATIONAL CORP.

SECURED PROMISSORY NOTE

 

 

Original Principal Amount: US $125,000 Las Vegas, Nevada
Consideration Paid at Close: US $100,000 December 2, 2015

 

This Secured Promissory Note (the “Note”), dated as of December 2, 2015 is made by Avalanche International Corp., a Nevada corporation, (“Maker”), in favor of Lori Livingston (“Holder”).

 

For good and valuable consideration, the Maker hereby makes and delivers this Note in favor of Holder, and hereby agrees as follows:

 

1.                   Principal Obligation and Interest; Due Date; Original Issue Discount. For value received, Maker promises to pay to Holder or her assigns, at such place as Holder may designate in writing, in currently available funds of the United States, the principal sum of One Hundred Twenty-five Thousand Dollars ($125,000). Except in the event of a default, Maker’s obligation under this Note shall not accrue interest. The Original Issue Discount (“OID”) under this Note is $25,000. Promptly upon the parties’ execution of this Note, Holder shall wire $100,000 (representing the amount of the Note, less the OID) to the Maker as specified in Exhibit A. All sums due under this Note shall be paid in full on or before sixty (60) days from the date of this Note (the “Due Date”).

 

2.                   Warrant to be Issued as Additional Consideration. As additional consideration to Holder, the Maker shall issue to the Holder a warrant to purchase up to 100,000 shares of the Company’s common stock at a price of $0.01 per share, exercisable for a period of one year. Shares issuable under the Warrant shall have “piggy-back” registration rights as set forth in the Warrant. The Warrant shall have the form and substance set forth in Exhibit B.

 

3. Payment Terms; Use of Proceeds. The principal amount of this Note shall be due and payable, in whole or in several parts, as applicable, upon the Maker’s receipt of any and all additional investments in the Maker subsequent to the date of this Note, whether effected through the sale of capital stock of the Maker or by the Maker’s issuance of additional debt. The net proceeds of all such investments in the Maker, when received by the Maker, shall be paid to Holder within twenty-four (24) hours after the funds from such investments have cleared and become available to the Maker, until the principal amount of this Note is paid in full. All funds currently held in an attorney escrow and intended for investment in the Maker shall not, when so invested, be subject to this provision.

 

Maker shall have the right to prepay all or any part of the principal under this Note without penalty.

 

Maker is the Holder of a certain Secured Promissory Note dated July 28, 2015 and issued from JS Technologies, Inc. to Maker (the “JS Note”). All proceeds of this Note shall be used by the Maker to fund an advance to JS Technologies, Inc. under the JS Note, less any origination fee applicable thereunder.

 

4. Grant of Security Interest. As collateral security for the prompt, complete, and timely satisfaction of all indebtedness, liabilities, duties, and obligations of Maker to Holder evidenced by or arising under this Note, and all attorneys’ fees, costs and expenses incurred by Holder in the collection or enforcement of the same (collectively, the “Obligations”), Maker hereby pledges, assigns and grants to Holder a continuing security interest and lien in all of Maker’s right, title and interest in and to that certain Secured Promissory Note dated July 28, 2015 and issued from JS Technologies, Inc. to Maker, a true and correct copy of which is attached hereto as Exhibit C (the “Collateral”). As applicable, the terms of this Note with respect to Maker’s granting of a security interest in the Collateral to Holder shall be deemed to be a security agreement under applicable provisions of the Uniform Commercial Code (“UCC”), with Maker as the debtor and Holder as the secured party.

   
   

 

5. Perfection. Upon the execution and delivery of this Note, Maker authorizes Holder to file such financing statements and other documents in such offices as shall be necessary or as Holder may reasonably deem necessary to perfect and establish the priority of the liens granted by this Note, including any amendments, modifications, extensions or renewals thereof. Maker agrees, upon Holder’s request, to take all such actions as shall be necessary or as Holder may reasonably request to perfect and establish the priority of the liens granted by this Note, including any amendments, modifications, extensions or renewals thereof.

 

6. Representations and Warranties of Maker. Maker hereby represents and warrants the following to Holder:

 

a.                   Maker and those executing this Note on its behalf have the full right, power, and authority to execute, deliver and perform the Obligations under this Note, which are not prohibited or restricted under the articles of incorporation or bylaws of Maker. This Note has been duly executed and delivered by an authorized officer of Maker and constitutes a valid and legally binding obligation of Maker enforceable in accordance with its terms.

 

b.                   The execution of this Note and Maker’s compliance with the terms, conditions and provisions hereof does not conflict with or violate any provision of any agreement, contract, lease, deed of trust, indenture, or instrument to which Maker is a party or by which Maker is bound, or constitute a default thereunder or result in the imposition of any lien, charge, encumbrance, claim or security interest of any nature whatsoever upon any of the Collateral.

 

c.                   The security interest granted hereby in and to the Collateral constitutes a present, valid, binding and enforceable security interest as collateral security for the Obligations, and, except as to leased equipment or purchase-money encumbrances existing as of the date of this Note as expressly disclosed to Holder in writing, such interests, upon perfection, will be senior and prior to any liens, encumbrances, charges, title defects, interests and rights of any others with respect to such Collateral.

 

7. Covenants of Maker. For so long as any Obligations remain outstanding:

 

a.                   Maker shall not sell, assign or transfer any of the Collateral, or any part thereof or interest therein;

 

b.                   Maker shall pay or cause to be paid promptly when due all taxes and assessments on the Collateral; and

 

c.                   Maker shall keep Holder apprised, in writing, as to the current location of the Collateral, providing Holder with current information with respect to the Collateral so the Holder may perfect and maintain the priority of its security interest therein.

 

8. Use of Collateral. For so long as no event of default shall have occurred and be continuing under this Note, Maker shall be entitled to use and possess the Collateral and to exercise its rights, title and interest in all contracts, agreements, and licenses subject to the rights, remedies, powers and privileges of Holder under this Note and to such use, possession or exercise not otherwise constituting an event of default. Notwithstanding anything herein to the contrary, Maker shall remain liable to perform its duties and obligations under the contracts and agreements included in the Collateral in accordance with their respective terms to the same extent as if this Note had not been executed and delivered; the exercise by Holder of any right, remedy, power or privilege in respect of this Note shall not release the Maker from any of its duties and obligations under such contracts and agreements; and Holder shall have no duty, obligation or liability under such contracts and agreements included in the Collateral by reason of this Note, nor shall Holder be obligated to perform any of the duties or obligations of Maker under any such contract or agreement or to take any action to collect or enforce any claim (for payment) under any such contract or agreement.

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9. Defaults. The following shall be events of default under this Note:

 

a.                   Maker’s failure to remit any payment under this Note on before the date due, if such failure is not cured in full within five (5) days of written notice of default;

 

b.                   Maker’s failure to make final payment of all sums due and owing under this Note on or before the Due Date;

 

c.                   Maker’s failure to perform or breach of any non-monetary obligation or covenant set forth in this Note or in any other written agreement between Maker and Holder if such failure is not cured in full within ten (10) days following delivery of written notice thereof from Holder to Maker;

 

d.                   If Maker is dissolved, whether pursuant to any applicable articles of incorporation or bylaws, and/or any applicable laws, or otherwise;

 

e.                   The commencement by Maker of any action or proceeding which affects the Collateral or title thereto or the interest of Holder therein, including, but not limited to eminent domain, insolvency, code enforcement or arrangements or proceedings involving a bankrupt or decedent;

 

f.                    The entry of a decree or order by a court having jurisdiction in the premises adjudging the Maker bankrupt or insolvent, or approving as properly filed a petition seeking reorganization, arrangement, adjustment or composition of or in respect of the Maker under the federal Bankruptcy Code or any other applicable federal or state law, or appointing a receiver, liquidator, assignee or trustee of the Maker, or any substantial part if its property, or ordering the winding up or liquidation of its affairs, and the continuance of any such decree or order unstayed and in effect for a period of twenty (20) days;

 

g.                   Maker’s institution of proceedings to be adjudicated a bankrupt or insolvent, or the consent by it to the institution of bankruptcy or insolvency proceedings against it, or its filing of a petition or answer or consent seeking reorganization or relief under the federal Bankruptcy Code or any other applicable federal or state law, or its consent to the filing of any such petition or to the appointment of a receiver, liquidator, assignee or trustee of the company, or of any substantial part of its property, or its making of an assignment for the benefit of creditors or the admission by it in writing of its inability to pay its debts generally as they become due, or the taking of corporate action by the Maker in furtherance of any such action; or

 

h.                   The Maker’s common stock is suspended or delisted for trading on the Over the Counter Bulletin Board market or such other market on which such common stock is listed or quoted.

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10. Rights and Remedies of Holder. Upon the occurrence of an event of default by Maker under this Note, the principal amount due under this Note shall immediately increase to 120% of the principal balance immediately prior to the occurrence of the event of default (the “Default Effect”). In addition, upon the occurrence of an event of default by Maker under this Note, interest shall accrue on all sums due under this Note, as adjusted to include the Default Effect, at the rate of twenty-nine percent (29%) per annum (the “Default Rate”). The Default Effect, and the accrual of interest at the Default Rate, shall automatically apply upon the occurrence of an event of default without the need for any party to give any notice or take any other action. In addition to the Default Effect, the accrual of interest at the Default Rate, and all other rights and remedies at law or in equity, Holder may also exercise any one or more of the following rights and remedies:

 

a.                   Pursue and enforce all of the rights and remedies provided to a secured party with respect to the Collateral under the Uniform Commercial Code.

 

b.                   Make such appearance, disburse such sums, and take such action as Holder deems necessary, in its sole discretion, to protect Holder’s interest, including but not limited to the disbursement of attorneys’ fees. Any amounts disbursed by Holder pursuant to this Section shall become additional indebtedness of the Maker secured by the Collateral and shall be immediately due and payable. Nothing contained in this Section shall require Holder to incur any expense or take any action.

 

c.                   Require Maker to assemble the Collateral and make it available to the Maker at the place to be designated by the Holder which is reasonably convenient to both parties. The Holder may sell all or any part of the Collateral as a whole or in part either by public auction, private sale, or other method of disposition. The Holder may bid at any public sale on all or any portion of the Collateral. Unless the Collateral threatens to decline speedily in value, Holder shall give Maker reasonable notice of the time and place of any public sale or of the time after which any private sale or other disposition of the Collateral is to be made, and notice given at least 10 days before the time of the sale or other disposition shall be conclusively presumed to be reasonable.

 

d.                   Pursue any other rights or remedies available to Holder at law or in equity.

 

11. Full Recourse. The liability of Maker for the Obligations shall not be limited to the Collateral, and Maker shall have full liability therefor beyond the Collateral.

 

12. Assignability; Lost Stolen of Mutilated Note. The Maker may not assign this Note. This Note will be binding upon the Maker and its successors and will inure to the benefit of the Holder and her successors and assigns and may be assigned by the Holder to anyone of her choosing without Maker’s approval. Upon receipt by the Maker of evidence reasonably satisfactory to the Maker of the loss, theft, destruction or mutilation of this Note, and, in the case of loss, theft or destruction, of any indemnification undertaking by the Holder to the Maker in customary form and, in the case of mutilation, upon surrender and cancellation of this Note, the Maker shall execute and deliver to the Holder a new Note representing the outstanding principal amount due.

 

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13. Representation of Counsel. Holder acknowledges that she has consulted with or has had the opportunity to consult with Holder’s legal counsel prior to executing this Note. This Note has been freely negotiated by Maker and Holder and any rule of construction to the effect that any ambiguities are to be resolved against the drafting party shall not be employed in the interpretation of this Note.

 

14. Choice of Laws; Actions. This Note shall be constructed and construed in accordance with the internal substantive laws of the State of Nevada, without regard to the choice of law principles of said State. Maker acknowledges that this Note has been negotiated in Clark County, Nevada. Accordingly, the exclusive venue of any action, suit, counterclaim or cross claim arising under, out of, or in connection with this Note shall be the state or federal courts in Clark County, Nevada. Maker hereby consents to the personal jurisdiction of any court of competent subject matter jurisdiction sitting in Clark County, Nevada.

 

15. Usury Savings Clause. Maker expressly agrees and acknowledges that Maker and Holder intend and agree that this Note shall not be subject to the usury laws of any state other than the State of Nevada. Notwithstanding anything contained in this Note to the contrary, if collection from Maker of interest at the rate set forth herein would be contrary to applicable laws of such State, then the applicable interest rate upon default shall be the highest interest rate that may be collected from Maker under applicable laws at such time.

 

16. Costs of Collection. Should the indebtedness represented by this Note, or any part hereof, be collected at law, in equity, or in any bankruptcy, receivership or other court proceeding, or this Note be placed in the hands of any attorney for collection after default, Maker agrees to pay, in addition to the principal and interest due hereon, all reasonable attorneys’ fees, plus all other costs and expenses of collection and enforcement, including any fees incurred in connection with such proceedings or collection of the Note and/or enforcement of Holder’s rights.

 

17. Miscellaneous.

 

a.                   This Note shall be binding upon Maker and shall inure to the benefit of Holder and its successors, assigns, heirs, and legal representatives.

 

b.                   Any failure or delay by Holder to insist upon the strict performance of any term, condition, covenant or agreement of this Note, or to exercise any right, power or remedy hereunder shall not constitute a waiver of any such term, condition, covenant, agreement, right, power or remedy.

 

c.                   Any provision of this Note that is unenforceable shall be severed from this Note to the extent reasonably possible without invalidating or affecting the intent, validity or enforceability of any other provision of this Note.

 

d.                   This Note may not be modified or amended in any respect except in a writing executed by the party to be charged.

 

e.                   Neither party may assign this Note without the express written consent of the other party.

 

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f.                    Time is of the essence.

 

18. Notices. All notices required to be given under this Note shall be given at the following address, which may be changed by the applicable party on five (5) business days advance written notice:

 

To Maker: Avalanche International, Corp.

5940 S. Rainbow Avenue

Las Vegas, NV 89118

Attn: Rachel Boulds, CFO

Email:rachel@AvalancheInternationalCorp.com

 

To Holder: Lori Livingston

512 SE Salmon

Portland, OR 97214

Attn: Lori Livingston

Email: Lori@transferonline.com

 

Notices may be transmitted by personal delivery or by a recognized overnight courier with confirmation of delivery or by e-mail, and shall be deemed given upon receipt by the Party to whom they are addressed.

 

19. Waiver of Certain Formalities. All parties to this Note hereby waive presentment, dishonor, notice of dishonor and protest. All parties hereto consent to, and Holder is hereby expressly authorized to make, without notice, any and all renewals, extensions, modifications or waivers of the time for or the terms of payment of any sum or sums due hereunder, or under any documents or instruments relating to or securing this Note, or of the performance of any covenants, conditions or agreements hereof or thereof or the taking. Any such action taken by Holder shall not discharge the liability of any party to this Note.

 

IN WITNESS WHEREOF, this Note has been executed effective the date and place first written above.

 

HOLDER:

MAKER:

 

 

 

By: /s/ Lori Livingston

Name: Lori Livingston

 

 

 

 

AVALANCHE INTERNATIONAL, CORP.  
By: /s/ Philip E. Mansour
Name: Philip E. Mansour
Title: President and Chief Executive Officer  

 

 

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Exhibit A – Wire Instructions

 

Wire Routing Transit Number: 121201694

SWIFT Code: USBKUS44IMT

Bank Name: US BANK

City, State: Las Vegas, NV

Account Number: 153 756 033 657

 

Title of Account:

Avalanche International, Corp.

5940 S. Rainbow Blvd.

Las Vegas, NV 89118

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Exhibit B – Warrant

  

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR REGISTERED OR QUALIFIED UNDER ANY STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE SOLD, TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS SUCH SALE, TRANSFER, PLEDGE OR HYPOTHECATION IS IN ACCORDANCE WITH SUCH ACT AND APPLICABLE STATE SECURITIES LAWS.

  

No. of Shares of Common Stock: 100,000

 

WARRANT

to Purchase Common Stock of

Avalanche International Corp.

a Nevada Corporation

This Warrant certifies that Lori Livingston (“Purchaser”), is entitled to purchase from Avalanche International Corp., a Nevada corporation (the “Company”), one hundred thousand (100,000) shares of Common Stock (or any portion thereof) at an exercise price of $0.01 per share of Common Stock, for a period of one (1) year from the date hereof, all on the terms and conditions hereinafter provided.

Section 1. Certain Definitions. As used in this Warrant, unless the context otherwise requires: “Articles” shall mean the Articles of Incorporation of the Company, as in effect from time to time. “Common Stock” shall mean the Company’s authorized common stock, no par value per share.

Exercise Price” shall mean the exercise price per share of Common Stock set forth above, as adjusted from time to time pursuant to Section 4 hereof.

Securities Act” shall mean the Securities Act of 1933, as amended.

Warrant” shall mean this Warrant and all additional or new warrants issued upon division or combination of, or in substitution for, this Warrant. All such additional or new warrants shall at all times be identical as to terms and conditions and date, except as to the number of shares of Common Stock for which they may be exercised.

Warrant Stock” shall mean the shares of Common Stock purchasable by the holder of this Warrant upon the exercise of such Warrant.

Warrantholder” shall mean the Purchaser, as the initial holder of this Warrant, and its nominees, successors or assigns, including any subsequent holder of this Warrant to whom it has been legally transferred.

Section 2. Exercise of Warrant.

(a)    At any time during the one (1) year following the date hereof, the Purchaser may at any time and from time to time exercise this Warrant, in whole or in part.

(b)   (i) The Warrantholder shall exercise this Warrant by means of delivering to the Company at its office identified in Section 14 hereof (i) a written notice of exercise, including the number of shares of Warrant Stock to be delivered pursuant to such exercise, (ii) this Warrant and (iii) payment equal to the Exercise Price in accordance with Section 2(b)(ii). In the event that any exercise shall not be for all shares of Warrant Stock purchasable hereunder, the Company shall deliver to the Warrantholder a new Warrant registered in the name of the Warrantholder, of like tenor to this Warrant and for the remaining shares of Warrant Stock purchasable hereunder, within ten (10) days of any such exercise. Such notice of exercise shall be in the Subscription Form set out at the end of this Warrant.

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(ii) The Warrantholder may elect to pay the Exercise Price to the Company either by cash, certified check or wire transfer.

(c)    Upon exercise of this Warrant and delivery of the Subscription Form with proper payment relating thereto, the Company shall cause to be executed and delivered to the Warrantholder a certificate or certificates representing the aggregate number of fully-paid and nonassessable shares of Common Stock issuable upon such exercise.

(d)   The stock certificate or certificates for Warrant Stock to be delivered in accordance with this Section 2 shall be in such denominations as may be specified in said notice of exercise and shall be registered in the name of the Warrantholder or such other name or names as shall be designated in said notice. Such certificate or certificates shall be deemed to have been issued and the Warrantholder or any other person so designated to be named therein shall be deemed to have become the holder of record of such shares, including to the extent permitted by law the right to vote such shares or to consent or to receive notice as stockholders, as of the time said notice is delivered to the Company as aforesaid.

(e)    The Company shall pay all expenses payable in connection with the preparation, issue and delivery of stock certificates under this Section 2, including any transfer taxes resulting from the exercise of the Warrant and the issuance of Warrant Stock hereunder.

(f)    All shares of Warrant Stock issuable upon the exercise of this Warrant in accordance with the terms hereof shall be validly issued, fully paid and nonassessable, and free from all liens and other encumbrances thereon, other than liens or other encumbrances created by the Warrantholder.

(g)    In no event shall any fractional share of Common Stock of the Company be issued upon any exercise of this Warrant. If, upon any exercise of this Warrant, the Warrantholder would, except as provided in this paragraph, be entitled to receive a fractional share of Common Stock, then the Company shall deliver in cash to such holder an amount equal to such fractional interest.

Section 3. Piggyback Registration Rights. The Company agrees that if, at any time prior to the expiration date of this Warrant, the Company shall authorize the filing of a registration statement under the Securities Act (other than a registration statement on Form S-8, Form S-4 or any other form that does not include substantially the same information as would be required in a form for the general registration of securities) in connection with the proposed offer of any of its securities by it or any of its stockholders, the Company shall cause such registration statement to cover the shares of Common Stock of the Company issuable to the Warrantholder upon exercise of this Warrant. The registration rights granted under this provision shall be subject to the right of the Company, or its underwriters, to reduce the inclusion of such shares in light of market conditions or comment from the Securities and Exchange Commission.

 

Section 4. Adjustment of Exercise Price and Warrant Stock.

(a)    If, at any time prior to the Expiration Date, the number of outstanding shares of Common Stock is (i) increased by a stock dividend payable in shares of Common Stock or by a subdivision or split- up of shares of Common Stock, or (ii) decreased by a combination of shares of Common Stock, then, following the record date fixed for the determination of holders of Common Stock entitled to receive the benefits of such stock dividend, subdivision, split-up, or combination, the Exercise Price shall be adjusted to a new amount equal to the product of (I) the Exercise Price in effect on such record date and (II) the quotient obtained by dividing (x) the number of shares of Common Stock outstanding on such record date (without giving effect to the event referred to in the foregoing clause (i) or (ii)), by (y) the number of shares of Common Stock which would be outstanding immediately after the event referred to in the foregoing clause (i) or (ii), if such event had occurred immediately following such record date.

(b) Upon each adjustment of the Exercise Price as provided in Section 4 (a), the Warrantholder shall thereafter be entitled to subscribe for and purchase, at the Exercise Price resulting from such adjustment, the number of shares of Warrant Stock equal to the product of (i) the number of shares of Warrant Stock existing prior to such adjustment and (ii) the quotient obtained by dividing (I) the Exercise Price existing prior to such adjustment by (II) the new Exercise Price resulting from such adjustment.

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(c)    If, at any time prior to the Expiration Date, there occurs an event which would cause the automatic conversion (“Automatic Conversion”) of the Warrant Stock into shares of the Company’s common stock (“Common Stock”) in accordance with the Articles, then any Warrant shall thereafter be exercisable, prior to the Expiration Date, into the number of shares of Common Stock into which the Warrant Stock would have been convertible pursuant to the Charter if the Automatic Conversion had not taken place.

(d)     Adjustment of Exercise Price for Certain Dilutive Issuances. If, at any time prior to the expiration date of this Warrant, the Company issues or sells any Warrant to purchase Common Stock of the Company at an exercise price per share less than the Exercise Price in effect on the date of such issuance or sale (a “Dilutive Issuance”), then immediately upon the Dilutive Issuance, the Exercise Price hereunder will be reduced to equal the exercise price specified in the Warrant issued by the Company in such Dilutive Issuance.

Section 5. Division and Combination. This Warrant may be divided or combined with other Warrants upon presentation at the aforesaid office of the Company, together with a written notice specifying the names and denominations in which new Warrants are to be issued, signed by the Warrantholder or its agent or attorney. The Company shall pay all expenses in connection with the preparation, issue and delivery of Warrants under this Section 5, including any transfer taxes resulting from the division or combination hereunder. The Company agrees to maintain at its aforesaid office books for the registration of the Warrants.

Section 6. Reclassification, Etc. In case of any reclassification or change of the outstanding Common of the Company (other than as a result of a subdivision, combination or stock dividend), or in case of any consolidation of the Company with, or merger of the Company into, another corporation or other business organization (other than a consolidation or merger in which the Company is the continuing corporation and which does not result in any reclassification or change of the outstanding Common Stock of the Company) at any time prior to the Expiration Date, then, as a condition of such reclassification, reorganization, change, consolidation or merger, lawful provision shall be made, and duly executed documents evidencing the same from the Company or its successor shall be delivered to the Warrantholder, so that the Warrantholder shall have the right prior to the Expiration Date to purchase, at a total price not to exceed that payable upon the exercise of this Warrant, the kind and amount of shares of stock and other securities and property receivable upon such reclassification, reorganization, change, consolidation or merger by a holder of the number of shares of Common Stock of the Company which might have been purchased by the Warrantholder immediately prior to such reclassification, reorganization, change, consolidation or merger, in any such case appropriate provisions shall be made with respect to the rights and interest of the Warrantholder to the end that the provisions hereof (including provisions for the adjustment of the Exercise Price and of the number of shares purchasable upon exercise of this Warrant) shall thereafter be applicable in relation to any shares of stock and other securities and property thereafter deliverable upon exercise hereof.

Section 7. Reservation and Authorization of Capital Stock. The Company shall at all times reserve and keep available for issuance such number of its authorized but unissued shares of Common Stock as will be sufficient to permit the exercise in full of all outstanding Warrants.

Section 8. Stock and Warrant Books. The Company will not at any time, except upon dissolution, liquidation or winding up, close its stock books or Warrant books so as to result in preventing or delaying the exercise of any Warrant.

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Section 9. Limitation of Liability. No provisions hereof, in the absence of affirmative action by the Warrantholder to purchase Warrant Stock hereunder, shall give rise to any liability of the Warrantholder to pay the Exercise Price or as a stockholder of the Company (whether such liability is asserted by the Company or creditors of the Company).

Section 10. Transfer. Subject to compliance with the Securities Act and the applicable rules and regulations promulgated thereunder, this Warrant and all rights hereunder shall be transferable in whole or in part. Any such transfer shall be made at the office or agency of the Company at which this Warrant is exercisable, by the registered holder hereof in person or by its duly authorized attorney, upon surrender of this Warrant together with the assignment hereof properly endorsed, and promptly thereafter a new warrant shall be issued and delivered by the Company, registered in the name of the assignee. Until registration of transfer hereof on the books of the Company, the Company may treat the Purchaser as the owner hereof for all purposes.

Section 11. Investment Representations; Restrictions on Transfer of Warrant Stock. Unless a current registration statement under the Securities Act shall be in effect with respect to the Warrant Stock to be issued upon exercise of this Warrant, the Warrantholder, by accepting this Warrant, covenants and agrees that, at the time of exercise hereof, and at the time of any proposed transfer of Warrant Stock acquired upon exercise hereof, such Warrantholder will deliver to the Company a written statement that the securities acquired by the Warrantholder upon exercise hereof are for the account of the Warrantholder or are being held by the Warrantholder as trustee, investment manager, investment advisor or as any other fiduciary for the account of the beneficial owner or owners for investment and are not acquired with a view to, or for sale in connection with, any distribution thereof (or any portion thereof) and with no present intention (at any such time) of offering and distributing such securities (or any portion thereof).

Section 12. Loss, Destruction of Warrant Certificates. Upon receipt of evidence satisfactory to the Company of the loss, theft, destruction or mutilation of any Warrant and, in the case of any such loss, theft or destruction, upon receipt of indemnity and/or security satisfactory to the Company or, in the case of any such mutilation, upon surrender and cancellation of such Warrant, the Company will make and deliver, in lieu of such lost, stolen, destroyed or mutilated Warrant, a new Warrant of like tenor and representing the right to purchase the same aggregate number of shares of Common Stock.

Section 13. Amendments. The terms of this Warrant may be amended, and the observance of any term herein may be waived, but only with the written consent of the Company and the Warrantholder.

Section 14. Notices Generally. Any notice, request, consent, other communication or delivery pursuant to the provisions hereof shall be in writing and shall be sent by one of the following means: (i) by registered or certified first class mail, postage prepaid, return receipt requested; (ii) by facsimile transmission with confirmation of receipt; (iii) by nationally recognized courier service guaranteeing overnight delivery; or (iv) by personal delivery, and shall be properly addressed to the Warrantholder at the last known address or facsimile number appearing on the books of the Company, or, except as herein otherwise expressly provided, to the Company at its principal executive office, or such other address or facsimile number as shall have been furnished to the party giving or making such notice, demand or delivery.

Section 15. Successors and Assigns. This Warrant shall bind and inure to the benefit of and be enforceable by the parties hereto and their respective permitted successors and assigns.

Section 16. Governing Law. In all respects, including all matters of construction, validity and performance, this Warrant and the obligations arising hereunder shall be governed by, and construed and enforced in accordance with the laws of the State of Nevada.

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IN WITNESS WHEREOF, the Company has caused this Warrant to be signed in its name by its President.

Dated: December 2, 2015

Avalanche International Corp.

a Nevada Corporation

 

 

 

By:/s/ Phil Mansour

Phil Mansour, President

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 SUBSCRIPTION FORM

(to be executed only upon exercise of Warrant)

 

To: Avalanche International Corp.

5940 S. Rainbow Avenue

Las Vegas, NV 89118

 

 

The undersigned, pursuant to the provisions set forth in the attached Warrant (No. 1 ), hereby irrevocably elects to purchase shares of the Common Stock covered by such Warrant and herewith makes payment of $ , representing the full purchase price for such shares at the price per share provided for in such Warrant.

 

 

Dated:

Name:

Signature:

Address:

 

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Exhibit C – JS Note

 

SECURED PROMISSORY NOT

 

 

US $400,000

Las Vegas, Nevada

July 28, 2015

 

This Promissory Note (the "Note"), dated as of July 28, 20 l S is made by JS Technologies, Inc., a California corporation, ("Maker"), in favor of Avalanche International, Corp., a Nevada corporation ("Holder").

 

For good and valuable consideration, the Maker hereby makes and delivers this Note in favor of Holder, and hereby agrees as follows:

 

1.     Principal Obligation and Interest. For value received, Maker promises to pay to Holder at such place as Holder may designate in writing, in currently available funds of the United States, all sums advanced by Holder to Maker under this Note up to a maximum principal sum of Four Hundred Thousand Dollars ($400,000). Maker's obligation under this Note shall accrue interest at the rate of ten percent (l 0%) per annum from the date hereof until paid in full. Interest shall be computed on the basis of a 365-day year or 366-day year, as applicable and actual days lapsed.

 

2.     Initial and Subsequent Advances. An initial advance from Holder to Maker in the amount of $200,000 shall be made as soon as practicable following the execution of this Note. The initial advance shall include an origination fee of $20,000, which shall become a part of the principal balance of this Note, together with $180,000 to be advanced to the Maker. In the sole discretion of the Maker, up to two (2) additional advances of up to $100,000 each may be made to the Maker by the Holder. The first such additional advance may be made thirty (30) days after the parties' execution of this Note. The second such additional advance may be made sixty (60) days after the parties' execution of this Note.

 

3.     Payment Terms.

 

Beginning on September 1, 2015, Maker shall remit to Holder monthly payments of interest only on the principal balance then due and outstanding. All unpaid principal, together with any then unpaid and accrued interest and other amounts payable hereunder, shall be due and payable in full on or before the date which is one year from the date hereof.

 

All payments shall be applied first to interest, then to principal and shall be credited to the Maker's account on the date that such payment is physically received by the Holder.

 

Maker shall have the right to prepay all or any part of the principal under this Note without penalty.

 

4.                                      Grant of Security Interest. As collateral security for the prompt, complete, and timely satisfaction of all present and future indebtedness, liabilities, duties, and obligations of Maker to Holder evidenced by or arising under this Note, and including, without limitation, all principal and interest payable under this Note, any future advances added to the principal amount due hereunder, and all attorneys' fees, costs and expenses incurred by Holder in the collection or enforcement of the same (collectively, the "Obligations"), Maker hereby pledges, assigns and grants to Holder a continuing security interest and lien in all of Maker's right, title and interest in and to the property, whether now owned or hereafter acquired by Maker and whether now existing or hereafter coming into existence or acquired, including the proceeds of any disposition thereof, described on Exhibit "A" attached hereto and incorporated herein by this reference (collectively , the "Collateral "). As applicable, the terms of this Note with respect to Maker's granting of a security interest in the Collateral to Holder shall be deemed to be a security agreement under applicable provisions of the Uniform Commercial Code ("UCC"), with Maker as the debtor and Holder as the secured party.

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5.                                      Perfection. Upon the execution and delivery of this Note, Maker authorizes Holder to file such financing statements and other documents in such offices as shall be necessary or as Holder may reasonably deem necessary to perfect and establish the priority of the liens granted by this Note, including any amendments, modifications, extensions or renewals thereof. Maker agrees, upon Holder's request, to take all such actions as shall be necessary or as Holder may reasonably request to perfect and establish the priority of the liens granted by this Note, including any amendments, modifications, extensions or renewals thereof.

 

6.                                      Representations and Warranties of Maker. Maker hereby represents and warrants the following to Holder:

 

a.                  Maker and those executing this Note on its behalf have the full right, power, and authority to execute, deliver and perform the Obligations under this Note, which are not prohibited or restricted under the articles of incorporation or bylaws of Maker. This Note has been duly executed and delivered by an authorized officer of Maker and constitutes a valid and legally binding obligation of Maker enforceable in accordance with its terms.

 

b.                 The execution of this Note and Maker's compliance with the terms, conditions and provisions hereof does not conflict with or violate any provision of any agreement, contract, lease, deed of trust, indenture, or instrument to which Maker is a party or by which Maker is bound, or constitute a default thereunder or result in the imposition of any lien, charge, encumbrance, claim or security interest of any nature whatsoever upon any of the Collateral.

 

c.                 The security interest granted hereby in and to the Collateral constitutes a present, valid, binding and enforceable security interest as collateral security for the Obligations, and, except as to leased equipment or purchase-money encumbrances existing as of the date of this Note as expressly disclosed to Holder in writing, such interests, upon perfection , will be senior and prior to any liens, encumbrances, charges, title defects, interests and rights of any others with respect to such Collateral.

 

7.                                      Covenants of Maker. For so Jong as any Obligations remain outstanding:

 

a.                   Maker shall not sell, assign or transfer any of the Collateral, or any part thereof or interest therein;

 

b.                  Maker shall pay or cause to be paid promptly when due all taxes and assessments on the Collateral; and

 

c.                   Maker shall keep Holder apprised, in writing, as to the current location of all of the Collateral, providing Holder with current information including any identifying serial numbers with respect to the Collateral so the Holder may perfect and maintain the priority of its security interest therein.

 

8.                                      Use of Collateral. For so long as no event of default shall have occurred and be continuing under this Note, Maker shall be entitled to use and possess the Collateral and to exercise its rights, title and interest m all contracts, agreements, and licenses subject to the rights, remedies, powers and privileges of Holder under this Note and to such use, possession or exercise not otherwise constituting an event of default. Notwithstanding anything herein to the contrary, Maker shall remain liable to perform its duties and obligations under the contracts and agreements included in the Collateral in accordance with their respective terms to the same extent as if this Note had not been executed and delivered; the exercise by Holder of any right, remedy, power or privilege in respect of this Note shall not release the Maker from any of its duties and obligations under such contracts and agreements; and Holder shall have no duty, obligation or liability under such contracts and agreements included in the Collateral by reason of this Note, nor shall Holder be obligated to perform any of the duties or obligations of Maker under any such contract or agreement or to take any action to collect or enforce any claim (for payment) under any such contract or agreement.

 

9.                                    Defaults. The following shall be events of default under this Note:

 

a.                   Maker's failure to remit any payment under this Note on before the date due, if such failure is not cured in full within five (5) days of written notice of default;

 

b.                  Maker's failure to perform or breach of any non-monetary obligation or covenant set forth in this Note or in any other written agreement between Maker and Holder if such failure is not cured in full within ten (l 0) days following delivery of written notice thereof from Holder to Maker;

 

c.                   If Maker is dissolved, whether pursuant to any applicable articles of incorporation or bylaws, and/or any applicable laws, or otherwise;

 

d.                  The commencement by Maker of any action or proceeding which affects the Collateral or title thereto or the interest of Holder therein, including, but not limited to eminent domain, insolvency, code enforcement or arrangements or proceedings involving a bankrupt or decedent;

 

e.                   The entry of a decree or order by a court having jurisdiction in the premises adjudging the Maker bankrupt or insolvent, or approving as properly filed a petition seeking reorganization, arrangement, adjustment or composition of or in respect of the Maker under the federal Bankruptcy Code or any other applicable federal or state law, or appointing a receiver, liquidator, assignee or trustee of the Maker, or any substantial part if its property, or ordering the winding up or liquidation of its affairs, and the continuance of any such decree or order unstayed and in effect for a period of twenty (20) days;

 

f. Maker's institution of proceedings to be adjudicated a bankrupt or insolvent, or the consent by it to the institution of bankruptcy or insolvency proceedings against it, or its filing of a petition or answer or consent seeking reorganization or relief under the federal Bankruptcy Code or any other applicable federal or state law, or its consent to the filing of any such petition or to the appointment of a receiver, liquidator, assignee or trustee of the company, or of any substantial part of its property, or its making of an assignment for the benefit of creditors or the admission by it in writing of its inability to pay its debts generally as they become due, or the taking of corporate action by the Maker in furtherance of any such action; or

 

10.                    Rights and Remedies of Holder. Upon the occurrence of an event of default by Maker under this Note or at any time before default when the Holder reasonably feels insecure, then, in addition to all other rights and remedies at law or in equity, Holder may exercise any one or more of the following rights and remedies:

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a.                   Accelerate the time for payment of all amounts payable under this Note by written notice thereof to Maker, whereupon all such amounts shall be immediately due and payable.

 

b.                  Pursue and enforce all of the rights and remedies provided to a secured party with respect to the Collateral under the Uniform Commercial Code.

 

c.                   Make such appearance, disburse such sums, and take such action as Holder deems necessary, in its sole discretion, to protect Holder's interest, including but not limited to (i) disbursement of attorneys' fees, (ii) entry upon the Maker's property to make repairs to the Collateral, and (iii) procurement of satisfactory insurance. Any amounts disbursed by Holder pursuant to this Section, with interest thereon, shall become additional indebtedness of the Maker secured by the Collateral and shall be immediately due and payable and shall bear interest from the date of disbursement at the default rate stated in this Note. Nothing contained in this Section shall require Holder to incur any expense or take any action.

 

d.                  Require Maker to assemble the Collateral and make it available to the Maker at the place to be designated by the Holder which is reasonably convenient to both parties. The Holder may sell all or any part of the Collateral as a whole or in part either by public auction, private sale, or other method of disposition. The Holder may bid at any public sale on all or any portion of the Collateral. Unless the Collateral threatens to decline speedily in value, Holder shall give Maker reasonable notice of the time and place of any public sale or of the time after which any private sale or other disposition of the Collateral is to be made, and notice given at least 10 days before the time of the sale or other disposition shall be conclusively presumed to be reasonable.

 

e.                   Pursue any other rights or remedies available to Holder at law or in equity.

 

11.                      Full Recourse. The liability of Maker for the Obligations shall not be limited to the Collateral, and Maker shall have full liability therefor beyond the Collateral.

 

12.                   Waiver of Certain Defenses. Maker acknowledges that its obligations under this Note are separate and independent from the rights and obligations of the parties to that certain Letter of Intent dated June 12, 2015 by and amongst the Maker, the Holder, and certain other parties (the "LOI"). With regard to any legal action or other proceeding for the collection of amounts due under this Note, Maker hereby waives any defense to such action or proceeding based on set-off, recoupment, or any other theory arising under or related to an alleged breach of the LOI by the Holder or others.

 

13.                    Representation of Counsel. Maker acknowledges that it has consulted with or have had the opportunity to consult with Maker's legal counsel prior to executing this Note. This Note has been freely negotiated by Maker and Holder and any rule of construction to the effect that any ambiguities are to be resolved against the drafting party shall not be employed in the interpretation of this Note.

 

14.                                        Choice of Laws; Actions. This Note shall be constructed and construed in accordance with the internal substantive laws of the State of Nevada, without regard to the choice of law principles of said State. Maker acknowledges that this Note has been negotiated in Clark County, Nevada. Accordingly, the exclusive venue of any action, suit, counterclaim or cross claim arising under, out of, or in connection with this Note shall be the state or federal courts in Clark County, Nevada. Maker hereby consents to the personal jurisdiction of any court of competent subject matter jurisdiction sitting in Clark County, Nevada.

 

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15.                    Usury Savings Clause. Maker expressly agrees and acknowledges that Maker and Holder intend and agree that this Note shall not be subject to the usury laws of any state other than the State of Nevada. Notwithstanding anything contained in this Note to the contrary, if collection from Maker of interest at the rate set forth herein would be contrary to applicable laws of such State, then the applicable interest rate upon default shall be the highest interest rate that may be collected from Maker under applicable laws at such time.

 

16.                    Costs of Collection. Should the indebtedness represented by this Note, or any part hereof be collected at law, in equity, or in any bankruptcy, receivership or other court proceeding, or this Note be placed in the hands of any attorney for collection after default, Maker agrees to pay, in addition to the principal and interest due hereon, all reasonable attorneys' fees, plus all other costs and expenses of collection and enforcement, including any fees incurred in connection with such proceedings or collection of the Note and/or enforcement of Holder's rights.

 

17.                    Miscellaneous.

 

a.                   This Note shall be binding upon Maker and shall inure to the benefit of Holder and its successors, assigns, heirs, and legal representatives.

 

b.                  Any failure or delay by Holder to insist upon the strict performance of any term, condition, covenant or agreement of this Note, or to exercise any right, power or remedy hereunder shall not constitute a waiver of any such term, condition, covenant, agreement, right, power or remedy.

 

c.                   Any provision of this Note that is unenforceable shall be severed from this Note to the extent reasonably possible without invalidating or affecting the intent, validity or enforceability of any other provision of this Note.

 

d.                  This Note may not be modified or amended in any respect except in a writing executed by the party to be charged.

 

e.                   Neither party may assign this Note without the express written consent of the other party.

 

f.                   Time is of the essence.

 

18.                            Notices. All notices required to be given under this Note shall be given at the following address, which may be changed by the applicable party on five (5) business days advance written notice:

 

To Maker:

JS Technologies, Inc.

601 A Crane Street

Lake Elsinore, CA 92530

Attn: President and Chief Financial Officer

 

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To Holder:

Avalanche International Co.

5940 S. Rainbow Blvd

Las Vegas, NY 891 18

Attn: President

 

Notices may be transmitted by personal delivery or by a recognized overnight courier with confirmation of delivery, and shall be deemed given upon receipt by the Party to whom they are addressed.

 

19. Waiver of Certain Formalities. All parties to this Note hereby waive presentment, dishonor, notice of dishonor and protest. All parties hereto consent to, and Holder is hereby expressly authorized to make, without notice, any and all renewals, extensions, modifications or waivers of the time for or the terms of payment of any sum or sums due hereunder, or under any documents or instruments relating to or securing this Note, or of the performance of any covenants, conditions or agreements hereof or thereof or the taking. Any such action taken by Holder shall not discharge the liability of any party to this Note.

 

IN WITNESS WHEREOF, this Note has been executed effective the date and place first written above.

 

“Maker”: J.S. Technologies, Inc.

 

By: /s/ John Suhr

Its: President

Print Name: John Suhr

Date: 8/4/15

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Exhibit "A"

 

Collateral

 

Each and all of the following in which J.S. Technologies, Inc., a California corporation, has any right, title, or interest, regardless of the manner in which such items are formally held or titled; all as defined in the Nevada Uniform Commercial Code - Secured Transactions (Nevada Revised Statutes ("NRS") § § 104.9101 et. seq.) as of the date of the Note, and as the same may be amended hereafter:

 

(1)                 Accounts, as defined in NRS 104.9102(l)(a)

(2)                 Cash proceeds, as defined in NRS 104.9102(1)(1)

(3)                 Chattel paper, as defined in NRS 104.9102( 1)(k)

(4)                 Commercial tort claims, as defined in NRS 104.9102(l)(m)

(5)                 Commodity accounts and commodity contracts, as defined in NRS 104.9102(1)(n) and NRS 104.9102(1)(0), respectively ,

(6)                 Deposit accounts, as defined in NRS 104.9102(1)(cc)

(7)                 Documents, as defined in NRS 104.9102(1)(dd)

(8)                 Electronic chattel paper, as defined in NRS 1049102(1)(ee)

(9)                 Equipment, as defined in NRS 104.9102(l)(gg)

(10)             General intangibles, as defined in NRS 104.9102(1)(pp) (except all Suhr and Suhr-related marks, which are specifically excluded herefrom)

(11)             Goods, as defined in NRS 104.9102(1)(rr)

(12)             Instruments, as defined in NRS 104.9102(1)(uu)

(13)             Inventory, as defined in NRS 104.9102(l)(vv)

(14)             Investment property, as defined in NRS 104.9102(l)(ww)

(15)             Letter-of-credit right, as defined in NRS 104.9102( 1)(yy)

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(16)             Noncash proceeds, as defined in NRS 104.9102(1)(fff)

(17)             Payment intangible, as defined in NRS 104.9102(1)(iii)

(18)             Proceeds, as defined in NRS 104.9102(1)(lll)

(19)             Promissory notes, as defined in NRS 104.9102(1)(mmm)

(20)             Record, as defined in NRS 104.9102(1)(qqq)

(21)             Software, as defined in NRS 104.9102(l)(www)

(22)             Supporting obligations, as defined in NRS 104.9102(1)(yyy)

(23)             Tangible chattel paper, as defined in NRS 104.9102(l )(zzz)

(24)             The following, as defined in NRS 104.9102(2): certificated securities, contracts for sale, leases, lease agreements, lease contracts, leasehold interests, letters of credit, negotiable instruments, notes, proceeds of letters of credit, securities, security certificates, security entitlements, and uncertificated securities.

 

In addition, the Collateral shall include all copyrights, all patents and patent applications (including the inventions and improvements described and claimed therein together with the reissues, divisions, continuations, renewals, extensions and continuations in-part thereof), all trade names, trademarks (except all Suhr and Suhr-related marks, which are specifically excluded herefrom) and service marks, logos, trademark and service mark registrations (including all renewals of trademark and service mark registrations, and all rights corresponding thereto throughout the world together, in each case, with the goodwill of the business connected with the use of, and symbolized by, each such trade name, trademark and service mark, but excluding any such registration that would be rendered invalid, abandoned, void or unenforceable by reason of its being included as part of the Collateral), all inventions, processes, production methods, proprietary information, know-how and trade secrets, all licenses or user or other agreements granted to the Maker with respect to any of the foregoing, in each case whether now or hereafter owned or used (including the licenses or other agreements with respect to any of the foregoing).

 

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AMENDMENT TO SECURED CONVERTIBLE PROMISSORY NOTE

 

This Amendment to Secured Convertible Promissory Note (this "Amendment ") is entered into as of January 22, 2016 (the "Effective Date"), by and between TYPENEX Co INVESTMENT, LLC, a Utah limited liability company ("Lender"), and AVALANCHE INTERNATIONAL, CORP., a Nevada corporation ("Borrower"). Capitalized terms used in this Amendment without definition shall have the meanings given to them in the Note (as defined below).

 

A.                 Borrower previously issued to Lender a Secured Convertible Promissory Note dated May 29, 2015 in the original principal amount of $252,500.00 (the "Note," and together with all other documents entered into in conjunction therewith, the "Transaction Documents").

 

B.Borrower has requested to amend the Note as set forth herein.

 

C.                 Lender has agreed, subject to the terms, amendments, conditions and understandings expressed in this Amendment, to make such amendments to the Note.

 

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties agree as follows:

 

1.                  Recitals. Each of the parties hereto acknowledges and agrees that the recitals set forth above in this Amendment are true and accurate and are hereby incorporated into and made a part of this Amendment.

 

2.                  Limitations on Conversions. From and after the Effective Date of this Amendment, and for a period of ninety (90) days thereafter (the "Conversion Limitation Period"), Lender agrees that the aggregate Conversion Amount of all Lender Conversions made by Lender during (a) the first thirty (30) days of the Conversion Limitation Period, (b) the second thirty (30) days of the Conversion Limitation Period, and (c) the third thirty (30) days of the Conversion Limitation Period (each such thirty (30) day period, a "Conversion Limitation Month") (and, for the avoidance of doubt, Lender may submit any number of Lender Conversion Notices during any Conversion Limitation Month so long as the aggregate Conversion Amount in all such Lender Conversion Notices submitted during such Conversion Limitation Month does not exceed the applicable Maximum Monthly Conversion Amount (as defined hereafter)), determined based on the date(s) any Lender Conversion Notices are delivered to Borrower, will not exceed an amount equal to ten percent (10%) of the Conversion Eligible Outstanding Balance of the Note as of the date of this Amendment (the "Maximum Monthly Conversion Amount"); provided, however, that if the aggregate Conversion Amount for all Lender Conversion Notices submitted by Lender in a Conversion Limitation Month is less than the Maximum Monthly Conversion Amount for the applicable Conversion Limitation Month, then in the following Conversion Limitation Month or Conversion Limitation Months the Maximum Monthly Conversion Amount shall increase by an amount equal to the difference between the Maximum Monthly Conversion Amount for the Conversion Limitation Month in which Lender's aggregate Conversion Amounts were less than the Maximum Monthly Conversion Amount and the aggregate of Lender's Conversion Amounts submitted for

   

 

 

Conversion during such Conversion Limitation Month. For illustration purposes only, if the Maximum Monthly Conversion Amount were $25,000.00 for a given Conversion Limitation Month and the aggregate of all Conversion Amounts submitted by Lender during such Conversion Limitation Month were $20,000.00, then the Maximum Monthly Conversion Amount for the next Conversion Limitation Month would increase to $30,000.00. Notwithstanding the foregoing, Lender's obligations set forth in this Section 2 shall immediately and automatically terminate upon the earlier of (x) the conclusion of the Conversion Limitation Period, (y) the occurrence of an Event of Default under the Note or Borrower's breach of this Amendment or the Transaction Documents at any time after the Effective Date of this Amendment, or (z) Borrower's failure to comply with its covenants set forth in Section 4 below.

 

3.                  Prepayment. Notwithstanding anything to the contrary in the Note, Borrower and Lender acknowledge and agree that Borrower may at any time on or after the Effective Date for so long as the Note remains outstanding prepay the Outstanding Balance of the Note in accordance with the provisions set forth in Section 1 of the Note.

 

4.                  Filing Obligations. Borrower covenants and agrees that on or before January 27, 2016, it shall have filed all reports required to be filed with the United States Securities and Exchange Commission pursuant to Sections 13 or 15(d) of the Securities Exchange Act of 1934, as amended, and shall have ensured that adequate current public information with respect to Borrower, as required in accordance with Rule 144 of the Securities Act of 1933, as amended, is publicly available.

 

5.                  Affirmation of Conversion Eligible Outstanding Balance. The Conversion Eligible Outstanding Balance of the Note as of the Effective Date of this Amendment is hereby deemed and affirmed to be equal to $125,000.00. For the avoidance of doubt, the foregoing Conversion Eligible Outstanding Balance includes application of the Default Effect with respect to two (2) Major Defaults. Accordingly, Borrower and Lender further acknowledge and confirm that Lender may still apply the Default Effect with respect to one (1) Major Default and three (3) Minor Defaults following the Effective Date.

 

6.                  Conditionality of Amendment. Borrower understands and agrees that the limitation on Lender Conversions set forth in Section 2 above and all other amendments to the Note set forth in this Amendment are conditioned on and subject to Borrower's compliance with its covenant set forth in Section 4 above as well as Borrower's continued compliance with the terms of the Note and the other Transaction Documents. Borrower further understands and agrees that such amendment shall immediately and automatically terminate (and be deemed to be void ab initio for all purposes) and all of the original terms of the Note shall be immediately restored as if the Note was never amended by this Amendment if Borrower fails to file all required reports on or before January 27, 2016, as set forth in more detail in Section 4 above, or upon the occurrence of any Event of Default under the Note or any other Transaction Document after the date hereof. Notwithstanding the foregoing, the affirmation of the Conversion Eligible Outstanding Balance set forth in Section 5 above shall survive any termination of this Amendment.

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7.                  Representations and Warranties. In order to induce Lender to enter into this Amendment, Borrower, for itself, and for its affiliates, successors and assigns, hereby acknowledges, represents, warrants and agrees as follows:

 

(a)               Borrower has full power and authority to enter into this Amendment and to incur and perform all obligations and covenants contained herein, all of which have been duly authorized by all proper and necessary action. No consent, approval, filing or registration with or notice to any governmental authority is required as a condition to the validity of this Amendment or the performance of any of the obligations of Borrower hereunder.

 

(b)               There is no fact known to Borrower or which should be known to Borrower which Borrower has not disclosed to Lender on or prior to the date of this Amendment which would or could materially and adversely affect the understanding of Lender expressed in this Amendment or any representation, warranty, or recital contained in this Amendment.

 

(c)                Except as expressly set forth in this Amendment, Borrower acknowledges and agrees that neither the execution and delivery of this Amendment nor any of the terms, provisions, covenants, or agreements contained in this Amendment shall in any manner release, impair, lessen, modify, waive, or otherwise affect the liability and obligations of Borrower under the terms of the Transaction Documents.

 

(d)               Borrower has no defenses, affirmative or otherwise, rights of setoff, rights of recoupment, claims, counterclaims, actions or causes of action of any kind or nature whatsoever against Lender, directly or indirectly, arising out of, based upon, or in any manner connected with, the transactions contemplated hereby, whether known or unknown, which occurred, existed, was taken, permitted, or begun prior to the execution of this Amendment and occurred, existed, was taken, permitted or begun in accordance with, pursuant to, or by virtue of any of the terms or conditions of the Transaction Documents. To the extent any such defenses, affirmative or otherwise, rights of setoff, rights of recoupment, claims, counterclaims, actions or causes of action exist or existed, such defenses, rights, claims, counterclaims, actions and causes of action are hereby waived, discharged and released. Borrower hereby acknowledges and agrees that the execution of this Amendment by Lender shall not constitute an acknowledgment of or admission by Lender of the existence of any claims or of liability for any matter or precedent upon which any claim or liability may be asserted.

 

(e)                Borrower represents and warrants that as of the date hereof no Events of Default or other material breaches exist under the Transaction Documents or have occurred prior to the date hereof.

 

8.                  Certain Acknowledgments. Each of the parties acknowledges and agrees that no property or cash consideration of any kind whatsoever has been or shall be given by Lender to Borrower in connection with any amendment to the Note granted herein.

 

9.                  Other Terms Unchanged. The Note, as amended by this Amendment, remains and continues in full force and effect, constitutes legal, valid, and binding obligations of each of the parties, and is in all respects agreed to, ratified, and confirmed. Any reference to the Note after the date of this Amendment is deemed to be a reference to the Note as amended by this Amendment. If there is a conflict between the terms of this Amendment and the Note, the terms of this Amendment shall control. No forbearance or waiver may be implied by this Amendment. Except as expressly set forth herein, the execution, delivery, and performance of this Amendment shall not operate as a waiver of, or as an amendment to, any right, power, or remedy of Lender under the Note, as in effect prior to the date hereof.

 

 3 

 

 

10.              No Reliance. Borrower acknowledges and agrees that neither Lender nor any of its officers, directors, members, managers, equity holders, representatives or agents has made any representations or warranties to Borrower or any of its agents, representatives, officers, directors, or employees except as expressly set forth in this Amendment and the Transaction Documents and, in making its decision to enter into the transactions contemplated by this Amendment, Borrower is not relying on any representation, warranty, covenant or promise of Lender or its officers, directors, members, managers, equity holders, agents or representatives other than as set forth in this Amendment.

 

11.               Counterparts. This Amendment may be executed in any number of counterparts, each of which shall be deemed an original, but all of which together shall constitute one instrument. The parties hereto confirm that any electronic copy of another party's executed counterpart of this Amendment (or such party's signature page thereof) will be deemed to be an executed original thereof.

 

12.              Further Assurances. Each party shall do and perform or cause to be done and performed, all such further acts and things, and shall execute and deliver all such other agreements, certificates, instruments and documents, as the other party may reasonably request in order to carry out the intent and accomplish the purposes of this Amendment and the consummation of the transactions contemplated hereby.

 

[Remainder of page intentionally left blank]

 4 

 

 

 

IN WITNESS WHEREOF, the undersigned have executed this Amendment as of the date set forth above.

 

BORROWER:

 

AVALANCHE INTERNATIONAL, CORP.

 

 

By: /s/ Phillip Mansour

Name: Phillip Mansour

Title: CEO

 

LENDER:

 

TYPENEX CO-INVESTMENT, LLC

 

By: Red Cliffs Investments, Inc., its Manager

 

By: /s/ John M. Fife

John M. Fife, President

 

 

[Signature Page to Amendment to Secured Convertible Promissory Note]

 5 

 



FIRST AMENDMENT TO 8% CONVERTIBLE REDEEMABLE NOTE

 

 

For good and valuable consideration , AVALANCHE INTERNATIONAL, CORP., a Nevada corporation, (the "Company"), and LG CAPITAL FUNDING, LLC (the "Holder") hereby agree that the 8% Convertible Redeemable Note issued from the Company to the Holder and dated November 3, 2014 (the "Note") shall be amended as follows:

 

1.                 Beginning on the date hereof and for a period of ninety (90) days thereafter, Holder shall, in any thirty (30) day period, convert no more than ten percent (10%) of the principal amount of the Note due and owing on the date hereof to common stock of the Company .

 

2.                  At any time after the expiration of the ninety (90) day period described above, the Company may repay the Note in accordance with the terms, requirements, and premiums for such payment, as set forth in Section 4(c) of the Note, which are applicable to a repayment made between 91 to 180 days after issuance of the Note.

 

3.                  In consideration for the above, the Company shall issue to the Holder a 3 year warrant to purchase 75,000 share of Common Stock at an exercise price of $0.30 per share. The warrant shall contain cashless exercise provisions and be subject to forward and reverse stock splits. Upon receipt of the warrant by the Holder and s1gnature on this Agreement by the Holder. this Agreement this Agreement shall take effect.

 

All other terms of the Note not modified by the terms of this Amendment shall remain in full force and effect.

 

IN WITNESS WHEREOF, this First Amendment to 8% Convertible Redeemable Note has been executed effective January 20, 2016.

 

"Company":

AVALANCHE INTERNATIONAL, CORP.

 

 

By: /s/ Phillip Mansour

Its: President

Print Name: Phillip Mansour

 

 

“Holder”:

LG CAPITAL FUNDING, LLC

 

 

By: /s/ Joseph Lerman

Its: Manager

Print Name: Joseph Lerman



FIRST AMENDMENT TO 8% CONVERTIBLE REDEEMABLE NOTES

 

 

For good and valuable consideration, AVALANCHE INTERNATIONAL, CORP., a Nevada corporation, (the "Company"), and UNION CAPITAL, LLC (the "Holder") hereby agree that the 8% Convertible Redeemable Notes issued from the Company to the Holder and dated May 11, 2015 (a front end note and a back end note, which are collectively, be referred to as the "Notes'') shall be amended as follows:

 

1.   Beginning on the date hereof and for a period of ninety (90) days thereafter, Holder shall, in any thirty (30) day period, convert no more than ten percent (10%) of the principal amount of the Note due and owing on the date hereof to common stock of the Company.

 

2.    At any time after the expiration of the ninety (90) day period described above, the Company may prepay the Note in accordance with the terms, requirements, and premiums for such prepayment, as set forth in Section 4(c) of the Note, which are applicable to a prepayment made between 151 to 180 days after issuance of the Note.

 

3.   The conversion discount set forth in Section 4(a) of the Notes shall be increased by 5% from 60% to 55% (resulting in an effective conversion discount of 45% instead of 40%)

 

4.   The lookback period set forth in Section 4(a) of the Notes shall be increased from twenty (20) days to twenty five (25) days.

 

5.   The prepay premium set forth in Section 4(c) of the front end (144) note shall be increased to 150% during the 90 day extension period. Once the back end note has been cash funded, the prepay premium will also increase to 150% during the 90 day extension period.

 

6.   The parties also agree that the term of collateralized note issued by the Holder to the Company on May 11, 2015 shall be extended until May 11, 2016.

 

All other terms of the Note not modified by the terms of this Amendment shall remain in full force and effect.

 

   

 

 

IN WITNESS WHEREOF, this First Amendment to 8%Convertible Redeemable Note has been executed effective January 22, 2016.

 

"Company":

AVALANCHE INTERNATIONAL, CORP.

 

 

By: /s/ Phillip Mansour

Its: President

Print Name: Phillip Mansour

 

“Holder”:

UNION CAPITAL, LLC

 

By: /s/ Yakov D. Borenstein

Its: Member

Print Name: Yakov D. Borenstein

 2 

 



 

FIRST AMENDMENT TO 8% CONVERTIBLE REDEEMABLE NOTES

 

For good and valuable consideration, AVALANCHE INTERNATIONAL, CORP., a Nevada corporation, (the “Company”), and ADAR BAYS, LLC (the “Holder”) hereby agree that the 8% Convertible Redeemable Notes issued from the Company to the Holder and dated May 11, 2015 (a front end note and a back end note, which are collectively, be referred to as the “Notes”) shall be amended as follows:

 

1.                  Beginning on the date hereof and for a period of ninety (90) days thereafter, Holder shall, in any thirty (30) day period, convert no more than ten percent (10%) of the principal amount of the Note due and owing on the date hereof to common stock of the Company.

 

2.                  At any time after the expiration of the ninety (90) day period described above, the Company may prepay the Note in accordance with the terms, requirements, and premiums for such prepayment, as set forth in Section 4(c) of the Note, which are applicable to a prepayment made between 151 to 180 days after issuance of the Note.

 

3.                  The conversion discount set forth in Section 4(a) of the Notes shall be increased by 5% from 60% to 55% (resulting in an effective conversion discount of 45% instead of 40%)

 

4.                  The lookback period set forth in Section 4(a) of the Notes shall be increased from twenty (20) days to twenty five (25) days.

 

5.                  The prepay premium set forth in Section 4(c) of the front end (144) note shall be increased to 150% during the 90 day extension period. Once the back end note has been cash funded, the prepay premium will also increase to 150% during the 90 day extension period.

 

6.                  The parties also agree that the term of collateralized note issued by the Holder to the Company on January 12, 2016 shall be extended until May 12, 2016.

 

All other terms of the Note not modified by the terms of this Amendment shall remain in full force and effect.

   
   

 

IN WITNESS WHEREOF, this First Amendment to 8% Convertible Redeemable Note has been executed effective January 25, 2016.

 

“Company”:

AVALANCHE INTERNATIONAL, CORP.

 

 

By: /s/ Phillip Mansour

Its: President

Print Name: Phillip Mansour

 

“Holder”:

ADAR BAYS, LLC

 

 

By: /s/ Samuel Eisenberg

Its: Member

Print Name: Samuel Eisenberg

 2 
   



CERTIFICATION

 

I, Philip Mansour, certify that;

 

1. I have reviewed this quarterly report on Form 10-Q for the quarter ended August 31, 2015 of Avalanche International, Corp.;

 

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date: January 25, 2016

 

/s/ Philip Mansour

By: Philip Mansour

Title: Chief Executive Officer



CERTIFICATION

 

I, Rachel Boulds, certify that;

 

1. I have reviewed this quarterly report on Form 10-Q for the quarter ended August 31, 2015 of Avalanche International, Corp.;

 

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date: January 25, 2016

 

/s/ Rachel Boulds

By: Rachel Boulds

Title: Chief Financial Officer



CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND

CHIEF FINANCIAL OFFICER

PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

In connection with the quarterly Report of Avalanche International Corp (the “Company”) on Form 10-Q for the quarter ended August 31, 2015 filed with the Securities and Exchange Commission (the “Report”), I, Phillip Mansour, Chief Executive Officer of the Company, and I, Rachel Boulds, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

 

1.The Report fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934; and

 

2.The information contained in the Report fairly presents, in all material respects, the consolidated financial condition of the Company as of the dates presented and the consolidated result of operations of the Company for the periods presented.

 

By: /s/ Philip Mansour
Name: Philip Mansour
Title: Principal Executive Officer and Director
Date: January 25, 2016

 

By:

/s/ Rachel Boulds

Name: Rachel Boulds
Title: Principal Financial Officer
Date: January 25, 2016

 

This certification has been furnished solely pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 



v3.3.1.900
Document and Entity Information - shares
9 Months Ended
Aug. 31, 2015
Jan. 20, 2016
Document And Entity Information    
Entity Registrant Name AVALANCHE INTERNATIONAL, CORP.  
Entity Central Index Key 0001537169  
Document Type 10-Q  
Document Period End Date Aug. 31, 2015  
Amendment Flag false  
Current Fiscal Year End Date --11-30  
Is Entity a Well-known Seasoned Issuer? No  
Is Entity a Voluntary Filer? No  
Is Entity's Reporting Status Current? Yes  
Entity Filer Category Smaller Reporting Company  
Entity Common Stock, Shares Outstanding   6,314,248
Document Fiscal Period Focus Q3  
Document Fiscal Year Focus 2015  


v3.3.1.900
Condensed Consolidated Balance Sheets - USD ($)
Aug. 31, 2015
Nov. 30, 2014
Current Assets:    
Cash $ 656 $ 2,247
Accounts receivable, related party 17,190
Loan and interest receivable 12,798
Loan and interest receivable, related party 167,326
Inventory 2,680 $ 25,900
Total current assets 200,650 28,147
Other assets 705 526
Total assets 201,355 28,673
Current Liabilities:    
Accounts payable and accrued expenses $ 129,731 87,217
Accounts payable, related party 88,572
Due to related parties $ 12,709 $ 6,927
Derivative liability 717,796
Convertible notes payable, net of discount of $328,700 and $9,040, respectively 239,085 $ 54,210
Loans payable 33,934 18,300
Total current liabilities 1,133,255 $ 255,226
Long Term Liabilities    
Convertible note payable, net of discount of $23,300 37,227
Total liabilities 1,170,482 $ 255,226
Stockholders Equity (Deficit):    
Common stock, $0.001 par value; 75,000,000 shares authorized; 5,703,816 and 5,144,400 shares issued and outstanding, respectively $ 5,705 $ 5,144
Preferred stock, $0.001 par value; 10,000,000 shares authorized
Class A Preferred stock, $0.001 par value; 50,000 shares designated, 29,380 and 14,000 shares issued and outstanding, respectively $ 29 $ 14
Additional paid-in capital 966,775 203,445
Accumulated deficit (1,941,636) (435,156)
Total stockholders equity (deficit) (969,127) (226,553)
Total liabilities and stockholders equity $ 201,355 $ 28,673


v3.3.1.900
Condensed Consolidated Balance Sheets (parenthetical) - USD ($)
Aug. 31, 2015
Nov. 30, 2014
Balance Sheet Related Disclosures [Abstract]    
Common stock, par value $ 0.001 $ 0.001
Common stock, shares authorized 75,000,000 75,000,000
Common stock, shares issued and outstanding 5,703,816 5,144,400
Class A preferred stock, par value $ 0.001 $ 0.001
Class A preferred stock, shares authorized 50,000 50,000
Class A preferred stock, shares issued and outstanding 29,380 14,000
Preferred stock, par value $ 0.001 $ 0.001
Preferred stock, share authorized 10,000,000 10,000,000
Preferred stock, shares issued and outstanding
Convertible notes payable, discount $ 328,700 $ 9,040
Convertible notes payable, long-term, discount $ 23,300


v3.3.1.900
Condensed Consolidated Statements of Operations - USD ($)
3 Months Ended 9 Months Ended
Aug. 31, 2015
Aug. 31, 2014
Aug. 31, 2015
Aug. 31, 2014
Income Statement [Abstract]        
Revenue $ 169 $ 6,431 $ 38,831 $ 10,172
Cost of revenue 258 1,098 29,550 3,279
Gross margin $ (89) 5,333 9,281 6,893
Operating Expenses:        
Advertising and marketing 61,193 6,364 61,193
General and administrative $ 488,466 84,406 1,050,951 123,538
Total operating expense 488,466 145,599 1,057,315 184,731
Net loss from operations (488,555) $ (140,266) (1,048,034) $ (177,838)
Other income (expense):        
Interest income 6,074 6,074
Interest expense (28,208) (39,063)
Interest expense debt discount (164,685) (248,863)
Loss on issuance of convertible debt (55,093) (356,402)
Change in fair value on derivative liability (2,968) 179,808
Total other expense (244,880) (458,446)
Loss before income tax $ (733,435) $ (140,266) $ (1,506,480) $ (177,838)
Provision for income taxes
Net Loss $ (733,435) $ (140,266) $ (1,506,480) $ (177,838)
Loss per common share Basic and diluted $ (0.13) $ (0.03) $ (0.28) $ (0.04)
Weighted average common shares Basic and diluted 5,651,549 5,075,478 5,442,147 5,071,839


v3.3.1.900
Condensed Consolidated Statements of Cash Flows - USD ($)
9 Months Ended
Aug. 31, 2015
Aug. 31, 2014
Cash flows from operating activities:    
Net loss for the period $ (1,506,480) $ (177,838)
Adjustments to reconcile net loss to net cash used by operating activities:    
Share based compensation 680,487
Debt discount amortization 248,863
Loss on issuance of convertible debt 356,402
Gain on derivative liability 717,796
Changes in operating assets and liabilities:    
Accounts receivable (17,190) $ (154)
Inventory 23,220 $ (13,180)
Other assets 8,860
Accounts payable and accrued expense 37,696 $ 67,469
Accounts payable related party $ (88,572) 41,240
Other liabilities $ 4,771
Accrued interest $ 28,401
Accrued compensation (2,412) $ 1,860
Net cash used in operating activities $ (410,533) $ (75,832)
Cash flows from investing activities:
Loan and interest receivable $ (12,798)
Loan and interest receivable, related party (160,197)
Net cash used by investing activities (172,995)
Cash flows from financing activities:    
Proceeds from convertible notes payable 508,000
Proceeds from other loans 21,305
Payments of note payable (32,050)
Advances from related parties 58,366
Repayment of related party advances (52,584)
Proceeds from issuance of common stock 2,000 $ 28,000
Proceeds from issuance of preferred stock 76,900 60,000
Net cash provided by financing activities 581,937 88,000
Increase (decrease) in cash (1,591) $ 12,168
Cash, beginning of period 2,247
Cash, end of period $ 656 $ 12,168
Supplemental Disclosures:    
Cash paid for interest
Cash paid for income tax
Non-Cash Investing and Financing Information:    
Common stock issued for conversion of debt $ 4,518
Derivative liability recorded in connection with convertible debt $ 717,796


v3.3.1.900
ORGANIZATION AND DESCRIPTION OF BUSINESS
9 Months Ended
Aug. 31, 2015
Accounting Policies [Abstract]  
ORGANIZATION AND DESCRIPTION OF BUSINESS

Avalanche International, Corp. (“the Company”) was incorporated under the laws of the State of Nevada on April 14, 2011. The company had plans to distribute crystallized glass tile in the North American markets to wholesale customers. On May 14, 2014, the Company entered into an Agreement of Conveyance, Transfer and Assignment of Assets and Assumption of Obligations (the “Agreement”) with our sole officer and director, John Pulos. Pursuant to the Agreement, the Company transferred all assets to Mr. Pulos. In exchange for this assignment of assets, Mr. Pulos agreed to assume and cancel all liabilities due to him. In conjunction with the change in management, it was decided to abandon this line of business and become a holding company with operations at the subsidiary levels only. The Company formed its first wholly owned subsidiary, Smith and Ramsay Brands, LLC (“SRB”), on May 19, 2014. The Company acquired certain perpetual license, know how, product, name license and other capabilities from Smith and Ramsay, LLC, a Nevada company. Smith and Ramsay Brands, LLC is a manufacturer and distributor of flavored liquids for electronic vaporizers and eCigarettes and distributor of vape accessories. SRB manufactures its premium signature brand of eLiquid, Smith and Ramsay, a line that features all natural flavors produced in the United States. SRB rolled out its flagship product to targeted areas in the fall of 2014, following its pre-launch phase. The Smith and Ramsay line was manufactured, packaged and strategically distributed on a limited basis to generate revenue in test markets. The Company’s goal is to maintain a high standard of quality and to insure the production and warehouse environments, processes and procedures continue to meet or exceed guidelines of the FDA, and are in line with International Organization for Standardization (“ISO”) and Current Good Manufacturing Practices (“cGMP”).

 

Basis of Unaudited Interim Financial Information

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and the rules of the Securities and Exchange Commission ("SEC") for interim financial information and the SEC instructions to Form 10-Q, accordingly, they do not include all of the information and footnotes required by U.S. GAAP for completed financial statements. In the opinion of management, all adjustments necessary in order for the financial statements to not be misleading have been reflected herein. Operating results for the interim period ended August 31, 2015 are not necessarily indicative of the results that can be expected for the full year. These unaudited interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements of the Company for the year ended November 30, 2014.

 

Use of Estimates

In preparing financial statements in conformity with U.S. GAAP, management is required 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, as well as the reported amounts of expenses during the reporting period. Due to inherent uncertainty involved in making estimates, actual results reported in future periods may be affected by changes in these estimates. On an ongoing basis, the Company evaluates its estimates and assumptions. These estimates and assumptions include valuing equity securities in share-based payment arrangements, estimating the fair value of equity instruments recorded as derivative liabilities, and estimating the useful lives of amortizable assets and whether impairment charges may apply.

 

Principles of Consolidation

The consolidated financial statements include the accounts of Avalanche International, Corp. and its wholly-owned subsidiary Smith and Ramsay Brands, LLC. All significant intercompany accounts and transactions have been eliminated.

 

Reclassification

The Company reclassified debt issuance costs from current assets to short-term debt, net on the condensed consolidated balance sheets for all periods presented pursuant to early adoption of Accounting Standards Update ("ASU") No. 2015-03 - Simplifying the Presentation of Debt Issuance Costs.

 

Convertible Instruments

The Company bifurcates conversion options from their host instruments and account for them as free standing derivative financial instruments if certain criteria are met. The criteria include circumstances in which (a) the economic characteristics and risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics and risks of the host contract, (b) the hybrid instrument that embodies both the embedded derivative instrument and the host contract is not re-measured at fair value under otherwise applicable generally accepted accounting principles with changes in fair value reported in earnings as they occur and (c) a separate instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument. An exception to this rule is when the host instrument is deemed to be conventional, as that term is described under applicable GAAP. 

 

When the Company has determined that the embedded conversion options should not be bifurcated from their host instruments, the Company records, when necessary, discounts to convertible notes for the intrinsic value of conversion options embedded in debt instruments based upon the differences between the fair value of the underlying common stock at the commitment date of the note transaction and the effective conversion price embedded in the note. Debt discounts under these arrangements are amortized over the term of the related debt to their stated date of redemption. The Company also records, when necessary, deemed dividends for the intrinsic value of conversion options embedded in preferred shares based upon the differences between the fair value of the underlying common stock at the commitment date of the transaction and the effective conversion price embedded in the preferred shares.

 

Recent Accounting Pronouncements

The Company has implemented all new accounting pronouncements that are in effect.  These pronouncements did not have any material impact on the financial statements unless otherwise disclosed, and the Company does not believe that there are any other new accounting pronouncements that have been issued, that might have a material impact on its financial position or results of operations.



v3.3.1.900
GOING CONCERN
9 Months Ended
Aug. 31, 2015
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
GOING CONCERN

The consolidated financial statements have been prepared on a going concern basis which assumes the Company will be able to realize its assets and discharge its liabilities in the normal course of business for the foreseeable future. The Company has an accumulated deficit of $1,941,636 as of August 31, 2015 and a net loss of $1,506,480 for the nine months ended August 31, 2015, raising substantial doubt about the Company’s ability to continue as a going concern. The ability to continue as a going concern is dependent upon the Company generating profitable operations in the future and/or to obtain the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due. Management intends to finance operating costs over the next twelve months with loans and/or private placement of common stock.



v3.3.1.900
LOAN RECEIVABLE
9 Months Ended
Aug. 31, 2015
Receivables [Abstract]  
LOAN RECEIVABLE

On June 5, 2015, the Company executed a Promissory Note Sale Agreement with Black Mountain Equities, Inc. The agreement transferred and assigned the Convertible Note, dated March 5, 2014 issued by IDS Industries, Inc. (now Aja Cannafacturing, Inc.) to Black Mountain Equities, Inc. The Note was transferred in consideration of payment of $12,500. On the same day the Company executed a Promissory Note with Aja Cannafacturing, Inc. for $12,500. The note is unsecured, accrues interest at 10% and is due December 31, 2015. This loan is currently in default and being renegotiated.



v3.3.1.900
RELATED PARTY TRANSACTIONS
9 Months Ended
Aug. 31, 2015
Related Party Transactions [Abstract]  
RELATED PARTY TRANSACTIONS

During the nine months ended August 31, 2015, the Company sold $34,017 in products to Vape Nation, generating 87.6% of its revenue. Vape Nation, is 50% owned by MCKEA Holdings, LLC. MCKEA Holdings, LLC is the majority member of Philou Ventures, LLC, which is our controlling shareholder. Kristine L. Ault is the Manager of MCKEA Holdings, LLC and the wife to the Chairman of Avalanche International, Corp.

 

Cross Click Media, Inc. (“Cross Click”) performs sales, marketing, and investor relation services for the Company. MCKEA Holdings, LLC is the controlling shareholder of Cross Click Media, Inc. MCKEA Holdings, LLC is also the majority member of Philou Ventures, LLC, which is our controlling shareholder.

 

Cross Click performed services on behalf of the Company in the amount of $53,679 and $60,000 for the three months ended August 31, 2015 and 2014 and $97,000 and $60,000 for the nine months ended August 31, 2015 and 2014, which are included in advertising and marketing expense in the statement of operations.

  

Loan receivable, related party

 

On June 5, 2015, the Company executed a Promissory Note Sale Agreement with Black Mountain Equities, Inc. The agreement transferred and assigned the Convertible Note, dated March 5, 2014 issued by Cross Click Media, Inc. to Black Mountain Equities, Inc. The Note was transferred in consideration of payment of $12,500. On the same day the Company executed a Promissory Note with Cross Click Media, Inc. for $12,500. The note is unsecured, accrues interest at 10% and is due December 31, 2015.

  

In addition, the Company loaned Cross Click approximately $202,500.  Approximately $54,000 of accounts payable for services performed by Cross Click Media, Inc. was used to reduce to the loan receivable.  The loan is due in one year and bears interest at 12%.  As of August 31, 2015 principal and interest of approximately $161,000 was outstanding.  Principal and interest from the loan of approximately $167,000 are included in Loan Receivable, related party on the balance sheet. This loan is currently in default and being renegotiated. 

 

Interest income of $6,062 was included in the statement of operations for the three and nine months ended August 31, 2015.

 



v3.3.1.900
LOANS PAYABLE
9 Months Ended
Aug. 31, 2015
Accounting Policies [Abstract]  
LOANS PAYABLE

On November 26, 2014, the Company executed a Promissory Note with Argent Offset, LLC for $12,500. The note included a $500 loan fee, accrued interest at 10%, compounded monthly, and was due December 5, 2014. A late payment fee of $500 per day was to be incurred from December 6, 2014 through December 7, 2014 and then increases to $1,000 per day. On February 1, 2015, the Company entered into a Temporary Forbearance Agreement with Argent. Under the forbearance agreement, the Company agreed to pay a forbearance fee of $7,500. The new loan will bear interest at an annual rate of 10% until due on August 1, 2015. Further, we have agreed to pay 12.5% of any new funds invested in the company until the amount due is paid in full. As of August 31, 2015, $11,500 has been repaid on this loan and an additional $8,129 added, leaving a balance of $17,129 and accrued interest of $1,301. This loan is currently in default and being renegotiated.

 

During the third quarter of fiscal year 2015 Argent Offset, LLC advanced the Company $4,305 to pay for certain operating expenses. The advances are unsecured, non-interest bearing and due on demand.

 

On March 17, 2015, the Company executed a Promissory Note for $10,750 with Strategic IR, Inc. The note bears interest at 10% per annum and is due on or before April 16, 2015. The note includes a one-time loan fee of $1,750 for a total due of $12,500. On April 16, 2015, the interest increased to 21% since the note has not yet been repaid. Accrued interest as of August 31, 2015, is $936. This note is currently in default.

 

On August 10, 2015, the Company executed a Short Term Promissory Note for $5,000 with a third party. The note required a $250 loan fee, was unsecured, accrued interest at 10% and was due August 19, 2015. The note and $23 of accrued interest was repaid in full on August 27, 2015.

 

    Issue Date   Maturity Date   Stated Interest Rate   Principle Balance Outstanding 8/31/2015
Argent Offset, LLC   11/26/14   8/1/15     10 %   $ 17,129  
Argent Offset, LLC   various   demand     n/a       4,305  
Strategic IR, Inc.   3/17/15   4/16/2015     21 %     12,500  
                    $ 33,934  

 



v3.3.1.900
CONVERTIBLE NOTES PAYABLE
9 Months Ended
Aug. 31, 2015
Debt Disclosure [Abstract]  
CONVERTIBLE NOTES PAYABLE

The following is a summary of outstanding convertible promissory notes as of November 30, 2014:

 

  Issue Date Maturity Date Stated Interest Rate Conversion Terms Principle Balance Outstanding 11/30/2014
LG Capital Funding, LLC 11/3/2014 11/3/2015 8% Not yet convertible 63,250

 

  Face Value Initial Discount Accumulated Amortization Carrying Value
LG Capital Funding, LLC 63,250 9,040 - 54,210

  

The following is a summary of outstanding convertible promissory notes as of August 31, 2015:

 

    Issue Date   Maturity Date   Stated Interest Rate   Conversion Terms (1)   Principle Balance Outstanding 8/31/2015
LG Capital Funding, LLC     11/3/2014     11/3/2015     8 %   $ 0.24       $                 59,000 (2)  
Dr. Gary Gelbfish     3/27/2015     9/23/2015     10 %     0.37       100,000  
JMJ Financial     4/29/2015     4/29/2017     12 %     0.24       33,000  
Union Capital, LLC     5/11/2015     5/11/2016     8 %     0.24       115,000  
Adar Bays, LL     5/12/2015     5/12/2016     8 %     0.24       115,000  
Typenex Co-Investment, LLC     5/29/2015     6/29/2016     10 %     0.50       87,500  
Black Mountain Equities, Inc.     6/4/2015     6/4/2016     8 %     0.28       55,000  
Lord Abstract, LLC     6/30/2015     6/30/2016     10 %     0.24       8,800  
GCEF Opportunity Fund, LLC     6/30/2015     6/30/2016     10 %     0.24       27,500  
JMJ Financial     8/27/2015     8/27/2017     12 %     0.24       27,500  
                                $ 628,300  

 

  (1) Conversion terms vary between a 30% - 40% discount on lowest or closing prices for a specified time period preceding conversion.
  (2) Converted $4,250 of principle to common stock.

 

Accrued interest on the above notes was $26,285 and $374 as of August 31, 2015 and November 30, 2014, respectively.

 

Debt discount expense including original issue discounts for the three and nine months ended August 31, 2015 was $164,685 and $248,863, respectively. Carrying value, of all convertible notes, net of debt discounts as of August 31, 2015 is $276, 312.

 

Based on the fair value of the embedded conversion options on the day of issuance a loss of $55,093 and $356,402 for the three months and nine months ended August 31, 2015 was recorded in the statement of operations. 

  

Principal amounts payable for convertible notes payable and due to related parties for the following fiscal years is as follows:

 

Twelve months ended November 30,    
  2015     $ 205,655  
  2016       408,800  
  2017       60,500  
  2018       —    
  2019       —    
  Total Future Maturities


v3.3.1.900
FAIR VALUE MEASUREMENTS
9 Months Ended
Aug. 31, 2015
Fair Value Disclosures [Abstract]  
FAIR VALUE MEASUREMENTS

The Company believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date.

 

The following table classifies the Company’s liabilities measured at fair value on a recurring basis into the fair value hierarchy as of August 31, 2015:

 

 

 

    Fair value measured at August 31, 2015
              Quoted prices in active       Significant other       Significant  
      Fair value at       markets       observable inputs       unobservable inputs  
      August 31, 2015       (Level 1)       (Level 2)       (Level 3)  
Derivative liability   $ 717,796     $ —       $ —       $ 717,796  

 

 There were no transfers between Level 1, 2 or 3 during the nine month period ended August 31, 2015.

 

The following table presents changes in Level 3 liabilities measured at fair value for the nine month period ended August 31, 2015. Both observable and unobservable inputs were used to determine the fair value of positions that the Company has classified within the Level 3 category. Unrealized gains and losses associated with liabilities within the Level 3 category include changes in fair value that were attributable to both observable (e.g., changes in market interest rates) and unobservable (e.g., changes in unobservable long-dated volatilities) inputs. 

 

    Derivative Liability  
Balance – November 30, 2014 $ —    
Initial valuation   627,559  
Change in fair value on derivative   (182,776 )
Balance – May 31, 2015   444,783  
     Initial valuation   270,045  
     Change in fair value on derivative   2,968  
Balance – August 31, 2015 $ 717,796  

 

A summary of quantitative information about significant unobservable inputs (Level 3 inputs) used in measuring the Company’s derivative liabilities that are categorized within Level 3 of the fair value hierarchy for the nine months ended August 31, 2015 is as follows:

 

 

Date of valuation August 31, 2015   Inception
Stock price $ 0.50       $2.46 – 0.50  
Conversion price   .24 – 0.28       .24 – 1.20  
Volatility (annual)   116% - 373%       111% - 159%  
Risk-free rate   .05% - .75%       .08% - .56%  
Years to maturity   .18 - 2       .5 - 2  

The development and determination of the unobservable inputs for Level 3 fair value measurements and fair value calculations are the responsibility of the Company’s management.



v3.3.1.900
COMMON STOCK
9 Months Ended
Aug. 31, 2015
Equity [Abstract]  
COMMON STOCK

The Company is authorized to issue 75,000,000 common shares with a par value of $0.001 per share.

 

Private placements

On December 15, 2014, the Company issued 1,600 shares of common stock at a price of $1.25 per share for total cash proceeds of $2,000.

 

Share based compensation

On March 27, 2015, we issued 50,000 shares of common stock to Dr. Gary Gelbfish in connection with the issuance of a convertible promissory note. The fair value of the common stock issued was determined to be $41,349 based its fair value relative to the fair value of the debt issued.

 

During the nine months ended August 31, 2015, the Company issued 440,000 shares of common stock to service providers for total non-cash compensation of $583,125. All shares were valued based on the closing price of the stock on the date of grant.

 

During the nine months ended August 31, 2015, the Company issued 48,990 shares of common stock, in connection with the issuance of convertible promissory notes, for total non-cash compensation of $56,063. All shares were valued based on the closing price of the stock on the date of grant.

 

Convertible debt conversion

On August 19, 2015, the Company issued 18,826 shares of common stock to LG Capital Funding, LLC in conversion of $4,250 of principal and $268 of accrued interest.



v3.3.1.900
PREFERRED STOCK
9 Months Ended
Aug. 31, 2015
Equity [Abstract]  
PREFERRED STOCK

The Company is authorized to issue 10,000,000 preferred shares with a par value of $0.001 per share.

 

On July 31, 2014, the Board of Directors designated a series of preferred stock titled Class A Convertible Preferred Stock consisting of 50,000 shares. Each share of Class A Convertible Preferred Stock (“preferred stock”) has a stated value of $5.00 per share. The holders of preferred stock have no voting rights. The holders are entitled to receive cumulative dividends at a rate of 10% of the stated value per annum, payable twice a year, subject to the availability of funds and approval by the Board of Directors. In the discretion of the Board of Directors dividends may be paid with common stock. In the event of liquidation or dissolution of the Company each holder of preferred stock shall be entitled to be paid in cash $5 per share plus cumulative dividends if any

 

On January 30, 2015, the Company issued 15,380 shares of preferred stock at a price of $5.00 per share for total cash proceeds of $76,900.



v3.3.1.900
LOSS PER SHARE APPLICABLE TO COMMON SHAREHOLDERS
9 Months Ended
Aug. 31, 2015
Earnings Per Share [Abstract]  
LOSS PER SHARE APPLICABLE TO COMMON SHAREHOLDERS

The following table sets forth the computations of loss per share amounts applicable to common stockholders for the three and nine months ended August 31, 2015 and 2014. Potentially dilutive shares were excluded from the computation as of August 31, 2015 and 2014 since they would have been anti-dilutive.

 

 

Three Months Ended

August 31,

 

Nine Months Ended

August 31,

  2015   2014   2015   2014
Loss applicable to common stockholders $ (733,435 )   $ (140,266 )   $ (1,506,480 )   $ (177,838 )
                               
Basic and diluted loss per common share $ (0.13 )   $ (0.03 )   $ (0.28 )   $ (0.04 )
                               
Weighted average common shares outstanding (1):                              
Basic and diluted shares   5,651,549       5,075,478       5,442,147       5,071,839  
                               
Potentially dilutive securities (2):                              
Convertible notes (3)   2,254,942       —         2,254,942       —    
Convertible preferred stock (3)   528,193       —         528,193       —    

 

  (1) Excludes nonvested restricted stock and restricted stock units.
  (2) Excludes grants with performance and market conditions as the necessary conditions have not been satisfied.
  (3) The impact of the convertible notes and the convertible preferred stock on earnings per share is antidilutive in a period of loss.



v3.3.1.900
LETTER OF INTENT AND COMMITMENTS
9 Months Ended
Aug. 31, 2015
Commitments and Contingencies Disclosure [Abstract]  
LETTER OF INTENT AND COMMITMENTS

On June 12, 2015, we entered into a binding Letter of Intent (the “LOI”) for the purchase of all of the issued and outstanding capital stock of J.S. Technologies, Inc., a California corporation (“JS”).  JS is the manufacturer of Suhr brand guitars and related electronics and accessories.  Under the LOI, we have agreed to purchase all of the issued and outstanding capital stock in JS for a total purchase price of $11,000,000.  The purchase price will be paid, at the option of the individual JS stockholders, in either cash, new convertible preferred stock, or a combination of both.  The new convertible preferred stock to be issued as payment toward the purchase price will have a stated value of $4.00 per share, will accrue dividends at a rate of six percent per year, and will be convertible to common stock at a price of $1.00 per share of common stock.  All shares of the new preferred stock issued and outstanding at thirty-six months after closing will be automatically converted to common stock.  

 

The anticipated closing date of the acquisition will be in in 120 days from the date of the LOI and will be documented by a definitive agreement to be prepared by the parties.  The transaction must close by the later of: (i) 120 days from the date of the LOI, or (ii) 60 days after delivery of audited financial statements and auditor reviewed subsequent quarters for JS, which is a condition to closing.  There are numerous additional conditions to closing of the acquisition, including, but not limited to: (i) execution of the definitive agreement by not less than 65% of JS’s stockholders and compliance with JS’s bylaws and a buy/sell agreement governing its common stock, (ii) our readiness and ability to pay the required portion of the purchase price to each JS stockholder who is ready and willing to sell its shares, and (iii) concurrent closing of an additional agreement under which we will purchase S&J Design Labs, LLC, the affiliated company which owns the building and equipment used in JS’s operations.  As of the date of this filing the auditor reviews of the subsequent quarters have not yet been completed. Both parties have agreed to extend the closing until all conditions have been met.

 

The LOI also contains a “no-shop” provision for the time between the date of the LOI and the defined closing date.  In addition, if we or any of the JS stockholders signing the LOI fail and refuse to close the acquisition on the defined closing date, and the other parties are ready and able to close, the breaching party will be assessed a $250,000 break-up fee. Extensive additional covenants, conditions, representations, and warranties between the parties are included in the LOI. The foregoing is a brief summary of the material terms of the LOI, which should be reviewed in its entirety for additional information.

 

On August 4, 2015, we entered into a Secured Promissory Note (the “Note”) with JS. Under the Note, we intend to lend up to $400,000 to JS in order to provide short-term financing pending our intended acquisition of JS. The Note calls for an initial advance in the amount of $200,000 to be made as soon as practicable. Up to two additional advances of $100,000 each may be made thirty and sixty days, respectively, from the date of the Note. The Note bears interest at a rate of ten percent per year and is due in one year. Monthly payment of interest only are due beginning September 1, 2015. The Note is secured by substantially all of the assets of JS.  Through the date of this filing we have not provided financing associated with this commitment. 

Also on August 4, 2015, we executed an Amendment to the LOI. The original LOI required that the parties settle on a purchase price for affiliated company S&J Design Labs, LLC within thirty days of the LOI. The Amendment allows the parties until the closing date of the acquisition to set a purchase price for S&J Design Labs, LLC.

Our ability to close the acquisition of JS as contemplated by the LOI will be dependent upon us obtaining additional financing through debt and/or equity financing arrangements.  Although management is working to secure the additional capital required to close the transaction, there is a risk that such additional financing will not be available to us on acceptable terms or in the amounts required to close the planned acquisition.



v3.3.1.900
RESTATEMENT
9 Months Ended
Aug. 31, 2015
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
RESTATEMENT

The consolidated financial statements for the year ended November 30, 2014 and for the three and nine months ended August 31, 2014 have been amended to expense the previously capitalized licensing fee. An analysis of those restated numbers are as follows.

  November 30, 2014
    As Reported   Adjustment   As Restated
Product license $ 29,250  $ (29,250) $ -
Total assets   66,963   (29,250)   37,713
             
Accumulated deficit   (405,906)   (29,250)   (435,156)
Total stockholders’ equity (deficit)   (197,303)   (29,250)   (226,553)
Total liabilities and stockholders’ equity   66,963   29,250   37,713

  

 

For the Three Months Ended

August 31, 2014

 

For the Nine Months Ended

August 31, 2014

    As Reported   Adjustment   As Restated   As Reported   Adjustment   As Restated
General and administrative $ 70,906 $ 13,500 $ 84,406 $ 107,788 $ 15,750 $ 123,538
Total Operating Expenses   132,099   13,500   145,599   168,981   15,750   184,731
Net loss from operations $ (126,766) $ (13,500) $ (140,266) $ (162,088) $ (15,750) $ (177,838)

 

 

                       
 

For the Three Months Ended

May 30, 2015

 

For the Six Months Ended

May 30, 2015

    As Reported   Adjustment   As Restated   As Reported   Adjustment   As Restated
General and administrative $ 363,769 $ 11,250 $ 375,019 $ 537,735 $ 24,750 $ 562,485
Total Operating Expenses   363,769   11,250   375,019   544,099   24,750   568,849
Net loss from operations $ (570,226) $ (11,250) $ (581,476) $ (748,295) $ (24,750) $


v3.3.1.900
SUBSEQUENT EVENTS
9 Months Ended
Aug. 31, 2015
Subsequent Events [Abstract]  
SUBSEQUENT EVENTS

On September 8, 2015, the Company issued 22,239 shares of common stock to LG Capital Funding, LLC in conversion of $5,000 of principal and $338 of accrued interest.

 

On September 21, 2015, pursuant to individual Notices of Conversion executed by each of the holders of its Class A Convertible Preferred Stock, the Corporation exchanged all 29,380 shares of its issued and outstanding Class A Convertible Preferred Stock, as well as accrued dividends thereon in the amount of $11,556, for a total of 528,193 shares common stock.

 

On October 8, 2015, the Company entered into a Promissory Note (the “Note”) with Studio Capital, LLC. (“Studio”). Under the Note, the Company borrowed the sum of $125,000. The Note featured an original issue discount of $25,000, resulting in net funding to the Company of $100,000. The Note is due in six (6) months and does not bear interest. As additional consideration to Studio, the Company agreed to issue it five thousand (5,000) shares of common stock.

 

On October 8, 2015, the Company issued 30,000 shares of common stock to an individual for consideration of personally guaranteeing the Promissory Note to Studio Capital, LLC.

 

On December 2, 2015, the Company entered into a Promissory Note (the “Note”) with a third party. Under the Note, the Company borrowed the sum of $125,000. The Note featured an original issue discount of $25,000, resulting in net funding to the Company of $100,000. The Note is due in sixty (60) days and does not bear interest. As additional consideration to the investor, the Company agreed to issue a warrant to purchase up to 100,000 shares of the Company’s common stock at a price of $0.01 per share, exercisable for a period of one year.

 

December 10, 2015, the Company entered into a Subscription Agreement with a third party, whereby it sold 25,000 shares of common stock for $5,000.

 

In January of 2016, the Company entered into Amendments to its promissory notes with Adar Bays, Union Capital, LG Capital, and Typenex (the “Amendments”).In general, each of the Amendments stipulates that the lender will, for a period of ninety (90) days, convert no more than ten percent (10%) of the principal amount due under their notes in any thirty (30) day period. In addition, the specific Amendments also provide as follows:

 

·The Adar Bays and Union Capital Amendments each provide that the conversion discount shall be increased by 5%, such that these notes are convertible at 55%, rather than 60%, of market price as defined in the notes. Further, the pricing period, or “look-back” for determining the conversion price has been extended from 20 days to 25 days, and the pre-payment penalty has been increased to 150%.

 

·The LG Capital Amendment also calls for additional consideration to LG Capital in the form of warrants to purchase 75,000 shares of our common stock at a price of $0.30 per share, exercisable for 3 years. Also, we will be permitted to re-pay the LG Capital note with the applicable penalty set forth in the note for a pre-payment made between 91 and 180 days after issue.

 

 



v3.3.1.900
ORGANIZATION AND DESCRIPTION OF BUSINESS (Policies)
9 Months Ended
Aug. 31, 2015
Accounting Policies [Abstract]  
Basis of Unaudited Interim Financial Information

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and the rules of the Securities and Exchange Commission ("SEC") for interim financial information and the SEC instructions to Form 10-Q, accordingly, they do not include all of the information and footnotes required by U.S. GAAP for completed financial statements. In the opinion of management, all adjustments necessary in order for the financial statements to not be misleading have been reflected herein. Operating results for the interim period ended August 31, 2015 are not necessarily indicative of the results that can be expected for the full year. These unaudited interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements of the Company for the year ended November 30, 2014.

Use of Estimates

In preparing financial statements in conformity with U.S. GAAP, management is required 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, as well as the reported amounts of expenses during the reporting period. Due to inherent uncertainty involved in making estimates, actual results reported in future periods may be affected by changes in these estimates. On an ongoing basis, the Company evaluates its estimates and assumptions. These estimates and assumptions include valuing equity securities in share-based payment arrangements, estimating the fair value of equity instruments recorded as derivative liabilities, and estimating the useful lives of amortizable assets and whether impairment charges may apply.

Principles of Consolidation

The consolidated financial statements include the accounts of Avalanche International, Corp. and its wholly-owned subsidiary Smith and Ramsay Brands, LLC. All significant intercompany accounts and transactions have been eliminated.

Reclassificaiton

The Company reclassified debt issuance costs from current assets to short-term debt, net on the condensed consolidated balance sheets for all periods presented pursuant to early adoption of Accounting Standards Update ("ASU") No. 2015-03 - Simplifying the Presentation of Debt Issuance Costs.

Convertible Instruments

The Company bifurcates conversion options from their host instruments and account for them as free standing derivative financial instruments if certain criteria are met. The criteria include circumstances in which (a) the economic characteristics and risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics and risks of the host contract, (b) the hybrid instrument that embodies both the embedded derivative instrument and the host contract is not re-measured at fair value under otherwise applicable generally accepted accounting principles with changes in fair value reported in earnings as they occur and (c) a separate instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument. An exception to this rule is when the host instrument is deemed to be conventional, as that term is described under applicable GAAP. 

 

When the Company has determined that the embedded conversion options should not be bifurcated from their host instruments, the Company records, when necessary, discounts to convertible notes for the intrinsic value of conversion options embedded in debt instruments based upon the differences between the fair value of the underlying common stock at the commitment date of the note transaction and the effective conversion price embedded in the note. Debt discounts under these arrangements are amortized over the term of the related debt to their stated date of redemption. The Company also records, when necessary, deemed dividends for the intrinsic value of conversion options embedded in preferred shares based upon the differences between the fair value of the underlying common stock at the commitment date of the transaction and the effective conversion price embedded in the preferred shares.

Recent Accounting Pronouncements

The Company has implemented all new accounting pronouncements that are in effect.  These pronouncements did not have any material impact on the financial statements unless otherwise disclosed, and the Company does not believe that there are any other new accounting pronouncements that have been issued, that might have a material impact on its financial position or results of operations.



v3.3.1.900
LOANS PAYABLE (Tables)
9 Months Ended
Aug. 31, 2015
Loans Payable Tables  
Schedule of Short Term Loans Payable
    Issue Date   Maturity Date   Stated Interest Rate   Principle Balance Outstanding 8/31/2015
Argent Offset, LLC   11/26/14   8/1/15     10 %   $ 17,129  
Argent Offset, LLC   various   demand     n/a       4,305  
Strategic IR, Inc.   3/17/15   4/16/2015     21 %     12,500  
                    $ 33,934  


v3.3.1.900
CONVERTIBLE NOTES PAYBLE (Tables)
9 Months Ended
Aug. 31, 2015
Convertible Notes Payble Tables  
Schedule of Convertible Notes Payable

  Issue Date Maturity Date Stated Interest Rate Conversion Terms Principle Balance Outstanding 11/30/2014
LG Capital Funding, LLC 11/3/2014 11/3/2015 8% Not yet convertible 63,250

 

  Face Value Initial Discount Accumulated Amortization Carrying Value
LG Capital Funding, LLC

 

    Issue Date   Maturity Date   Stated Interest Rate   Conversion Terms (1)   Principle Balance Outstanding 8/31/2015
LG Capital Funding, LLC     11/3/2014     11/3/2015     8 %   $ 0.24       $                 59,000 (2)  
Dr. Gary Gelbfish     3/27/2015     9/23/2015     10 %     0.37       100,000  
JMJ Financial     4/29/2015     4/29/2017     12 %     0.24       33,000  
Union Capital, LLC     5/11/2015     5/11/2016     8 %     0.24       115,000  
Adar Bays, LL     5/12/2015     5/12/2016     8 %     0.24       115,000  
Typenex Co-Investment, LLC     5/29/2015     6/29/2016     10 %     0.50       87,500  
Black Mountain Equities, Inc.     6/4/2015     6/4/2016     8 %     0.28       55,000  
Lord Abstract, LLC     6/30/2015     6/30/2016     10 %     0.24       8,800  
GCEF Opportunity Fund, LLC     6/30/2015     6/30/2016     10 %     0.24       27,500  
JMJ Financial     8/27/2015     8/27/2017     12 %     0.24       27,500  
                                $ 628,300  

 

 

Schedule of Maturities of Convertible Notes Payable
Twelve months ended November 30,    
  2015     $ 205,655  
  2016       408,800  
  2017       60,500  
  2018       —    
  2019       —    
  Total Future Maturities


v3.3.1.900
FAIR VALUE MEASUREMENTS (Tables)
9 Months Ended
Aug. 31, 2015
Fair Value Disclosures [Abstract]  
Schedule of Fair Value of Liabilities
    Fair value measured at August 31, 2015
              Quoted prices in active       Significant other       Significant  
      Fair value at       markets       observable inputs       unobservable inputs  
      August 31, 2015       (Level 1)       (Level 2)       (Level 3)  
Derivative liability   $ 717,796     $ —       $ —       $ 717,796  
Schedule of Fair Value Liabilities Gains & Losses
    Derivative Liability  
Balance – November 30, 2014 $ —    
Initial valuation   627,559  
Change in fair value on derivative   (182,776 )
Balance – May 31, 2015   444,783  
     Initial valuation   270,045  
     Change in fair value on derivative   2,968  
Balance – August 31, 2015 $ 717,796  
Schedule of Fair Value Inputs
Date of valuation August 31, 2015   Inception
Stock price $ 0.50       $2.46 – 0.50  
Conversion price   .24 – 0.28       .24 – 1.20  
Volatility (annual)   116% - 373%       111% - 159%  
Risk-free rate   .05% - .75%       .08% - .56%  
Years to maturity   .18 - 2       .5 - 2  


v3.3.1.900
LOSS PER SHARE APPLICABLE TO COMMON SHAREHOLDERS (Tables)
9 Months Ended
Aug. 31, 2015
Earnings Per Share [Abstract]  
Schedule of Earnings per Share Basic
 

Three Months Ended

August 31,

 

Nine Months Ended

August 31,

  2015   2014   2015   2014
Loss applicable to common stockholders $ (733,435 )   $ (140,266 )   $ (1,506,480 )   $ (177,838 )
                               
Basic and diluted loss per common share $ (0.13 )   $ (0.03 )   $ (0.28 )   $ (0.04 )
                               
Weighted average common shares outstanding (1):                              
Basic and diluted shares   5,651,549       5,075,478       5,442,147       5,071,839  
                               
Potentially dilutive securities (2):                              
Convertible notes (3)   2,254,942       —         2,254,942       —    
Convertible preferred stock (3)   528,193       —         528,193       —    


v3.3.1.900
RESTATEMENT (Tables)
9 Months Ended
Aug. 31, 2015
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Schedule of Consolidated Balance Sheet
  November 30, 2014
    As Reported   Adjustment   As Restated
Product license $ 29,250  $ (29,250) $ -
Total assets   66,963   (29,250)   37,713
             
Accumulated deficit   (405,906)   (29,250)   (435,156)
Total stockholders’ equity (deficit)   (197,303)   (29,250)   (226,553)
Total liabilities and stockholders’ equity   66,963   29,250   37,713
Schedule of Consolidated Statement of Operations
 

For the Three Months Ended

August 31, 2014

 

For the Nine Months Ended

August 31, 2014

    As Reported   Adjustment   As Restated   As Reported   Adjustment   As Restated
General and administrative $ 70,906 $ 13,500 $ 84,406 $ 107,788 $ 15,750 $ 123,538
Total Operating Expenses   132,099   13,500   145,599   168,981   15,750   184,731
Net loss from operations $ (126,766) $ (13,500) $ (140,266) $ (162,088) $ (15,750) $ (177,838)

 

 

                       
 

For the Three Months Ended

May 30, 2015

 

For the Six Months Ended

May 30, 2015

    As Reported   Adjustment   As Restated   As Reported   Adjustment   As Restated
General and administrative $ 363,769 $ 11,250 $ 375,019 $ 537,735 $ 24,750 $ 562,485
Total Operating Expenses   363,769   11,250   375,019   544,099   24,750   568,849
Net loss from operations $ (570,226) $ (11,250) $ (581,476) $ (748,295) $ (24,750) $


v3.3.1.900
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative)
9 Months Ended
Aug. 31, 2015
Accounting Policies [Abstract]  
Date of Incorporation Apr. 14, 2011
Date of Subsidiary Incorporation May 19, 2014
Current Fiscal Year End --11-30


v3.3.1.900
GOING CONCERN (Details Narrative) - USD ($)
3 Months Ended 9 Months Ended
Aug. 31, 2015
Aug. 31, 2014
Aug. 31, 2015
Aug. 31, 2014
Nov. 30, 2014
Organization, Consolidation and Presentation of Financial Statements [Abstract]          
Accumulated deficit $ (1,941,636)   $ (1,941,636)   $ (435,156)
Net loss $ (733,435) $ (140,266) $ (1,506,480) $ (177,838)  


v3.3.1.900
LOAN RECEIVABLE (Details Narrative)
9 Months Ended
Aug. 31, 2015
USD ($)
Prom Note Sale Agmt  
Date of Agreement Jun. 05, 2015
Payment for Loan Receivable $ 12,500
Prom Note #1  
Date of Agreement Jun. 05, 2015
Debt Instrument $ 12,500
Debt Instrument, Interest Rate 10.00%
Debt Instrument, Maturity Date Dec. 31, 2015


v3.3.1.900
RELATED PARTY TRANSACTIONS (Details Narrative) - USD ($)
3 Months Ended 9 Months Ended
Aug. 31, 2015
Aug. 31, 2014
Aug. 31, 2015
Aug. 31, 2014
Nov. 30, 2014
Product sold     $ 34,017    
Revenue     87.60%    
Loan and interest receivable, related party $ 167,326   $ 167,326  
Interest income $ 6,074 $ 6,074  
Accounts payable, related party     $ 88,572
CrossClick Media          
Services $ 53,679 $ 60,000 $ 97,000 $ 60,000  
Loan     $ 202,500    
Loan, term     1 year    
Loan, Interest Rate     12.00%    
Loan and interest receivable, related party 167,000   $ 167,000    
Interest income 6,062   $ 6,062    
Debt Instrument, Interest Rate     12.00%    
Accounts payable, related party 54,000   $ 54,000    
Prom Note #2          
Loan, Interest Rate     10.00%    
Date of Agreement     Jun. 05, 2015    
Debt Instrument $ 12,500   $ 12,500    
Debt Instrument, Interest Rate     10.00%    
Debt Instrument, Maturity Date     Dec. 31, 2015    
Prom Note Sale Agmt #2          
Date of Agreement     Jun. 05, 2015    
Payment for Loan Receivable     $ 12,500    


v3.3.1.900
LOANS PAYABLE (Details Narrative) - USD ($)
6 Months Ended 9 Months Ended 12 Months Ended
May. 31, 2015
Aug. 31, 2015
Aug. 31, 2014
Nov. 30, 2014
Aug. 31, 2019
Aug. 31, 2018
Aug. 31, 2017
Aug. 31, 2016
Accrued interest   $ 26,285   $ 374        
Promissory Note Balance   276,312     $ 60,500 $ 408,800
Advances from related parties   $ 58,366          
Strategic IR Amdt #1                
Interest   21.00%            
Prom Note #3                
Date issuance   Aug. 10, 2015            
Promissory note   $ 5,000            
Loan fee   $ 250            
Maturity date   Aug. 19, 2015            
Interest   10.00%            
Accrued interest   $ 23            
Repayment   $ 5,023            
Argent Offset                
Date issuance   Nov. 26, 2014            
Promissory note   $ 12,500            
Loan fee   $ 500            
Maturity date   Dec. 05, 2014            
Interest   10.00%            
Advances from related parties   $ 4,305            
Argent Offset Amdt #1                
Date issuance   Feb. 01, 2015            
Maturity date   Aug. 01, 2015            
Interest   12.50%            
Accrued interest   $ 1,301            
Forbearance fee   7,500            
Promissory Note Balance   17,129            
Repayment   11,500            
Strategic IR                
Date issuance Mar. 17, 2015              
Promissory note   10,750            
Loan fee   $ 1,750            
Maturity date Apr. 16, 2015              
Interest   10.00%            
Accrued interest $ 936              
Promissory Note Balance   $ 12,500            


v3.3.1.900
CONVERTIBLE NOTES PAYABLE - Schedule of Convertible Notes Payable (Details) - USD ($)
9 Months Ended
Aug. 31, 2015
Aug. 31, 2019
Aug. 31, 2018
Aug. 31, 2017
Aug. 31, 2016
Nov. 30, 2014
Debt Instrument, Discount $ 328,700         $ 9,040
Debt Instrument, Carrying Amount $ 276,312 $ 60,500 $ 408,800  
LG Capital Funding            
Date of Issuance Nov. 03, 2014          
Maturity date Nov. 03, 2015          
Interest Rate 8.00%          
Debt Instrument $ 63,250          
Debt Instrument, Discount 9,040          
Debt Instrument, Carrying Amount $ 54,210          


v3.3.1.900
CONVERTIBLE NOTES PAYABLE - Schedule of Maturities of Convertible Notes Payable (Details) - USD ($)
Aug. 31, 2019
Aug. 31, 2018
Aug. 31, 2017
Aug. 31, 2016
Aug. 31, 2015
Convertible Notes Payable - Schedule Of Maturities Of Convertible Notes Payable Details          
Debt Instrument, Carrying Amount $ 60,500 $ 408,800 $ 276,312
Total Future Maturities         $ 674,955


v3.3.1.900
CONVERTIBLE NOTES PAYABLE (Details Narrative) - USD ($)
3 Months Ended 9 Months Ended 12 Months Ended
Aug. 31, 2015
Aug. 31, 2014
Aug. 31, 2015
Aug. 31, 2014
Nov. 30, 2014
Aug. 31, 2019
Aug. 31, 2018
Aug. 31, 2017
Aug. 31, 2016
Accrued interest     $ 26,285   $ 374        
Debt Instrument, Carrying Amount $ 276,312   276,312     $ 60,500 $ 408,800
Original issue discount, value 164,685   248,863            
Loss on issuance of convertible debt $ (55,093) $ (356,402)          
Union Capital                  
Date of Issuance     May 11, 2015            
Interest Rate 8.00%   8.00%            
Maturity Date     May 11, 2016            
Convertible rate     24.00%            
Accrued interest     $ 681            
Debt Instrument, Carrying Amount $ 115,000   $ 115,000            
Adar Bays                  
Date of Issuance     May 12, 2015            
Promissory note $ 115,000   $ 115,000            
Interest Rate 8.00%   8.00%            
Maturity Date     May 12, 2016            
Convertible rate     24.00%            
Accrued interest     $ 655            
Debt Instrument, Carrying Amount $ 115,000   $ 115,000            
LG Capital Funding                  
Date of Issuance     Nov. 03, 2014            
Promissory note $ 63,250   $ 63,250            
Interest Rate 8.00%   8.00%            
Maturity Date     Nov. 03, 2015            
Convertible rate     24.00%            
Debt Instrument, Carrying Amount $ 54,210   $ 54,210            
Dr. Gelbfish                  
Date of Issuance     Mar. 27, 2015            
Promissory note $ 100,000   $ 100,000            
Interest Rate 10.00%   10.00%            
Maturity Date     Sep. 23, 2015            
Convertible rate     37.00%            
JMJ Financial                  
Date of Issuance     Apr. 29, 2015            
Interest Rate 12.00%   12.00%            
Maturity Date     Apr. 29, 2017            
Debt Instrument, Carrying Amount $ 33,000   $ 33,000            
Typenex #2                  
Date of Issuance     May 29, 2015            
Interest Rate 10.00%   10.00%            
Maturity Date     Jun. 29, 2016            
Convertible rate     50.00%            
Debt Instrument, Carrying Amount $ 87,500   $ 87,500            
GCEF Fund                  
Date of Issuance     Jun. 30, 2015            
Interest Rate 10.00%   10.00%            
Maturity Date     Jun. 30, 2016            
Convertible rate     24.00%            
Debt Instrument, Carrying Amount $ 27,500   $ 27,500            
Black Mountain                  
Date of Issuance     Jun. 04, 2015            
Interest Rate 8.00%   8.00%            
Maturity Date     Jun. 04, 2016            
Convertible rate     28.00%            
Debt Instrument, Carrying Amount $ 55,000   $ 55,000            
Lord Abstract                  
Date of Issuance     Jun. 30, 2015            
Interest Rate 10.00%   10.00%            
Maturity Date     Mar. 30, 2016            
Convertible rate     24.00%            
Debt Instrument, Carrying Amount $ 8,800   $ 8,800            
JMJ Financial #2                  
Date of Issuance     Aug. 27, 2015            
Interest Rate 12.00%   12.00%            
Maturity Date     Aug. 27, 2017            
Convertible rate     24.00%            
Debt Instrument, Carrying Amount $ 27,500   $ 27,500            


v3.3.1.900
FAIR VALUE MEASUREMENTS - Fair Value Measurements (Details)
Aug. 31, 2015
USD ($)
Derivative Liability $ 717,796
Level 3  
Derivative Liability $ 717,796


v3.3.1.900
FAIR VALUE MEASUREMENTS - Schedule of Fair Value Liabilities Gains & Losses (Details) - USD ($)
3 Months Ended 6 Months Ended 9 Months Ended 12 Months Ended
Aug. 31, 2015
Aug. 31, 2014
May. 31, 2015
Aug. 31, 2015
Aug. 31, 2014
Nov. 30, 2014
Fair Value Disclosures [Abstract]            
Derivative Liability, Beginning Balance $ 2,968   $ 627,559 $ 627,559
Change in Fair Value of Derivative 2,968 $ 270,045 $ (179,808) $ (182,776)
Derivative Liability, Ending Balance $ 717,796   $ 2,968 $ 717,796  


v3.3.1.900
FAIR VALUE MEASUREMENTS - Schedule of Fair Value Inputs (Details) - $ / shares
8 Months Ended 9 Months Ended
Nov. 30, 2011
Aug. 31, 2015
Apr. 13, 2011
Level 3 [Min]      
Stock Price     $ 0.50
Conversion price   $ 0.24 0.24
Weighted Average volatility 111.00% 116.00%  
Risk free rate 0.08% 0.05%  
Years to maturity 0 years 0 years  
Level 3 [Max]      
Stock Price   $ 0.50 2.46
Conversion price   $ 0.28 $ 1.20
Weighted Average volatility 159.00% 373.00%  
Risk free rate 0.56% 0.75%  
Years to maturity 2 years 2 years  


v3.3.1.900
COMMON STOCK (Details Narrative)
9 Months Ended
Aug. 31, 2015
USD ($)
$ / shares
shares
Aug. 31, 2014
USD ($)
Nov. 30, 2014
$ / shares
shares
Common stock, Par Value | $ / shares $ 0.001   $ 0.001
Common stock, Shares | shares 75,000,000   75,000,000
Common Stock, Proceeds $ 2,000 $ 28,000  
Stock Split 2    
Shares Issued for Services, Shares | shares 251,833    
Shares Issued for Services $ (251,833)    
Prepaid Stock for Services $ 188,417    
Shares Issued, Conversion of Notes, Shares | shares 2,254,942    
Shares Issued, Conversion of Notes $ 4,518  
Dr. Gelbfish      
Date of Issuance Mar. 27, 2015    
Shares Issued for Services, Shares | shares 50,000    
Shares Issued for Services $ 41,349    
LG Capital Funding      
Common Stock Issued, Shares | shares 18,826    
Date of Issuance Aug. 19, 2015    
Debt Instrument, Converted Amount $ 4,250    
Debt Instrument, Interest Accrued, Converted Amount $ 268    
Service Providers      
Shares Issued for Services, Shares | shares 440,000    
Shares Issued for Services $ 583,125    
Prom Note Conversions      
Shares Issued, Conversion of Notes, Shares | shares 48,990    
Shares Issued, Conversion of Notes $ 56,063    


v3.3.1.900
PREFERRED STOCK (Details Narrative) - USD ($)
9 Months Ended
Aug. 31, 2015
Nov. 30, 2014
Preferred stock, par value $ 0.001 $ 0.001
Preferred stock, share authorized 10,000,000 10,000,000
Preferred stock Class A, shares 50,000  
Preferred stock Class A, price per share $ 5.00  
Finiks Capital    
Date of Issuance Jan. 30, 2015  
Preferred stock issued, shares 15,380  
Preferred stock issued, price per share $ 5.00  
Preferred stock, value $ 76,900  


v3.3.1.900
LOSS PER SHARE APPLICABLE TO COMMON SHAREHOLDERS - Schedule of Earnings per Share Basic (Details) - USD ($)
3 Months Ended 9 Months Ended
Aug. 31, 2015
Aug. 31, 2014
Aug. 31, 2015
Aug. 31, 2014
Earnings Per Share [Abstract]        
Net Loss $ (733,435) $ (140,266) $ (1,506,480) $ (177,838)
Loss per common share Basic and diluted $ (0.13) $ (0.03) $ (0.28) $ (0.04)
Weighted average common shares outstanding:        
Weighted average common shares Basic and diluted 5,651,549 5,075,478 5,442,147 5,071,839
Potentially dilutive securities:        
Convertible notes 2,254,942 2,254,942
Convertible preferred stock 528,193 528,193


v3.3.1.900
LETTER OF INTENT AND COMMITMENTS (Details Narrative)
9 Months Ended
Aug. 31, 2015
USD ($)
JS Tech  
Date of Agreement Jun. 12, 2015
Business Acquisition, Purchase Price $ 11,000,000
Business Acquisition, Terms

The purchase price will be paid, at the option of the individual JS stockholders, in either cash, new convertible preferred stock, or a combination of both.  The new convertible preferred stock to be issued as payment toward the purchase price will have a stated value of $4.00 per share, will accrue dividends at a rate of six percent per year, and will be convertible to common stock at a price of $1.00 per share of common stock.  All shares of the new preferred stock issued and outstanding at thirty-six months after closing will be automatically converted to common stock.  

 

The anticipated closing date of the acquisition will be in in 120 days from the date of the LOI and will be documented by a definitive agreement to be prepared by the parties.  The transaction must close by the later of: (i) 120 days from the date of the LOI, or (ii) 60 days after delivery of audited financial statements and auditor reviewed subsequent quarters for JS, which is a condition to closing.  There are numerous additional conditions to closing of the acquisition, including, but not limited to: (i) execution of the definitive agreement by not less than 65% of JS’s stockholders and compliance with JS’s bylaws and a buy/sell agreement governing its common stock, (ii) our readiness and ability to pay the required portion of the purchase price to each JS stockholder who is ready and willing to sell its shares, and (iii) concurrent closing of an additional agreement under which we will purchase S&J Design Labs, LLC, the affiliated company which owns the building and equipment used in JS’s operations.  As of the date of this filing the auditor reviews of the subsequent quarters have not yet been completed. Both parties have agreed to extend the closing until all conditions have been met.

 

The LOI also contains a “no-shop” provision for the time between the date of the LOI and the defined closing date.  In addition, if we or any of the JS stockholders signing the LOI fail and refuse to close the acquisition on the defined closing date, and the other parties are ready and able to close, the breaching party will be assessed a $250,000 break-up fee. Extensive additional covenants, conditions, representations, and warranties between the parties are included in the LOI. The foregoing is a brief summary of the material terms of the LOI, which should be reviewed in its entirety for additional information.

JS Tech Note  
Date of Agreement Aug. 04, 2015
Debt Instrument $ 400,000
Debt Instrument, Initial Advance $ 200,000


v3.3.1.900
RESTATEMENT- Schedule of Consolidated Balance Sheet (Details) - USD ($)
Aug. 31, 2015
Nov. 30, 2014
Total assets $ 201,355 $ 28,673
Accumulated deficit (1,941,636) (435,156)
Total stockholders equity (deficit) (969,127) (226,553)
Total liabilities and stockholders equity 201,355 $ 28,673
As Reported    
Product license 29,250  
Total assets 66,963  
Accumulated deficit (405,906)  
Total stockholders equity (deficit) (197,303)  
Total liabilities and stockholders equity 66,963  
Adjustment    
Product license (29,250)  
Total assets (29,250)  
Accumulated deficit (29,250)  
Total stockholders equity (deficit) (29,250)  
Total liabilities and stockholders equity $ 29,250  
As Restated    
Product license  
Total assets $ 37,713  
Accumulated deficit (435,156)  
Total stockholders equity (deficit) (226,553)  
Total liabilities and stockholders equity $ 37,713  


v3.3.1.900
RESTATEMENT- Schedule of Consolidated Statement of Operations (Details) - USD ($)
3 Months Ended 6 Months Ended 9 Months Ended
Aug. 31, 2015
May. 31, 2015
Aug. 31, 2014
May. 31, 2015
Aug. 31, 2015
Aug. 31, 2014
General and administrative $ 488,466   $ 84,406   $ 1,050,951 $ 123,538
Total operating expense 488,466   145,599   1,057,315 184,731
Net loss from operations $ (488,555)   (140,266)   $ (1,048,034) (177,838)
As Reported            
General and administrative   $ 363,769 70,906 $ 537,735   107,788
Total operating expense   363,769 132,099 544,099   168,981
Net loss from operations   (570,226) (126,766) (748,295)   (162,088)
Adjustment            
General and administrative   11,250 13,500 24,750   15,750
Total operating expense   11,250 13,500 24,750   15,750
Net loss from operations   (11,250) (13,500) (24,750)   (15,750)
As Restated            
General and administrative   375,019 84,406 562,485   123,538
Total operating expense   375,019 145,599 568,849   184,731
Net loss from operations   $ (581,476) $ (140,266) $ (773,045)   $ (177,838)


v3.3.1.900
SUBSEQUENT EVENTS (Details Narrative) - USD ($)
3 Months Ended 9 Months Ended
Aug. 31, 2015
Aug. 31, 2015
Nov. 30, 2014
Debt Instrument, Original Issue Discount $ 164,685 $ 248,863  
Common stock, shares issued 5,703,816 5,703,816 5,144,400
Preferred stock Class A, shares 50,000 50,000  
Union Capital Amdt #1      
Date of Agreement   Jan. 22, 2016  
Convertible rate   55.00%  
Debt Instrument Description  

Further, the pricing period, or “look-back” for determining the conversion price has been extended from 20 days to 25 days, and the pre-payment penalty has been increased to 150%.

 
Adar Bays Amdt      
Date of Agreement   Jan. 25, 2016  
Debt Instrument Description  

Further, the pricing period, or “look-back” for determining the conversion price has been extended from 20 days to 25 days, and the pre-payment penalty has been increased to 150%.

 
Studio Capital      
Date of Agreement   Oct. 08, 2015  
Debt Instrument $ 100,000 $ 100,000  
Debt Instrument, Term   6 months  
Debt Instrument, Borrowing Capacity $ 125,000 $ 125,000  
Debt Instrument, Original Issue Discount   $ 25,000  
Common stock, shares issued 5,000 5,000  
Studio Capital Guarantee      
Issuance Date   Oct. 08, 2015  
Common stock, shares issued 30,000 30,000  
Convertible Prom Note #1      
Issuance Date   Sep. 08, 2015  
Common stock, shares issued 22,239 22,239  
Debt Instrument, Converted Amount   $ 5,000  
Debt Instrument, Interest Accrued, Converted Amount   $ 338  
Class A Convertible Note      
Issuance Date   Sep. 21, 2015  
Common stock, shares issued 528,193 528,193  
Debt Instrument, Converted Amount   $ 11,556  
Preferred stock Class A, shares 29,380 29,380  
Prom Note #4      
Date of Agreement   Dec. 02, 2015  
Debt Instrument $ 125,000 $ 125,000  
Debt Instrument, Original Issue Discount   $ 25,000  
Warrant   100,000  
Warrant, price per share $ 0.01 $ 0.01  
Warrant, period   1 year  
LG Capital Funding Amdt      
Date of Agreement   Jan. 20, 2016  
Warrant   75,000  
Warrant, price per share $ 0.30 $ 0.30  
Warrant, period   3 years  
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