Item
4.01 Changes in Registrant’s Certifying Accountant.
On
September 13, 2016, Seale & Beers, CPAs, (the “Former Accountant”) informed the Company that the Former Accountant
was in the process of being acquired by AMC Auditing, LLC. As a result of the acquisition, on November 5, 2016, the Former Accountant
resigned as the Company’s independent registered public accounting firm and the Company engaged AMC Auditing, LLC (the “New
Accountant”) as the Company’s independent registered public accounting firm. The engagement of the New Accountant
was approved by the Company’s Board of Directors.
The
Former Accountant’s audit reports on the financial statements of the Company for the fiscal year ended December 31, 2015
contained no adverse opinion or disclaimer of opinion, nor were they qualified or modified as to uncertainty, audit scope or accounting
principles, except that the audit reports on the financial statements of the Company for the fiscal year ended December 31, 2015
contained an uncertainty about the Company’s ability to continue as a going concern.
During
the fiscal year ended December 31, 2015, and through the interim period ended November 5, 2016, there were no “disagreements”
(as such term is defined in Item 304 of Regulation S-K) with the Former Accountant on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or procedures, which disagreements if not resolved to the satisfaction of the
Former Accountant would have caused them to make reference thereto in their reports on the financial statements for such periods.
During
the fiscal year ended December 31, 2015, and through the interim period ended November 5, 2016, there were the following “reportable
events” (as such term is defined in Item 304 of Regulation S-K). As disclosed in Part I, Item 4 of the Company’s Form
10-Q for the quarterly period ended June 30, 2016, the Company’s management determined that the Company’s internal
controls over financial reporting were not effective as of the end of such period due to the existence of material weaknesses
related to the following:
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The
Company does not have written documentation of its internal control policies and procedures. Written documentation of key
internal controls over financial reporting is a requirement of Section 404 of the Sarbanes-Oxley Act as of the period ending
June 30, 2016. Management evaluated the impact of the Company’s failure to have written documentation of our internal
controls and procedures on its assessment of the Company’s disclosure controls and procedures and has concluded that
the control deficiency that resulted represented a material weakness.
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The
Company does not have sufficient segregation of duties within accounting functions, which is a basic internal control. Due
to the Company’s size and nature, segregation of all conflicting duties may not always be possible and may not be economically
feasible. However, to the extent possible, the initiation of transactions, the custody of assets and the recording of transactions
should be performed by separate individuals. Management evaluated the impact of its failure to have segregation of duties
on the Company’s assessment of our disclosure controls and procedures and has concluded that the control deficiency
that resulted represented a material weakness.
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Effective
controls over the control environment were not maintained. Specifically, a formally adopted written code of business conduct
and ethics that governs the Company’s employees, officers, and directors was not in place. Additionally, management
has not developed and effectively communicated to employees its accounting policies and procedures. This has resulted in inconsistent
practices. Further, the Company’s Board of Directors does not currently have any independent members and no director
qualifies as an audit committee financial expert as defined in Item 407(d)(5)(ii) of Regulation S-K. Since these entity level
programs have a pervasive effect across the organization, management has determined that these circumstances constitute a
material weakness.
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These
material weaknesses have not been remediated as of the date of this Current Report on Form 8-K.
Other
than as disclosed above, there were no reportable events during the fiscal year ended December 31, 2015, and through the interim
period ended November 5, 2016. The Company’s Board of Directors discussed the subject matter of each reportable event with
the Former Accountant. The Company authorized the Former Accountant to respond fully and without limitation to all requests of
the New Accountant concerning all matters related to the audited period by the Former Accountant, including with respect to the
subject matter of each reportable event.
Prior
to retaining the New Accountant, the Company did not consult with the New Accountant regarding either: (i) the application of
accounting principles to a specified transaction, either contemplated or proposed, or the type of audit opinion that might be
rendered on the Company’s financial statements; or (ii) any matter that was the subject of a “disagreement”
or a “reportable event” (as those terms are defined in Item 304 of Regulation S-K).
On
November 8, 2016, the Company provided the Former Accountant with its disclosures in the Current Report on Form 8-K disclosing
the resignation of the Former Accountant and requested in writing that the Former Accountant furnish the Company with a letter
addressed to the Securities and Exchange Commission stating whether or not they agree with such disclosures. The Former Accountant’s
response is filed as an exhibit to this Current Report on Form 8-K.