The accompanying notes are an integral part
of these financial statements.
The accompanying notes are an integral part
of these financial statements.
The accompanying notes are an integral part
of these financial statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THESE FINANCIAL STATEMENTS HAVE NOT BEEN
REVIEWED
(1)
Summary of Significant Accounting Policies
Organization and Description of Business
Adama Technologies Corporation (“Adama
Technologies” or the “Company”) was incorporated under the laws of the State of Delaware on September 17, 2007.
On November 23, 2016, Adama Technologies
successfully completed its acquisition of Alpine Industries, LLC a defense contractor that manufactures a number of parts for the
United States government. With Alpine having substantial annual revenues, Adama Technologies underwent a reverse merger and ceased
to be a shell company at that time. The transaction has been treated as a recapitalization of the Company, with the Company, Adama
Technologies Corp. (the legal acquirer of Alpine Industries, Inc.) considered the accounting acquiree, and Alpine Industries, Inc.,
(the legal acquiree of the Company) considered the accounting acquirer. All costs related to the transaction are being charged
to operations as incurred. The historical financial statements presented as of December 31, 2015 are presented under predecessor
entity reporting wherein the prior historical information consists solely of Alpine Industries, LLC’s balance sheet and results
of operations and cash flows. The consolidated financial statements as of December 31, 2016 are presented under successor entity
reporting and include the balance sheets of Alpine Industries, LLC and Adama Technologies and the results of operations and cash
flows of Alpine Industries, LLC for the year end December 31, 2016 and the results of operations and cash flows of Adama Technologies
from November 23, 2016 through December 31, 2016.
Cash
For purposes of reporting within the statement
of cash flows, the Company considers all cash on hand, cash accounts not subject to withdrawal restrictions or penalties, and all
highly liquid debt instruments purchased with an original maturity of three months or less to be cash and cash equivalents. There
was $10,541 of cash on has in the quarter ended June 30, 2017 and compared to $0 June 30, 2016.
Inventory
All inventory is work in process and
consists of products, materials, parts and labor and is carried at the lower of cost or market. The Company capitalizes costs on
all contracts until the contract is completed. At June 30, 2017, the Company had $1,523,740 in inventory compared to $0 in June
30, 2016.
Shipping and Handling Costs
The Company includes shipping and handling
costs as part of costs of goods sold.
Advertising and Marketing Costs
Advertising and marketing costs are
expensed as incurred. The Company incurred $0 advertising or marketing costs during the quarters ended June 30, 2017 and 2016.
Fixed Assets
Property and equipment are recorded
at cost.
Depreciation
Depreciation is provided for on the
straight-line method over the estimated useful lives of the assets as follows:
Type
|
Life
|
Building & Improvements
|
15 to 39 years
|
Equipment
|
5 to 10 years
|
Equipment Leased
|
7 years
|
Furniture & Fixture
|
5 to 15 years
|
Office Equipment
|
5 to 10 years
|
Vehicle
|
5 years
|
F- 6
The accumulated depreciation as of
December 31, 2016 and 2015 was $1,394,379 and $1,495,612, respectively. Depreciation expense for the year ended December 31, 2016
and 2015 was $83,043 and $97,545, respectively.
Revenue Recognition
The Company recognizes revenue from
sales at the time a contract is completed. Any payment received from customers before a contract is completed is deferred and recorded
as customer deposits until the contract is completed. At June 30, 2017 and 2016, we had $1,044,589 and $0 in customer deposits,
respectively.
Concentration of Revenue
A significant portion of the Company’s
revenue comes from government contracts. Due to that fact, the Company received 95% of its revenue from one company, LSI, a primary
defense contract holder, in the year ended December 31, 2015. For the year ended December 31, 2016 that same company, LSI, represented
90% of our revenue.
Earnings Per Share
Basic net income (loss) per share is
calculated pursuant to ASC Topic No. 260 whereby net income (loss) per share is divided by the weighted average number of common
shares outstanding during the period. Diluted net income (loss) per share incorporates the dilutive effect of common stock equivalent
options, warrants, and other convertible securities.
Accounts Receivable
Currently we have had no issues in
collection on accounts receivables simply because the vast majority of our revenue is the result of completed contracts with the
United States government as we are a defense contractor. We have currently adopted the policy to write off receivables after they
have been uncollectable for 1 year. Currently we have no receivables more than 90 days old.
Basis of Presentation and Organization
The accompanying consolidated financial
statements of the Company were prepared from the accounts of the Adama Technologies and Alpine Industries, LLC under the accrual
basis of accounting.
Income Taxes
Deferred tax assets and liabilities are
determined based on temporary differences between the bases of certain assets and liabilities for income tax and financial reporting
purposes. The deferred tax assets and liabilities are classified according to the financial statement classification of the assets
and liabilities generating the differences.
The Company maintains a valuation allowance
with respect to deferred tax assets. The Company establishes a valuation allowance based upon the potential likelihood of realizing
the deferred tax asset and taking into consideration the Company’s financial position and results of operations for the current
period. Future realization of the deferred tax benefit depends on the existence of sufficient taxable income within the carry-forward
period under the federal tax laws.
Changes in circumstances, such as the Company generating taxable
income, could cause a change in judgment about ability to realize the related deferred tax asset. Any change in the valuation allowance
will be included in income in the year of the change in estimate.
Fair Value of Financial Instruments
Financial Accounting Standards Board
(FASB) Accounting Standards Codification (ASC) 820 “Fair Value Measurements and Disclosures” (ASC 820) defines fair
value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal
or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement
date. ASC 820 also establishes a fair value hierarchy that distinguishes between (1) market participant assumptions developed
based on market data obtained from independent sources (observable inputs) and (2) a reporting entity’s own assumptions
about market participant assumptions developed based on the best information available in the circumstances (unobservable inputs).
The fair value hierarchy consists of six broad levels, which gives the highest priority to unadjusted quoted prices in active markets
for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the
fair value hierarchy are described below:
Level 1 - Unadjusted quoted prices in active
markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.
Level 2 - Inputs other than quoted prices
included within Level 1 that are observable for the asset or liability, either directly or indirectly, including quoted prices
for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that
are not active; inputs other than quoted prices that are observable for the asset or liability (e.g., interest rates); and inputs
that are derived principally from or corroborated by observable market data by correlation or other means.
Level 3 - Inputs that are both significant
to the fair value measurement and unobservable.
F- 7
The Company estimates the fair value of
financial instruments using the available market information and valuation methods. Considerable judgment is required in estimating
fair value. Accordingly, the estimates of fair value may not be indicative of the amounts the Company could realize in a current
market exchange. As of December 31, 2016 and December 31, 2015, the carrying value of accounts payable and loans that are required
to be measured at fair value, approximated fair value due to the short-term nature and maturity of these instruments.
Estimates
The preparation of financial statements
in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the
reported amounts of assets, liabilities and expenses. Actual results could differ from those estimates made by management.
Recent Accounting Pronouncements
In May 2014, the Financial Accounting Standards Board ("FASB")
issued Accounting Standards Update ("ASU") No. 2014-09, "Revenue from Contracts with Customers (Topic 606)".
ASU No. 2014-09 supersedes the revenue recognition requirements in "Revenue Recognition (Topic 605)," and doubt is not
alleviated, and (6) requires an assessment for a period of one year after the date that the financial statements are issued (or
available to be issued). The amendments in this update are effective for annual periods beginning after December 15, 2017 and interim
periods within those reporting periods. Earlier adoption is permitted. This ASU is not anticipated to have a material impact on
the Company's financial statements and notes to the financial statements. The Company is evaluating the effects of the adoption
of this ASU to its consolidated financial statements.
In January 2016, the FASB issued ASU 2016-01, Recognition and
Measurement of Financial Assets and Financial Liabilities, which provides guidance for the recognition, measurement, presentation,
and disclosure of financial assets and liabilities. This ASU will be effective for the Company beginning in the first quarter of
fiscal year 2019. The Company is evaluating the effects of the adoption of this ASU to its consolidated financial statements.
In February 2016, the FASB issued Accounting Standards Update
(“ASU”) 2016-02, “Leases (Topic 842)”. Under this guidance, an entity is required to recognize right-of-use
assets and lease liabilities on its balance sheet and disclose key information about leasing arrangements. This guidance offers
specific accounting guidance for a lessee, a lessor and sale and leaseback transactions. Lessees and lessors are required to disclose
qualitative and quantitative information about leasing arrangements to enable a user of the financial statements to assess the
amount, timing and uncertainty of cash flows arising from leases. This guidance is effective for annual reporting periods beginning
after December 15, 2018, including interim periods within that reporting period, and requires a modified retrospective adoption,
with early adoption permitted. The Company is currently evaluating the impact that this standard will have on our consolidated
financial statements.
In May 2017, the
FASB issued guidance to clarify when to account for a change to the terms or conditions of a share-based payment award as
a modification. Under the new guidance, modification accounting is required only if the fair value, the vesting conditions,
or the classification of the award (as equity or liability) changes as a result of the change in terms or conditions. The
guidance is effective prospectively for all companies for annual periods and interim periods within those annual periods, beginning
on or after December 15, 2017. The Company is currently evaluating the impact that this standard will have on our consolidated
financial statements.
In October 2016, the FASB issued new guidance that requires
a reporting entity to recognize the tax expense from intra-entity asset transfers of assets other than inventory in the selling
entity’s tax jurisdiction when the transfer occurs, even though the pre-tax effects of that transaction are eliminated in
consolidation. Any deferred tax asset that arises in the buying entity’s jurisdiction would also be recognized at the time
of the transfer. The Company is currently evaluating the impact that this standard will have on our consolidated financial statements.
Note 2 Going Concern
The accompanying consolidated financial
statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which
contemplate continuation of the Company as a going concern. The Company has generated revenues, however, the Company has a negative
working capital deficit of $5,173,883. This and other factors raise substantial doubt about the Company’s ability to continue
as a going concern. The accompanying financial statements do not include any adjustments to reflect the possible future effects
on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the possible
inability of the Company to continue as a going concern.
Note 3 Convertible Notes Payable
On November 18,
2011, the Company signed a $30,000 convertible promissory note with a third party. The note bears interest at 8% per annum and
was due on August 18, 2012. The note has conversion rights that allow the holder of the note to convert after 180 days all or any
part of the remaining principal balance into the Company’s common stock at a price equal to 58% of the average of the lowest
six trading prices for the Common Stock during the most recent ten-day period. The conversion feature was determined to exist and
was recorded at the time of issue as a derivative liability, but has been fully amortized in prior periods. This note is in default.
According to the terms of the note upon default the balance due is 150% of the unpaid principal balance. In addition, from the
date of default the notes bear interest at 22% per annum. The investor
F- 8
may in its sole discretion convert the
default amount into equity. During 2016, the Company issued 8,000,000 shares of common stock to convert $200,000 of the outstanding
balance of this note. The total balance outstanding on this note at December 31, 2016 was $273,650, which included $243,650 of
accrued interest and penalties.
In April 27, 2012, the Company signed a
$32,500 convertible promissory note with a third party. The note bears interest at 8% per annum and was due on January 27, 2013.
The note has conversion rights that allow the holder of the note to convert after 180 days all or any part of the remaining principal
balance into the Company’s common stock at a price equal to 58% of the average of the lowest six trading prices for the Common
Stock during the most recent ten-day period. The conversion feature was determined to exist and was recorded at the time of issue
as derivative liability, but has been fully amortized in prior periods. This note is in default. According to the terms of the
note upon default the balance due is 150% of the unpaid principal balance. In addition, from the date of default the notes bear
interest at 22% per annum. The investor may in its sole discretion convert the default amount into equity. During 2016, the Company
issued 8,500,000 shares of common stock to convert $212,500 of the outstanding balance on this note. The total balance outstanding
on this note at December 31, 2016 was $300,544, which included $268,544 of accrued interest and penalties.
On October 15, 2013, the Company converted
$30,000 of payables into a convertible promissory note with a third party. The note bears interest at 8% per annum and was due
on October 15, 2014. The note has conversion rights that allow the holder of the note at any time to convert all or any part of
the remaining principal balance into the Company’s common stock at a fixed price of $0.0015. This note is in default and
the total balance outstanding as of December 31, 2016 was $53,939.
On January 15, 2014, the Company converted
$30,000 of payables into a convertible promissory note with a third party. The note bears interest at 8% per annum and was due
on January 15, 2015. The note has conversion rights that allow the holder of the note at any time to convert all or any part of
the remaining principal balance into the Company’s common stock at a fixed price of $0.0015. This note is in default and
the total balance outstanding as of December 31, 2016 was $51,078.
On March 15, 2014, the Company converted
$30,000 of payables into a convertible promissory note with a third party. The note bears interest at 8% per annum and was due
on March 15, 2015. The note has conversion rights that allow the holder of the note at any time to convert all or any part of the
remaining principal balance into the Company’s common stock at a fixed price of $0.0015. This note is in default and the
total balance outstanding as of December 31, 2016 was $49,225.
On March 15, 2014, the Company converted
$30,000 of payables into a convertible promissory note with a third party. The note bears interest at 8% per annum and was due
on March 15, 2015. The note has conversion rights that allow the holder of the note at any time to convert all or any part of the
remaining principal balance into the Company’s common stock at a fixed price of $0.0015. This note is in default and the
total balance outstanding as of December 31, 2016 was $49,225.
On June 15, 2014, the Company converted
$30,000 of payables into a convertible promissory note with a third party. The note bears interest at 8% per annum and was due
on June 15, 2015. The note has conversion rights that allow the holder of the note at any time to convert all or any part of the
remaining principal balance into the Company’s common stock at a fixed price of $0.0015. This note is in default and the
total balance outstanding as of December 31, 2016 was $46,642.
On July 1, 2014, the Company converted
$60,000 of amounts due to officers into a convertible promissory note with a third party. The note bears interest at 8% per annum
and was due on July 31, 2015. The note has conversion rights that allow the holder of the note after six months to convert all
or any part of the remaining principal balance into the Company’s common stock at a fixed price of $0.0015. This note is
in default and the total balance outstanding as of December 31, 2016 was $93,285.
On September 15, 2014, the Company converted
$30,000 of payables into a convertible promissory note with a third party. The note bears interest at 8% per annum and was due
on September 15, 2015. The note has conversion rights that allow the holder of the note at any time to convert all or any part
of the remaining principal balance into the Company’s common stock at a fixed price of $0.0015. This note is in default and
the total balance outstanding as of December 31, 2016 was $44,168.
On December 15, 2014, the Company converted
$30,000 of payables into a convertible promissory note with a third party. The note bears interest at 8% per annum and was due
on December 15, 2015. The note has conversion rights that allow the holder of the note at any time to convert all or any part of
the remaining principal balance into the Company’s common stock at a fixed price of $0.0015. This note is in default and
the total balance outstanding as of December 31, 2016 was $41,826.
On March 15, 2015, the Company converted
$30,000 of payables into a convertible promissory note with a third party. The note bears interest at 8% per annum and was due
on March 15, 2016. The note has conversion rights that allow the holder of the note at any time to convert all or any part of the
remaining principal balance into the Company’s common stock at a fixed price of $0.0015. This note is in default and the
total balance outstanding as of December 31, 2016 was $39,607.
On April 1, 2015, the Company converted
$52,500 of compensation owed into a convertible promissory note with a third party. The note bears interest at 8% per annum and
was due on June 30, 2016. The note has conversion rights that allow the holder of the note at any time to convert all or any part
of the remaining principal balance into the Company’s common stock at a fixed price of $0.0015. This note is in default and
the total balance outstanding as of December 31, 2016 was $69,312.
F- 9
On April 1, 2015, the Company converted
$30,000 of compensation owed into a convertible promissory note with a third party. The note bears interest at 8% per annum and
was due on June 30, 2016. The note has conversion rights that allow the holder of the note at any time to convert all or any part
of the remaining principal balance into the Company’s common stock at a fixed price of $0.0015. This note is in default and
the total balance outstanding as of December 31, 2016 was $39,607.
On June 15, 2015, the Company converted
$30,000 of payables into a convertible promissory note with a third party. The note bears interest at 8% per annum and was due
on June 15, 2016. The note has conversion rights that allow the holder of the note at any time to convert all or any part of the
remaining principal balance into the Company’s common stock at a fixed price of $0.0015. This note is in default and the
total balance outstanding as of December 31, 2016 was $37,506.
On September 15, 2015, the Company converted
$30,000 of payables into a convertible promissory note with a third party. The note bears interest at 8% per annum and was due
on September 15, 2016. The note has conversion rights that allow the holder of the note at any time to convert all or any part
of the remaining principal balance into the Company’s common stock at a fixed price of $0.0015. This note is in default and
the total balance outstanding as of December 31, 2016 was $35,517.
On December 15, 2015, the Company converted
$30,000 of payables into a convertible promissory note with a third party. The note bears interest at 8% per annum and was due
on December 15, 2016. The note has conversion rights that allow the holder of the note at any time to convert all or any part of
the remaining principal balance into the Company’s common stock at a fixed price of $0.0015. This note is in default and
the total balance outstanding as of December 31, 2016 was $33,633.
On
October 7, 2016, the Company entered in convertible note agreement with a private and accredited investor, Vincent & Rees,
LC, in the amount of $74,000, unsecured, accruing interest at a 12% interest rate, with principal and interest amounts due and
payable upon maturity on October 7, 2017. After six months, the note holder has the option to convert any portion of the unpaid
principal balance into the Company’s common shares at any time at a 40% discount to the current market value. The Company
has determined that the conversion feature in this note is is considered to be a derivative. The Company calculated the fair value
of this conversion feature using the Black-Scholes model and the following assumptions: Risk-free interest rates of 1.21%; Dividend
rate of 0%; and, historical volatility rate of 435.56%. A debt discount amount of $74,000 was recorded upon issuance of the note
and as of December 31, 2016, the carrying amount of the convertible note is $17,233, the unamortized discount on the note is $56,767
and accrued interest is $2,096. Interest expense of $8,641 was recorded on the note since the date of the merger.
On
November 14, 2016, the Company entered in convertible note agreement with a private and accredited investor, Chienn Consulting,
LLC, in the amount of $35,000, unsecured, accruing interest at a 12% interest rate, with principal and interest amounts due and
payable upon maturity on November 14, 2017. After six months, the note holder has the option to convert any portion of the unpaid
principal balance into the Company’s common shares at any time at a 40% discount to the current market value. The Company
has determined that the conversion feature in this note is is considered to be a derivative. The Company calculated the fair value
of this conversion feature using the Black-Scholes model and the following assumptions: Risk-free interest rates of 1.21%; Dividend
rate of 0%; and, historical volatility rate of 435.56%. A debt discount amount of $35,000 was recorded upon issuance of the note
and as of December 31, 2016, the carrying amount of the convertible note is $4,507, the unamortized discount on the note is $30,493
and accrued interest is $529. Interest expense of $4,058 was recorded on the note since the date of the merger.
On
December 19, 2016, the Company entered in convertible note agreement with a private and accredited investor, Vertex Systems, Inc.,
in the amount of $535,000, unsecured, accruing interest at a 12% interest rate, with principal and interest amounts due and payable
upon maturity on December 19, 2017. After six months, the note holder has the option to convert any portion of the unpaid principal
balance into the Company’s common shares at any time at a 40% discount to the current market value. The Company has determined
that the conversion feature in this note is considered to be a derivative. The Company calculated the fair value of this conversion
feature using the Black-Scholes model and the following assumptions: Risk-free interest rates of 1.21%; Dividend rate of 0%; and,
historical volatility rate of 435.56%. A debt discount amount of $535,000 was recorded upon issuance of the note and as of December
31, 2016, the carrying amount of the convertible note is $55,699, the unamortized discount on the note is $479,301 and accrued
interest is $2,287. Interest expense of $57,986 was recorded on the note since the date of the merger.
As of December 31, 2016, and 2015, the
principle balance of convertible notes payable was $643,689 and $0, respectively. The accrued interest balance as of December 31,
2016 and 2015 was $697,486 and $0, respectively, and is recorded in accounts payable & accrued liabilities on the balance sheet.
On
February 2, 2017, the Company entered in convertible note agreement with a private and accredited investor, Vincent & Rees,
LC, in the amount of $56,000, unsecured, accruing interest at a 12% interest rate, with principal and interest amounts due and
payable upon maturity on February 2, 2018. After six months, the note holder has the option to convert any portion of the unpaid
principal balance into the Company’s common shares at any time at a 40% discount to the current market value. The Company
has determined that the conversion feature in this note is indexed to the Company’s stock, and is considered to be a derivative
that requires bifurcation. The Company calculated the fair value of this conversion feature using the Black-Scholes model and the
following assumptions: Risk-free interest rates of 1.21%; Dividend rate of 0%; and, historical volatility rate of 435.56%.
On
February 22, 2017, the Company entered in convertible note agreement with a private and accredited investor, Power Up Lending Group
Ltd., in the amount of $35,000, unsecured, accruing interest at a 12% interest rate, with principal and interest amounts due and
payable upon maturity on February 22, 2018. After six months, the note holder has the option to convert any portion of the unpaid
principal balance into the Company’s
F- 10
common
shares at any time at a 40% discount to the current market value. The Company has determined that the conversion feature in this
note is considered to be a derivative. The Company calculated the fair value of this conversion feature using the Black-Scholes
model and the following assumptions: Risk-free interest rates of 1.21%; Dividend rate of 0%; and, historical volatility rate of
435.56%.
On
March 9, 2017, the Company entered in convertible note agreement with a private and accredited investor, Chienn Consulting, LLC.,
in the amount of $53,000, unsecured, accruing interest at a 12% interest rate, with principal and interest amounts due and payable
upon maturity on March 9, 2018. After six months, the note holder has the option to convert any portion of the unpaid principal
balance into the Company’s common shares at any time at a 40% discount to the current market value. The Company has determined
that the conversion feature in this note is considered to be a derivative. The Company calculated the fair value of this conversion
feature using the Black-Scholes model and the following assumptions: Risk-free interest rates of 1.21%; Dividend rate of 0%; and,
historical volatility rate of 435.56%.
On
May 1, 2017, the Company entered in convertible note agreement with a private and accredited investor, Marp, LLC., in the amount
of $30,000, unsecured, accruing interest at a 12% interest rate, with principal and interest amounts due and payable upon maturity
on May 1, 2018. After six months, the note holder has the option to convert any portion of the unpaid principal balance into the
Company’s common shares at any time at a 40% discount to the current market value. The Company has determined that the conversion
feature in this note is considered to be a derivative. The Company calculated the fair value of this conversion feature using the
Black-Scholes model and the following assumptions: Risk-free interest rates of 1.21%; Dividend rate of 0%; and, historical volatility
rate of 435.56%.
On May 19, 2017, the Company entered in convertible note agreement with a private and accredited
investor, Horizon Phoenix Enterprises, LLC., in the amount of $71,000, unsecured, accruing interest at a 12% interest rate, with
principal and interest amounts due and payable upon maturity on May 19, 2018. After six months, the note holder has the option
to convert any portion of the unpaid principal balance into the Company’s common shares at any time at a 40% discount to
the current market value. The Company has determined that the conversion feature in this note is considered to be a derivative.
The Company calculated the fair value of this conversion feature using the Black-Scholes model and the following assumptions: Risk-free
interest rates of 1.21%; Dividend rate of 0%; and, historical volatility rate of 435.56%.
On June 4, 2017, the Company
entered in convertible note agreement with a private and accredited investor, SARJ, LLC., in the amount of $44,000, unsecured,
accruing interest at a 12% interest rate, with principal and interest amounts due and payable upon maturity on June 4, 2018. After
six months, the note holder has the option to convert any portion of the unpaid principal balance into the Company’s common
shares at any time at a 40% discount to the current market value. The Company has determined that the conversion feature in this
note is considered to be a derivative. The Company calculated the fair value of this conversion feature using the Black-Scholes
model and the following assumptions: Risk-free interest rates of 1.21%; Dividend rate of 0%; and, historical volatility rate of
435.56%.
Note 4 Notes Payable
|
|
|
2016
|
|
|
2015
|
|
Mark Bergson
|
|
$
|
25,000
|
|
|
—
|
|
Lower Foods
|
|
|
348,259
|
|
|
—
|
|
Bank of Utah
|
|
|
—
|
|
|
280,102
|
|
|
|
$
|
373,2595
|
|
|
280,102
|
|
The following table discloses the terms, interest rate, and
balance of these notes:
Lender
|
|
Principal
Balance
|
|
Interest Rate
|
|
Loan
Origination
|
|
Maturity
Date
|
|
Collateral
|
Mark Bergson (1)
|
|
$25,000
|
|
25.00%
|
|
May 12, 2016
|
|
May 26, 2016 (in default)
|
|
None
|
Lower Foods (2)
|
|
$350,000
|
|
6.00%
|
|
April 21,2016
|
|
April 21,2017 (in default)
|
|
Income on AR
|
Bank of Utah
|
|
$900,000
|
|
6.25%
|
|
June 25, 2008
|
|
July 1, 2018 (paid off March 2016)
|
|
Real Estate
|
(1)
|
As of December 31, 2016 and 2015, the note payable with Mark Bergson has a total balance outstanding of $52,550 and $0, respectively. These amounts include accrued interest and penalties of $27,550 and $0 as of December 31, 2016 and 2015, respectively, and are recorded in accounts payable and accrued liabilities on the balance sheet.
|
|
|
(2)
|
As of December 31, 2016 and 2015, the note payable with Lower Foods has a total balance outstanding of $357,815 and $0, respectively. These amounts include accrued interest of $9,556 and $0 as of December 31, 2016 and 2015, respectively, and are recorded in accounts payable and accrued liabilities on the balance sheet.
|
F- 11
Note 5 Related Party Loans
During the years ending December 31, 2016 and 2015, the Company
had related party loans of $316,746 and $205,930, respectively, The loans are non-interest bearing and were to pay for the day-to-day
operations of the Company. Imputed interest was calculated using a rate of 7.5% and $19,917 and $0 was recorded for the years ending
December 31, 2016 and 2015, respectively.
|
|
|
2016
|
|
|
2015
|
|
Wyn Ward
|
|
$
|
20,000
|
|
|
10,000
|
|
Erik Durrant
|
|
|
92,446
|
|
|
2,630
|
|
Kent Durrant
|
|
|
196,000
|
|
|
185,000
|
|
Lori Durrant
|
|
|
8,300
|
|
|
8,300
|
|
|
|
$
|
316,746
|
|
|
205,930
|
|
The following table discloses the terms, interest rate, and
balance of the related party loans:
Lender
|
|
Principal Balance
|
|
Interest Rate
|
|
Loan Origination
|
|
Maturity Date
|
|
Collateral
|
Wyn Ward (Loan 1)
|
|
$10,000
|
|
0.00%
|
|
April 1, 2015
|
|
Paid off April 2015
|
|
None
|
Wyn Ward (Loan 2)
|
|
$10,000
|
|
0.00%
|
|
October 31, 2015
|
|
June 1, 2017
|
|
None
|
Wyn Ward (Loan 3)
|
|
$10,000
|
|
0.00%
|
|
February 29, 2016
|
|
June 1, 2017
|
|
None
|
Erik Durrant
|
|
$92,446
|
|
0.00%
|
|
March 30, 2015
|
|
June 1, 2017
|
|
None
|
Kent Durrant
|
|
$196,000
|
|
0.00%
|
|
July 1, 2016
|
|
June 1, 2017
|
|
None
|
Lori Durrant
|
|
$8,300
|
|
0.00%
|
|
April 23, 2011
|
|
June 1, 2017
|
|
Laser Printer
|
Each of the above notes except for the Wyn Ward Loan #1 is currently
in default as indicated above.
Note 6 Line of Credit
The following table discloses the terms, interest rate, and
balance of the Company’s Line of Credit:
Lender
|
|
Principal Balance
|
|
Interest Rate
|
|
Loan Origination
|
|
Maturity Date
|
|
Balance as of Dec. 31, 2016
|
|
Balance as of Dec. 31, 2015
|
|
Monthly Payment
|
Chase Bank Line of Credit
|
|
$149,532
|
|
Prime Rate plus 3.50%
|
|
August 1, 2014
|
|
August 1, 2021
|
|
$99,688
|
|
$121,049
|
|
$1,780
|
Line of Credit Collateral is as follows:
This line of credit is secured by all accounts, chattel paper,
equipment, general intangibles and inventory
The future minimum
line of credit payments required are as follows:
Year ending December 31,
|
|
Amount
|
|
2017
|
|
$
|
22,307
|
|
2018
|
|
$
|
23,063
|
|
2019
|
|
$
|
24,094
|
|
2020
|
|
$
|
25,406
|
|
2021
|
|
$
|
4,818
|
|
Total minimum payments required
|
|
$
|
99,688
|
|
Note 7 Leases
Capital Leases
The Company has two separate equipment leases with a total balance
of $487,750 and accumulated amortization of $221,934 and $152,256 included in property and equipment on the balance sheet as of
December 31, 2016 and 2015, respectively. For the years ended December 31, 2016 and 2015, amortization expense was $69,678 and
$69,678, respectively.
F- 12
The following table itemizes and details the Company’s
current lease obligations:
|
Lessor
|
Purpose of Lease
|
Date of Agreement
|
Length of Lease
|
Monthly Payment
|
|
|
|
|
|
|
1
|
M2 LEASING
|
MACHINE LEASE
|
9/20/2012
|
10/30/2017
|
$2,609
|
2
|
US BANK FINANCE
|
MACHINE LEASE
|
6/4/2014
|
6/4/2020
|
$5,012
|
The future minimum
capital lease payments are as follows:
Year ending December 31,
|
|
Amount
|
|
2017
|
|
$
|
83,637
|
|
2018
|
|
$
|
53,162
|
|
2019
|
|
$
|
55,827
|
|
2020
|
|
$
|
48,357
|
|
Total minimum payments required
|
|
$
|
240,983
|
|
Operating Leases
The Company’s facilities located in Richmond, Utah that
are utilized for manufacturing are leased and the monthly payment for that lease is $5,879 per month.
|
Lessor
|
Purpose of Lease
|
Date of Agreement
|
Length of Lease
|
Monthly Payment
|
|
|
|
|
|
|
1
|
Lowers Foods
|
Building/Facility
|
4/21/2016
|
36 Months
|
$5,879
|
The future minimum
lease payments required are as follows:
Year ending December 31,
|
|
Amount
|
|
2017
|
|
$
|
70,548
|
|
2018
|
|
$
|
70,548
|
|
2019
|
|
$
|
23,516
|
|
Total minimum payments required
|
|
$
|
164,612
|
|
Note 8 Derivative Liabilities
The Company has various convertible instruments outstanding
more fully described in Note 3, some of which contain derivative features. As of December 31, 2016, the fair value of the Company'
s derivative liabilities was $2,747,122.
The following table summarizes the derivative liabilities included
in the balance sheet:
|
|
|
Fair Value
|
|
|
|
|
Measurements
|
|
|
|
Using Significant
|
|
|
|
|
Unobservable
|
|
|
|
|
Inputs (Level 3)
|
|
Derivative Liabilities:
|
|
|
|
|
Balance at December 31, 2015
|
|
$
|
—
|
|
Derivative balances assumed in merger
|
|
|
3,930,629
|
|
Additions
|
|
|
2,621,096
|
|
Change in fair value
|
|
|
(3,804,603
|
)
|
Balance at December 31, 2016
|
|
$
|
2,747,122
|
|
New Balance as of June 30, 2017
|
|
|
1,369,893
|
|
The fair values of derivative instruments were estimated using
the Black Scholes valuation model based on the following weighted-average assumptions:
F- 13
|
|
Convertible Debt
Instruments
|
|
Risk-free rate
|
|
|
1.21
|
%
|
Expected volatility
|
|
|
435.56
|
%
|
Expected life
|
|
|
1 year
|
|
Note 9 Stockholders ' Deficit
The total common shares outstanding as
of June 30, 2017 was 157,217,781 and total preferred shares outstanding as of June 30, 2017 was 500,000,000.
The preferred shares have voting power
equal to 51 percent of the total combined voting power of all classes of stock entitled to vote on any matter. These shares do
not hold any liquidation, dividend or conversion rights.
Note 10 Income Taxes
The reconciliation of the provision (benefit)
for income tax expense for the years ended December 31, 2016 and 2015 with the expected income tax was as follows:
|
|
2016
|
|
|
2015
|
|
|
|
|
|
|
|
|
Current Tax Provision:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal income tax (benefit) at statutory rate (15%)
|
|
$
|
305,739
|
|
|
$
|
(17,646)
|
|
State tax (benefit) at rate of 5%
|
|
|
101,913
|
|
|
|
(5,882)
|
|
Pre-merger pass-through income of Alpine Industries, LLC
|
|
|
(107,400)
|
|
|
|
—
|
|
Derivatives (net)
|
|
|
(343,701)
|
|
|
|
---
|
|
Change in valuation allowance
|
|
|
43,449
|
|
|
|
23,528
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current tax provision
|
|
$
|
—
|
|
|
$
|
—
|
|
The Company had deferred income tax assets as of December 31,
2016 and 2015, as follows:
|
|
2016
|
|
|
2015
|
|
|
|
|
|
|
|
|
Net operating loss carryforwards
|
|
$
|
981,566
|
|
|
$
|
938,117
|
|
Less - Valuation allowance
|
|
|
(981,566
|
)
|
|
|
(938,117
|
)
|
|
|
|
|
|
|
|
|
|
Total net deferred tax assets
|
|
$
|
—
|
|
|
$
|
—
|
|
The Company provided a valuation allowance
equal to the deferred income tax assets for the period ended December 31, 2016 and 2015, because it is not presently known whether
future taxable income will be sufficient to utilize the loss carryforwards.
As of December 31, 2016, the Company had
approximately $4,909,000 in tax loss carryforwards that can be utilized in future periods to reduce taxable income, and expire
by the year 2032.t
The Company did not identify any material
uncertain tax positions. The Company recognizes accrued interest related to unrecognized tax benefits in interest expense and penalties
in operating expenses. For the years ended December 31, 2016 and 2015, the Company did not recognize any interest or penalties
for unrecognized tax benefits.
The Company has elected to file consolidated
returns, in which the prior Net Operating Losses of Adama as the parent company for tax purposes survive the merger, but as the
accounting acquire, its other deferred tax assets do not. Prior to the reverse merger, Alpine was a pass-through entity whose losses
passed through to its members.
The Company has filed income tax returns
in the United States. The tax years of 2016, 2015 and 2014 are still open for examination by taxing authorities as the statute
of limitation is 3 years
F- 14
Note 11 Pending Litigation
On October 25, 2012, JS Barkats PLLC filed
a breach of contract action against the Company and a former officer, Aviram Malik in the Supreme Court of New York, for breach
of contract relating to a funding transaction in June 2012. The Complaint, which was apparently served on former management but
was never answered or otherwise responded to by former management and which was never disclosed in our prior episodic filings,
seeks to recover $45,395 in a cash finders ' fee allegedly due plus 2.5 percent of our issued and outstanding common stock as of
the date the fee was earned, plus forfeiture of all of the common stock, warrants and options owned by Aviram Malik, individually.
As a result of the failure to respond to the action, the plaintiff has been awarded a default judgement which was entered on December
15, 2015 for a cash amount of $182,300 and 2.5% of the fully diluted common stock issued and outstanding of Adama Technologies
Corporation which is currently valued at $32,885 for a total amount of $248,490 which has been recorded as judgement payable on
the balance sheet.
There are no other known pending legal
proceedings to which the Company is a party or in which any director, officer or affiliate of the Company, any owner of record
or beneficially of more than 5% of any class of voting securities of the Company, or security holder is a party adverse to the
Company or has a material interest adverse to the Company. The Company’s property is not the subject of any other pending
legal proceedings.
Note 12 – Acquisition of Alpine Industries, LLC
On November 23, 2016, Adama Technologies
completed its acquisition of Alpine Industries, LLC.
Unaudited pro forma results of operations
data for the fiscal years ending December 31, 2016 and 2015 as if the companies had been combined as of January 1, 2015. The pro
forma results include estimates and assumptions which management believes are reasonable. However, pro forma results are not necessarily
indicative of the results that would have occurred if the reverse merger had been in effect on the date indicated or which may
result in the future.
UNAUDITED
PRO FORMA STATEMENT OF OPERATIONS
|
|
|
Year Ended December 31, 2016
|
|
|
Year Ended December 31, 2015
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
2,880,248
|
|
$
|
2,468,657
|
|
Cost of Goods Sold
|
|
|
2,082,662
|
|
|
2,107,697
|
|
Gross Profit
|
|
|
797,586
|
|
|
360,960
|
|
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and Administrative
|
|
|
14,957,282
|
|
|
351,001
|
|
Depreciation and Amortization
|
|
|
83,043
|
|
|
97,545
|
|
Consulting
|
|
|
8,526,000
|
|
|
180,000
|
|
Total Operating Expenses
|
|
|
23,566,325
|
|
|
628,546
|
|
|
|
|
|
|
|
|
|
Income(Loss) From Operations
|
|
|
(22,768,739
|
)
|
|
(267,586
|
)
|
|
|
|
|
|
|
|
|
Other Income (Expenses)
|
|
|
|
|
|
|
|
Gain on Sale of Asset
|
|
|
228,018
|
|
|
—
|
|
Forgiveness of debt
|
|
|
—
|
|
|
22,030
|
|
Judgment
|
|
|
—
|
|
|
(248,490
|
)
|
Loss of extinguishment of debt
|
|
|
—
|
|
|
(497,500
|
)
|
Convertible note premium
|
|
|
—
|
|
|
371,640
|
|
Gain/(Loss) on Derivatives
|
|
|
(1,956,894
|
)
|
|
25,333
|
|
Interest Expense
|
|
|
(1,059,042
|
)
|
|
(106,115
|
)
|
Total Other Income/(Expense)
|
|
|
(2,787,918
|
)
|
|
(433,102
|
)
|
|
|
|
|
|
|
|
|
Net Income/(Loss) before Income Taxes
|
|
|
(25,556,657
|
)
|
|
(700,688
|
)
|
Income Tax Expense
|
|
|
—
|
|
|
—
|
|
Net Income/(Loss)
|
|
|
(25,556,657
|
)
|
|
(700,688
|
)
|
F- 15
Note 13 Subsequent Events
Common Stock Issuances
Subsequent to this filing period ending June 30, 2017, the Company issued 15,000,000 shares of stock for a variety of operational
and acquisition purposes. The following represents shares issued subsequent to this filing period:
Number of Shares
|
Purpose
|
27,401,250
|
Shares Issued for Initial Acquisition Payment of EZ Mart Food Stores, Inc.
|
|
|
|
|
Total: 15,000,000 Shares
|
|
Convertible Notes Issued
Subsequent to this filing period ending June 30, 2017, the Company issued four additional convertible notes.
On July 16, 2017, the
Company entered in convertible note agreement with a private and accredited investor, SARJ, LLC., in the amount of $90,000, unsecured,
accruing interest at a 12% interest rate, with principal and interest amounts due and payable upon maturity on July 16, 2018.
After six months, the note holder has the option to convert any portion of the unpaid principal balance into the Company’s
common shares at any time at a 40% discount to the current market value. The Company has determined that the conversion feature
in this note is considered to be a derivative. The Company calculated the fair value of this conversion feature using the Black-Scholes
model and the following assumptions: Risk-free interest rates of 1.21%; Dividend rate of 0%; and, historical volatility rate of
435.56%.
On August 19, 2017, the
Company entered in convertible note agreement with a private and accredited investor, Horizon Phoenix Enterprises, LLC., in the
amount of $62,000, unsecured, accruing interest at a 12% interest rate, with principal and interest amounts due and payable upon
maturity on June 4, 2018. After six months, the note holder has the option to convert any portion of the unpaid principal balance
into the Company’s common shares at any time at a 40% discount to the current market value. The Company has determined that
the conversion feature in this note is considered to be a derivative. The Company calculated the fair value of this conversion
feature using the Black-Scholes model and the following assumptions: Risk-free interest rates of 1.21%; Dividend rate of 0%; and,
historical volatility rate of 435.56%.
F- 16