Indicate by check mark whether the
registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the
definitions of "large accelerated filer", "accelerated filer" and "smaller reporting company" in
Rule 12b-2 of the Exchange Act. (Check one):
As of March 24, 2015, the aggregate
market value of the voting and non-voting common equity held by non-affiliates of the registrant computed by reference to the price
at which the common equity was last sold based on the closing price on that date was approximately $6,974,090. On March 24, 2016,
the registrant had outstanding 188,446,419 shares of Common Stock, $0.0001 par value per share.
Corporate History - Revised to provide addition detail regarding operational activities.
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS
December 31, 2015
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
Nature of Operations
UMED Holdings, Inc. ("UMED"
or the "Company") was organized on March 13, 2002 under the laws of the State of Texas as Dynalyst Manufacturing Corporation. On
August 18, 2009, in connection with a merger with Universal Media Corporation, a privately held Nevada company, the Company changed
its name to Universal Media Corporation ("UMC"). The company changed its name to UMED Holdings, Inc. on March
23, 2011.
UMED's mission is to operate as
a holding company through the acquisition of businesses as wholly-owned subsidiaries that meet some key requirements: (1) solid
management that will not have to be replaced in the near future (2) the ability to grow with steady growth to follow and (3) an
emphasis on emerging core industry markets, such as energy and metals. It is the Company's intention to add experienced
personnel and select strategic partners to manage and operate the acquired business units.
In September 2010, UMED has acquired
1,440 acres of placer mining claims on Bureau of Land Management land in Mohave County, Arizona. See discussion in Note 4.
Due the Company not producing any revenues from its BLM mining leases since its acquisition of the leases, achieving a position
of producing cash flow levels to fund the development of its BLM mining leases in December of 2010 and not having current resources
for an appraisal, we recognized an impairment charge of $100,000 during the year ended December 31, 2014.
In October 2011, UMED has acquired
a 49% interest in Jet Regulators, LP, an aircraft maintenance company located at Meacham Field in Fort Worth, Texas. See
discussion in Notes 5 and 7. Due to reduced growth expectations and the Company not receiving any revenues from its ownership
in Jet Tech described in Note 7, we recognized an impairment charge of $90,000 during the year ended December 31, 2014.
In May 2012, the Company acquired
80% of Mamaki Tea & Extract of Hawaii, Inc. (nka Mamaki of Hawaii, Inc.) which owns and operates Wood Valley Plantation a
25 acre Mamaki Tea plantation located in the Kau district of the Island of Hawaii and lies at the foot of Mauna Loa, the Earth's
largest volcano. On December 31, 2012, the Company acquired the remaining 20% for 500,000 shares of restricted
common stock and $127,800 of cash. Mamaki of Hawaii, Inc. was sold in October 2015 as discussed further in Notes 2, 3, 4,
5 and 13.
In August 2012, the Company acquired
100% of Greenway Innovative Energy, Inc., which owns patents and proprietary technology that is capable of converting natural
gas to diesel and jet fuels.
NOTE 2 - BASIS OF PRESENTATION AND GOING CONCERN
UNCERTAINTIES
Principles of Consolidation
The accompanying consolidated financial
statements include the financial statements of UMED and its wholly-owned subsidiaries. The Company's investment in Jet Regulators
is accounted for at cost due to its lack of significant influence. All significant inter-company accounts and transactions
were eliminated in consolidation.
The accompanying consolidated financial
statements include the accounts of the following entities:
Name of Entity
|
%
|
|
Entity
|
Incorporation
|
Relationship
|
UMED Holdings, Inc.
|
|
|
Corporation
|
Texas
|
Parent
|
Mamaki of Hawaii, Inc.*
|
100
|
%
|
Corporation
|
Nevada
|
Subsidiary
|
Universal Media Corporation
|
100
|
%
|
Corporation
|
Wyoming
|
Subsidiary
|
Greenway Innovative Energy, Inc.
|
100
|
%
|
Corporation
|
Nevada
|
Subsidiary
|
Logistix Technology Systems, Inc.
|
100
|
%
|
Corporation
|
Texas
|
Subsidiary
|
* Sold in October 2015
F - 6
Going Concern Uncertainties
The accompanying consolidated financial
statements have been prepared on a going concern basis, which contemplates realization of assets and the satisfaction of liabilities
in the normal course of business. As shown in the accompanying consolidated financial statements, the Company sustained a loss
of $4 million for the year ended December 31, 2015 and has a deficit of $12.5 million at December 31, 2015. The ability of the
Company to continue as a going concern is in doubt and dependent upon achieving a profitable level of operations or on the ability
of the Company to obtain necessary financing to fund ongoing operations. Management believes that its current and future plans
enable it to continue as a going concern for the next twelve months.
To meet these objectives, the Company
continues to seek other sources of financing in order to support existing operations and expand the range and scope of its business.
However, there are no assurances that any such financing can be obtained on acceptable terms and timely manner, if at all. The
failure to obtain the necessary working capital would have a material adverse effect on the business prospects and, depending
upon the shortfall, the Company may have to curtail or cease its operations.
The accompanying consolidated financial
statements do not include any adjustment to the recorded assets or liabilities that might be necessary should the Company have
to curtail operations or be unable to continue in existence.
NOTE 3 - RESTATEMENT
In preparing the financial statements for the year ended
December 31, 2014, the Company (through procedures performed by its independent auditors) determined that it had failed to properly
value shares issued for services and shareholder conversions and properly identify and value derivatives related to
a convertible note with associated warrants. As the result of this error, we are restating our financial statements ("The
Restatement") and associated disclosures to include the cost associated with the shares issued and the derivatives associated
with the convertible note and warrants. The error resulted in the understatement of non-cash expenses and a corresponding
understatement of net loss by $1,699,129, for the year ended December 31, 2014.
Also in this restatement, the Company has reclassified
the accounts and operations related to Mamaki of Hawaii, Inc., a wholly-owned subsidiary, that was sold in 2015 as discontinued
operations as discussed in Note 13.
Balance Sheet Accounts
|
|
As Previously
Stated
|
|
|
Reclassify
Mamaki
|
|
|
Correction of Derivative and
Stock Valuations
|
|
|
As
Restated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
82.400
|
|
|
$
|
(4,896
|
)
|
|
|
|
|
$
|
77,504
|
|
Accounts receivable
|
|
|
780
|
|
|
|
(780
|
)
|
|
|
|
|
|
0
|
|
Prepaid expenses
|
|
|
32,700
|
|
|
|
(32,700
|
)
|
|
|
|
|
|
0
|
|
Land
|
|
|
150,000
|
|
|
|
(150,000
|
)
|
|
|
|
|
|
0
|
|
Buildings
|
|
|
871,842
|
|
|
|
(871,842
|
)
|
|
|
|
|
|
0
|
|
Equipment
|
|
|
1,084,755
|
|
|
|
(996,052
|
)
|
|
|
|
|
|
88,703
|
|
Accumulated depreciation
|
|
|
(312,946
|
)
|
|
|
298,885
|
|
|
|
|
|
|
(14,061
|
)
|
Mine Properties
|
|
|
100,000
|
|
|
|
|
|
|
|
(100,000
|
)
|
|
|
0
|
|
Investments
|
|
|
90,000
|
|
|
|
|
|
|
|
(90,000
|
)
|
|
|
0
|
|
Debt issue costs
|
|
|
55,427
|
|
|
|
|
|
|
|
(55,427
|
)
|
|
|
0
|
|
Assets related to discontinued operations
|
|
|
0
|
|
|
|
1,757,643
|
|
|
|
|
|
|
|
1,757,643
|
|
Total
|
|
$
|
2,155,214
|
|
|
$
|
0
|
|
|
$
|
(233,302
|
)
|
|
$
|
1,909,789
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
70,568
|
|
|
$
|
(35,582
|
)
|
|
|
|
|
|
$
|
34,986
|
|
Advances from shareholders
|
|
|
181,272
|
|
|
|
|
|
|
|
|
|
|
|
181,272
|
|
Accrued expenses
|
|
|
733,316
|
|
|
|
(579,725
|
)
|
|
|
|
|
|
|
153,591
|
|
Convertible note payable, net
|
|
|
136,801
|
|
|
|
|
|
|
|
(89,601
|
)
|
|
|
47,200
|
|
Derivative liability
|
|
|
0
|
|
|
|
|
|
|
|
239,789
|
|
|
|
239,789
|
|
Term notes
|
|
|
1,245,211
|
|
|
|
(1,245,211
|
)
|
|
|
|
|
|
|
0
|
|
Liabilities related to discontinued operations
|
|
|
0
|
|
|
|
1,860,518
|
|
|
|
|
|
|
|
1,860,518
|
|
Total
|
|
$
|
4,189,845
|
|
|
$
|
0
|
|
|
$
|
150,189
|
|
|
$
|
4,340,034
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class B common
|
|
$
|
1,574
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
1,574
|
|
Class A common
|
|
|
14,557
|
|
|
|
0
|
|
|
|
0
|
|
|
|
14,557
|
|
Additional paid-in-capital
|
|
|
4,679,538
|
|
|
|
0
|
|
|
|
1,303,515
|
|
|
|
5,983,53
|
|
Accumulated deficit
|
|
|
(6,730,300
|
)
|
|
|
0
|
|
|
|
(1,699,129
|
)
|
|
|
(8,429,429
|
)
|
Total
|
|
$
|
2,034,631
|
)
|
|
$
|
0
|
|
|
$
|
(383,489
|
)
|
|
|
(2,418,120
|
)
|
F - 7
Statement of Operations
|
|
As Previously
Stated
|
|
|
Mamaki Reclassification
|
|
|
Correction of Derivative and
Stock Valuations
|
|
|
As
Restated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales
|
|
$
|
24,581
|
|
|
$
|
(24,581
|
)
|
|
0
|
|
|
$
|
0
|
|
Cost of sales
|
|
|
54,696
|
|
|
|
(54,696
|
)
|
|
0
|
|
|
|
0
|
|
Gross profit
|
|
|
(30,115
|
)
|
|
|
(30,115
|
)
|
|
0
|
|
|
|
0
|
|
Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative
|
|
|
2,092,746
|
|
|
|
(415,009
|
)
|
|
|
563,339
|
|
|
|
2,241,076
|
|
Research and development
|
|
|
218,000
|
|
|
|
0
|
|
|
|
0
|
|
|
|
218,000
|
|
Depreciation
|
|
|
119,350
|
|
|
|
(118,954
|
)
|
|
|
0
|
|
|
|
396
|
|
|
|
|
2,430,096
|
|
|
|
(533,963
|
)
|
|
|
563,339
|
|
|
|
2,459,472
|
|
Operating loss
Other expenses
|
|
|
(2,460,211
|
)
|
|
|
(564,078
|
)
|
|
|
(563,339
|
)
|
|
|
(2,459,472
|
)
|
Impairment on investments
|
|
|
0
|
|
|
|
0
|
|
|
|
(190,000
|
)
|
|
|
(190,000
|
)
|
Loss on derivative
|
|
|
0
|
|
|
|
0
|
|
|
|
(91,395
|
)
|
|
|
(91,395
|
)
|
Interest expense
|
|
|
(225,135
|
)
|
|
|
(150,756
|
)
|
|
|
(842,270
|
)
|
|
|
(928,774
|
)
|
Operating loss from continuing operations
|
|
|
(2,685,346
|
)
|
|
|
(714,834
|
)
|
|
|
(1,687,004
|
)
|
|
|
(3,669,641
|
)
|
Loss from discontinued operations
|
|
|
0
|
|
|
|
(714,834
|
)
|
|
|
0
|
|
|
|
(714,834
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before income taxes
|
|
|
(2,685,346
|
)
|
|
|
0
|
|
|
|
(1,687,004
|
)
|
|
|
(4,384,475
|
)
|
Provision for income taxes
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
Net loss
|
|
$
|
(2,685,346
|
)
|
|
$
|
(714,834
|
)
|
|
|
(1,687,004
|
)
|
|
$
|
(4,384,475
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic loss per share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(0.03
|
)
|
Loss from discontinued operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(0.00
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Statement of Cash Flows Accounts
|
|
As Previously
Stated
|
|
|
Mamaki Reclassification
|
|
|
Correction of Derivative and
Stock Valuations
|
|
|
As
Restated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss from operations
|
|
$
|
(2,685,346
|
)
|
|
$
|
(714,834
|
)
|
|
$
|
(269,461
|
)
|
|
$
|
(3,669,641
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
119,350
|
|
|
|
(118,955
|
)
|
|
|
0
|
|
|
|
395
|
|
Interest and amortization of debt discounts
|
|
|
0
|
|
|
|
|
|
|
|
64,836
|
|
|
|
64,836
|
|
Stock issued for services
|
|
|
738,842
|
|
|
|
0
|
|
|
|
563,409
|
|
|
|
1,302,251
|
|
Impairment provisions
|
|
|
0
|
|
|
|
0
|
|
|
|
190,000
|
|
|
|
19,000
|
|
Warrants
|
|
|
89,568
|
|
|
|
0
|
|
|
|
(89,568
|
)
|
|
|
0
|
|
Debt issue costs amortized
|
|
|
0
|
|
|
|
0
|
|
|
|
12,125
|
|
|
|
12,125
|
|
Accounts receivable
|
|
|
900
|
|
|
|
(900
|
)
|
|
|
0
|
|
|
|
0
|
|
Prepaid expenses
|
|
|
21,149
|
|
|
|
(21,149
|
)
|
|
|
0
|
|
|
|
0
|
|
Accounts payable
|
|
|
(9,287
|
)
|
|
|
(10,532
|
)
|
|
|
0
|
|
|
|
(19,819
|
)
|
Accrued management fees
|
|
|
493,851
|
|
|
|
0
|
|
|
|
0
|
|
|
|
493,851
|
|
Derivative liability
|
|
|
0
|
|
|
|
0
|
|
|
|
239,789
|
|
|
|
239,789
|
|
Accrued expenses
|
|
|
262,332
|
|
|
|
(240,240
|
)
|
|
|
|
|
|
|
22,092
|
|
Net Cash Provided by Operations
|
|
|
(968,641
|
)
|
|
|
323,056
|
|
|
|
1,081,812
|
|
|
|
(1,455,517
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Advances and conversions from shareholders
|
|
|
729,029
|
|
|
|
0
|
|
|
|
798,151
|
|
|
|
1,582,049
|
|
Proceeds from convertible note
|
|
|
136,801
|
|
|
|
0
|
|
|
|
(89,601
|
)
|
|
|
47,200
|
|
Decrease in notes payable
|
|
|
(120,393
|
)
|
|
|
90,393
|
|
|
|
0
|
|
|
|
(30,000
|
)
|
Proceeds from sale of common stock
|
|
|
336,500
|
|
|
|
0
|
|
|
|
0
|
|
|
|
336,500
|
|
Net Cash Provided by Financing
|
|
|
1,049,855
|
|
|
|
90,393
|
|
|
|
157,859
|
|
|
|
1,935,749
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash used in discontinued operations
|
|
|
|
|
|
|
(402,823
|
)
|
|
|
|
|
|
|
(402,823
|
)
|
Net Increase in Cash
|
|
$
|
81,214
|
|
|
$
|
(3,805
|
)
|
|
|
|
|
|
$
|
77,409
|
|
F - 8
NOTE 4 - SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
A summary of significant accounting
policies applied in the presentation of the consolidated financial statements are as follows:
Property & Equipment
Property and equipment is recorded
at cost. Major additions and improvements are capitalized. The cost and related accumulated depreciation of equipment retired
or sold are removed from the accounts and any differences between the undepreciated amount and the proceeds from the sale are
recorded as a gain or loss on sale of equipment. Depreciation is computed using the straight-line method over the estimated useful
life of the assets as follows.
Impairment of Long-Lived Assets
The Company assesses the impairment
of long-lived assets whenever events or changes in circumstances indicate that the carrying amount may not be recoverable, in
accordance with ASC Topic 360, "Property, Plant and Equipment." An asset or asset group is considered impaired
if its carrying amount exceeds the undiscounted future net cash flow the asset or asset group is expected to generate. If
an asset or asset group is considered impaired, the impairment to be recognized is measured by the amount by which the carrying
amount of the assets exceeds its fair value. If estimated fair value is less than the book value, the asset is written
down to the estimated fair value and an impairment loss is recognized. Due the Company not producing any revenues from its
BLM mining leases since its acquisition of the leases, achieving a position of producing cash flow levels to fund the development
of its BLM mining leases in December of 2010 and not having current resources for an appraisal, we recognized an impairment charge
of $100,000 during the year ended December 31, 2014. The Company will continue to pay the annual renewal fees of $11,160
based on obtaining encouraging results from samples on surface material. Due to reduced growth expectations and the Company
not receiving any revenues from its ownership in Jet Tech described in Note 7, we recognized an impairment charge of $90,000 during
the year ended December 31, 2014.
Discontinued Operations
On November 2, 2015, the Company consummated the sale
of its wholly owned subsidiary, Mamaki of Hawaii, Inc. ("Mamaki") to Hawaiian Beverages, Inc. ("HBI").
Under the agreement, HBI acquired 100% of the common stock of Mamaki in exchange for seven hundred thousand dollars ($700,000)
and the assumption of eighty-four thousand two hundred seventy-five thousand dollars ($84,275) of UMED debts. HBI has paid
so far two hundred forty-five thousand five hundred dollars ($245,400) of the two hundred fifty thousand dollars ($250,000) due
at closing and pay three installments of one hundred fifty thousand dollars ($150,000) on each of thirty, sixty and ninety-day
from the closing date. The Company has not received any payment on the $454,600 and has determined that the account is doubtful
and wrote it off, as of December 31, 2015, as a deduction from the gain calculated on the sale.
The results of Mamaki are presented as a separate line
item in the consolidated statements of operations and the consolidated balance sheets entitled "Assets/Liabilities sold relating
to discontinued operations" and "Assets/Liabilities related to discontinued operations". In accordance with EITF
87-24, "Allocation of Interest to Discontinued Operations", the Company elected to not allocate consolidated interest
expense to discontinued operations where the debt is not directly attributable to or related to discontinued operations. All of
the financial information in the consolidated financial statements and notes to the consolidated financial statements has been
revised to reflect only the results of continued operations. (See Note 13).
Revenue Recognition
The Company has not, to date, generated
significant revenues. The Company plans to recognize revenue in accordance with Accounting Standards Codification subtopic
605-10, Revenue Recognition ("ASC 605-10") which requires that four basic criteria must be met before revenue can be
recognized: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred; (3) the selling price is fixed and determinable;
and (4) collectability is reasonably assured. Determination of criteria (3) and (4) are based on management's judgments regarding
the fixed nature of the selling prices of the products delivered and the collectability of those amounts. Provisions for discounts
and rebates to customers, estimated returns and allowances, and other adjustments are provided for in the same period the related
sales are recorded.
ASC 605-10 incorporates Accounting
Standards Codification subtopic 605-25,
Multiple-Element Arraignments
("ASC 605-25"). ASC 605-25 addresses accounting
for arrangements that may involve the delivery or performance of multiple products, services and/or rights to use assets. The
effect of implementing 605-25 on the Company's financial position and results of operations was not significant.
F - 9
Use of Estimates
The preparation of the financial
statements in conformity with accounting principles generally accepted in the United States requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities
at the date of the financial statements and the reported amount of revenue and expenses during the reported period. Actual
results could differ materially from the estimates.
Cash and Cash Equivalent
The Company considers all highly
liquid investments purchased with an original maturity of three months or less to be cash equivalents. There were no cash
equivalents at December 31, 2015 and 2014, respectively.
Segment Information
ASC 280, "
Segment Reporting
"
requires use of the "
management approach
" model for segment reporting. The management approach model is
based on the way a company's management organizes segments within the company for making operating decisions and assessing performance.
The Company determined that is had one operating segment, Mamaki of Hawaii, Inc., in addition to its corporate activities, which
the Company is presenting as discontinued operations.
Mine Exploration and Development
Costs
The Company plans to account for
mine exploration costs in accordance with Accounting Standards Codification 932,
Extractive Activities.
All exploration
expenditures are expensed as incurred. Mine development costs are capitalized until production, other than production incidental
to the mine development process, commences and are amortized on a units of production method based on the estimated proven and
probable reserves. Mine development costs represent costs incurred in establishing access to mineral reserves and include costs
associated with sinking or driving shafts and underground drifts, permanent excavations, roads and tunnels. The end of the development
phase and the beginning of the production phase takes place when construction of the mine for economic extraction is substantially
complete. Coal extracted during the development phase is incidental to the mine's production capacity and is not considered to
shift the mine into the production phase. Amortization of capitalized mine development is computed based on the estimated life
of the mine and commences when production, other than production incidental to the mine development process, begins.
Due to the Company not producing any revenues from its BLM mining leases since its acquisition of the leases, achieving a position
of producing cash flow levels to fund the development of its BLM mining leases in December of 2010 and not having current resources
for an appraisal, we recognized an impairment charge of $100,000 during the year ended December 31, 2014. Through December
31, 2015, the Company had not incurred any mine development costs. During the year ended December 31, 2015, the Company
incurred $9,166 in costs of obtaining surface samples. Through December 31, 2015, the Company had not incurred any mine development
costs.
Mine Properties
The Company will account for mine
properties in accordance with Accounting Standard Codification 930,
Extractive Activities-Mining.
Costs of acquiring
mine properties are capitalized by project area upon purchase of the associated claims. Mine properties are periodically
assessed for impairment of value and any diminution in value. The Company had 1,440 acres of placer mining claims at December
31, 2015, which were acquired in December 2010 in exchange for 5,066,000 shares of common stock valued at $100,000. Due
to the Company not producing any revenues from its BLM mining leases since its acquisition of the leases, achieving a position
of producing cash flow levels to fund the development of its BLM mining leases in December of 2010 and not having current resources
for an appraisal, we recognized an impairment charge of $100,000 during the year ended December 31, 2014.
Income Taxes
The Company accounts for income
taxes in accordance with FASB ASC 740, "Income Taxes," which requires that the Company recognize deferred tax liabilities
and assets based on the differences between the financial statement carrying amounts and the tax bases of assets and liabilities,
using enacted tax rates in effect in the years the differences are expected to reverse. Deferred income tax benefit (expense)
results from the change in net deferred tax assets or deferred tax liabilities. A valuation allowance is recorded when it is more
likely than not that some or all deferred tax assets will not be realized.
The Company has adopted the provisions
of FASB ASC 740-10-05
Accounting for Uncertainty in Income Taxes
. The ASC clarifies the accounting for uncertainty in income
taxes recognized in an enterprise's financial statements. The ASC prescribes a recognition threshold and measurement
attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The
ASC provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure and
transition. Open tax-years subject to IRS examination include 2009 – 2014.
F - 10
Net Loss Per Share, basic and diluted
Basic loss per share has been computed
by dividing net loss available to common shareholders by the weighted average number of common shares outstanding for the period.
Shares issuable upon the exercise of warrants (5,112,953) have been excluded as a common stock equivalent in the diluted loss
per share because their effect is anti-dilutive.
Derivative Instruments
The Company accounts for derivative
instruments in accordance with Accounting Standards Codification 815,
Derivatives and Hedging ("ASC 815"),
which
establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in
other contracts, and for hedging activities. They require that an entity recognize all derivatives as either assets
or liabilities in the balance sheet and measure those instruments at fair value.
If certain conditions are met,
a derivative may be specifically designated as a hedge, the objective of which is to match the timing of gain or loss recognition
on the hedging derivative with the recognition of (i) the changes in the fair value of the hedged asset or liability that are
attributable to the hedged risk or (ii) the earnings effect of the hedged forecasted transaction. For a derivative not designated
as a hedging instrument, the gain or loss is recognized in income in the period of change.
See Note 8 below for discussion
regarding a warrant agreement related to a convertible note, which was repaid on July 22, 2015.
Original Issue Discount
For certain convertible debt issued,
the Company provides the debt holder with an original issue discount ("OID"). An OID is the difference between
the original cash proceeds and the amount of the note upon maturity. The Note is originally recorded for the proceeds received.
The OID is amortized into interest expense pro-rata over the term of the Note.
Fair Value of Financial Instruments
The Company's financial instruments,
as defined by Accounting Standard Codification subtopic 825-10,
Financial Instrument
("ASC 825-10), include cash,
accounts payable and convertible note payable. All instruments are accounted for on a historical cost basis, which,
due to the short maturity of these financial instruments, approximates fair value at December 31, 2015 and 2014.
FASB ASC 820 defines fair value,
establishes a framework for measuring fair value in accordance with generally accepted accounting principles, and expands disclosures
about fair value measurements. ASC 820 establishes a three-tier fair value hierarchy which prioritizes the inputs used in measuring
fair value as follows:
Level 1: Observable inputs such
as quoted prices in active markets;
Level 2: Inputs, other than the
quoted prices in active markets, that are observable either directly or indirectly; and
Level 3: Unobservable inputs in
which there is little or no market data, which requires the reporting entity to develop its own assumptions
The Company's derivative was
valued at level 3.
Stock Based Compensation
The Company follows Accounting
Standards Codification subtopic 718-10,
Compensation
("ASC 718-10") which requires that all share-based payments
to both employees and non-employees be recognized in the income statement based on their fair values.
At December 31, 2015, the Company
did not have any issued or outstanding stock options.
Concentration and Credit Risk
Financial instruments and related
items, which potentially subject the Company to concentrations of credit risk, consist primarily of cash. The Company places its
cash with high credit quality institutions. At times, such deposits may be in excess of the FDIC insurance limit.
F - 11
Research and Development
The Company accounts for research
and development costs in accordance with Accounting Standards Codification subtopic 730-10,
Research and Development
("ASC
730-10"). Under ASC 730-10, all research and development costs must be charged to expense as incurred. Accordingly, internal
research and development costs are expensed as incurred. Third-party research and development costs are expensed when the contracted
work has been performed or as milestone results have been achieved as defined under the applicable agreement. Company-sponsored
research and development costs related to both present and future products are expensed in the period incurred. The Company
incurred research and development expenses of $766,726 and $218,000 during the years ended December 31, 2015 and 2014, respectively.
Issuance of Common Stock
The issuance of common stock for other than cash is
recorded by the Company at market values.
Impact of New Accounting Standards
Management does not believe that any other recently
issued, but not yet effective accounting pronouncements, if adopted, would have a material effect on the accompanying consolidated
financial statements.
NOTE 5 – CONTRACT RECEIVABLE
In November 2015, the Company completed the sale (entered
into on October 1, 2015) of its wholly owned subsidiary, Mamaki of Hawaii, Inc., ("Mamaki") to Hawaiian Beverages, Inc.
("HBI"). Under the agreement, HBI acquired 100% of the common stock of Mamaki in exchange for seven hundred thousand
dollars ($700,000) and the assumption of eighty-four thousand two hundred seventy- five thousand dollars ($84,275) of UMED debts.
HBI paid two hundred forty-five thousand five hundred dollars ($245,400) at closing towards the first installment due of two hundred
fifty thousand ($250,000), resulting in a receivable of $454,600 at December 31, 2015. The Company has not received any
payment on the $454,600 and has determined that collection is doubtful and wrote the account off at December 31, 2015 as a reduction
to the gain calculated on the sale.
NOTE 6 – PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment, their estimated useful
lives, and related accumulated depreciation at December 31, 2015 and 2014, respectively, are summarized as follows:
|
|
Range of
|
|
|
|
|
|
|
|
|
|
Lives in
|
|
|
|
|
|
|
Years
|
|
|
2015
|
|
|
2014
|
|
Equipment
|
|
|
5
|
|
|
|
2,032
|
|
|
|
13,220
|
|
Logistix software
|
|
|
5
|
|
|
|
0
|
|
|
|
73,500
|
|
Furniture and fixtures
|
|
|
5
|
|
|
|
1,983
|
|
|
|
1,983
|
|
|
|
|
|
|
|
|
4,015
|
|
|
|
88,703
|
|
Less accumulate depreciation
|
|
|
|
|
|
|
(3,271
|
)
|
|
|
(14,061
|
)
|
|
|
|
|
|
|
$
|
744
|
|
|
|
74,642
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation expense for the year ended
|
|
|
|
|
|
$
|
396
|
|
|
$
|
297
|
|
During the year ended December 31, 2015, the Company
wrote-off the balance of its Logistix software and $11,188
of fully depreciated assets.
F - 12
NOTE 7 – INVESTMENTS
Investments consisted of the following at December 31,
2015 and 2014;
|
|
|
2015
|
|
|
|
2014
Restated
|
|
|
|
|
|
|
|
|
|
|
Jet Tech LLC
In October 2011, the Company acquired
a 49% interest in
JetTech LLC which is an aerospace maintenance
operation
located at Meacham Airport in Fort Worth,
Texas -The Company
has impaired the investment at December
31, 2015 and 2014,
respectively,
|
|
$
|
0
|
|
|
$
|
0
|
|
|
|
|
|
|
|
|
|
|
TOTAL INVESTMENTS
|
|
$
|
0
|
|
|
$
|
0
|
|
NOTE 8 – CONVERTIBLE PROMISSORY NOTE
On September 18, 2014, the Company issued a $158,000
convertible promissory note bearing interest at 10.0% per annum to an accredited investor, payable July 23, 2015, in monthly installments
of $31,600 plus accrued interest beginning 6 months after the date of this promissory note. The note was paid in full on
July 22, 2015. The holder had the right under certain circumstances to convert the note into common stock of the Company
at a conversion price equal to 70% of the average of the 3 lowest volume weighted average trading prices during the 20-day period
ending on the latest complete trading day prior to the conversion date.
The Company evaluated the terms
of the convertible note in accordance with ASC 815-40, Contracts in Entity's Own Equity, and concluded that the Convertible Note
did result in a derivative. The Company evaluated the terms of the convertible note and concluded that there was a beneficial
conversion feature since the convertible note was convertible into shares of common stock at a discount to the market value of
the common stock. The discount related to the beneficial conversion feature on the note was valued at $158,000 based on its then
intrinsic value. The discount related to the beneficial conversion feature ($78,463) and the warrants ($79,537) is being
amortized over the term of the debt (10 months). For the year ended December 30, 2015, the Company recognized $51,001of
interest expense related to the amortization of the discount as the note was paid in full on July 22,2015.
In connection with the issuance
of the $158,000 note discussed above, the Company recorded debt issue cost and discount as follows:
|
|
10.4% cash – which is equivalent to $16,500, and
|
|
|
Warrants – having a fair value
of $107,212 and recorded on the balance sheet at $60,164 and $239,789 as of
December 31, 2015 and 2014, respectively,
which was computed as follows;
|
|
|
Commitment Date
|
|
Expected dividends
|
|
|
0%
|
|
Expected volatility
|
|
|
189%
|
|
Expected term: conversion feature
|
|
3.75years
|
|
Risk free interest rate
|
|
|
1.75%
|
|
|
|
|
|
|
|
|
The debt issue costs were capitalized and amortized
through July 22, 2015, when the note was repaid.
Amortization of debt issue costs
for the year ended December 31, 2015 was $55,427. Net debt issue costs at December 31, 2015 was $0, as the note had
been repaid.
The original issue discount pertains
to discount taken by lender against the total convertible note of $158,000, resulting in a disbursement of $144,000 to the company.
The original issue discount of
$14,000 was amortized $5,900 and $8,100 in the years ended December 31, 2015 and 2014, respectively, as the note was paid in full
in July 2015.
F - 13
NOTE 9 – ACCRUED EXPENSES
Accrued expenses consisted of the following at December
31, 2015 and 2014;
|
|
2015
|
|
|
2014
Restated
|
|
|
|
|
|
|
|
|
Accrued consulting fees
|
|
$
|
229,000
|
|
|
$
|
144,500
|
|
Bank overdraft
|
|
|
763
|
|
|
|
0
|
|
Accrued interest expense
|
|
|
0
|
|
|
|
9,091
|
|
Total accrued expenses
|
|
$
|
229,763
|
|
|
$
|
153,591
|
|
NOTE 10– CAPITAL STRUCTURE
The Company is authorized to issue
300,000,000 shares of class A common stock with a par value of $.0001 per share and 20,000,000 shares of class B stock with a
par value of $.0001 per share. Each common stock share has one voting right and the right to dividends, if and when
declared by the Board of Directors.
Class A Common Stock
At December 31, 2015, there were
183,882,132 shares of class A common stock issued and outstanding.
During the period from July 1,
through September 30, 2105, the Company issued 5,921,992 shares of restricted class A common stock to eighteen individuals through
private placements for cash of $450,910 at average of $0.076 per share.
During the period from July 1,
2015 through September 30, 2015, the Company issued 9,179,340 shares of class A stock for 611,956 class B shares on terms set
by the Company's predecessor, Dynalyst Manufacturing Corporation.
During the period from July 1,
2015 through September 30, 2015, the Company issued 1,600,000 shares of restricted class A common stock for consulting services
at a value of $244,5000 based on value of the services provided, at average of $0.153 per share.
During the period from July 1,
2015 through September 30, 2015, the Company issued 1,235,110 shares of restricted class A common stock for legal and management
services at a value of $140,713 based on value of the services provided, at average of $0.114 per share.
During the period from April 1,
2015 through June 30, 2015, the Company issued 1,726,080 shares of restricted class A common stock valued at $293,434 for conversion
of advances from shareholders at an average of $0.17 per share.
During the period from April 1,
2015 through June 30, 2015, the Company issued 4,150,732 shares of restricted class A common stock to twelve individuals through
private placements for cash of $508,500 at average of $0.1225 per share.
During the period from April 1,
2015 through June 30, 2015, the Company issued a total of 13,125,000 shares of restricted class A common stock to its former CEO,
its President and Chief Financial Officer per their employment agreements. The shares were valued at $0.15 per share based on
market value.
During the period from April 1,
2015 through June 30, 2015, the Company issued 250,000 shares of restricted class A common stock to its former CEO as set out
in his separation agreement. The shares were valued at $0.138 per share based on market value.
During the period from April 1,
2015 through June 30, 2015, the Company issued 200,000 shares of restricted class A common stock for consulting services at a
value of $34,000 at an average of $0.17 per share.
During the period from January
1, 2015 through March 31, 2015, the Company issued 91,666 shares of restricted class A common stock valued at $21,083 for conversion
of advances from shareholders at an average of $0.23 per share.
During the period from January
1, 2015 through March 31, 2015, the Company issued 842,377 shares of restricted class A common stock to seven individuals through
private placements for cash of $122,950 at $0.146 per share.
F - 14
During the period from October 1 through December
31, 2014, the Company issued 1,633,142 shares of restricted class A common stock valued at $351,126 for the conversion of shareholder
advances at an average of $0.215 per share.
During the period from October
1 through December 31, 2014, the Company issued 1,000,000 shares of restricted class A common stock to six investors for cash
consideration of $127,500.
During the period from October
1 through December 31, 2014, the Company issued 225,000 shares of restricted class A common stock for consulting services valued
at $48,375, at an average of $0.215 per share.
During the period from July 1,
2014 through September 30, 2014, the Company issued 1,118,000 shares of restricted class A common stock for conversion of $335,400
in advances from shareholder, or $0.30 per share.
During the period from July 1,
2104 through September 30, 2104, the Company issued 3,770,182 shares of restricted class A common stock for services rendered.
The shares were valued at $583,727, or $0.18 per share.
During the period from July 1,
2104 through September 30, 2014, the Company entered into subscription agreements with individuals and sold 550,000 shares of
restricted class A common stock for $67,000 cash, or $0.122 per share.
During the period from April 1,
2014 through June 30, 2014, the Company issued 2,216,233 shares of restricted class A common stock valued at $613,762 for conversion
of advances from shareholder, or $0.277 per share.
During the period from April 1,
2104 through June 30, 2104, the Company issued 1,645,000 shares of restricted class A common stock for services rendered.
The shares were valued at $385,050, or $0.234 per share.
During the period from April 1,
2104 through June 30, 2014, the Company entered into subscription agreements with individuals and sold 490,888 shares of restricted
class A common stock for $107,000 cash, or $0.218 per share.
During the period from January 1, 2014 through March
31, 2014, the Company issued 1,736,540 shares of restricted class A common stock valued at $185,677 for conversion of advances
from shareholder at an average of $0.107.
During the period from January 1, 2014 through March
31, 2014, the Company issued 634,652 shares of restricted class A common stock for services rendered. The shares were valued
at $78,500, or $0.124 per share.
During the period from January 1, 2014 through March
31, 2014, the Company issued 100,000 shares of restricted class A common stock for services rendered. The shares were valued
at $10,000, or $0.10 per share.
During the period from January
1, 2014 through March 31, 2014, the Company entered into subscription agreement with an individual and sold 269,230 shares of
restricted class A common stock for $35,000 cash, or $0.13 per share.
During the period from January 1, 2014 through March
31, 2014, the Company issued 600,000 shares of restricted class A common stock for the conversion of 60,000 shares of class B
common stock at the conversion rate of 10 shares of restricted class common stock for each share of class B common stock.
During the period from January 1, 2014 through March
31, 2014, the Company issued 500,000 shares of restricted class A common stock for legal services rendered. The shares were
valued at $75,000, or $0.15 per share.
During the period from January 1, 2014 through March
31, 2014, the Company issued 160,000 shares of restricted class A common stock for services rendered. The shares were valued
at $21,600, or $0.135 per share.
Class B Stock
At December 31, 2015, there were
15,126,938 shares of class B stock issued and outstanding. Each class B share is convertible, at the option of the shareholder,
into common stock on a one for one basis.
During the period from July 1,
2015 through September 30, 2015, the Company issued 9,179,340 shares of class A stock for 611,956 class B shares on terms set
by the Company's predecessor, Dynalyst Manufacturing Corporation.
F - 15
Stock options, warrants and other rights
At December 31, 2015, the Company has not adopted any
employee stock option plans.
On October 1, 2015, the Company issued 4,000,000 warrants
for legal work. The warrants are exercisable for $.20 per share for a period of five years from the date of issue. The Company
valued the warrants as of December 31, 2015 at $386,549 using the Black-Scholes Model with expected dividend rate of 0%, expected
volatility rate of 189%, expected conversion term of 4.75 years and risk free interest rate of 1.75%.
NOTE 11 - RELATED PARTY TRANSACTIONS
Shareholders have made advances to the Company in the
amounts of $383,878 and $715,070 during the years ended December 31, 2015 and 2014, respectively. The shareholders have
elected to convert advances of $314,517 and $1,527,179 to shares of class A, common stock at an average value of $0.173 and $0.228
per share and received repayments of $79,058 and $0 during the years ended December 31, 2015 and 2014, respectively.
In April 2015, the Company's then Chief Executive Officer
resigned and in his settlement agreement gave up claims to receive deferred compensation, which amounted to $518,300 and treated
as debt forgiveness, as discussed in Note 14 below.
In May 2015, the Company issued
13,125,000 shares of restricted class A common stock to its former CEO, its President and Chief Financial Officer per their employment
agreements. The shares were valued at an average of $0.15 per share based on market value.
In July 2015, the Company issued
a total of 9,179,340 shares of restricted class A common stock to its President and Chief Financial Officer for the conversion
of 611,956 shares of class B stock at the rate of fifteen shares of restricted common stock for each share of Class B stock, on
terms set by the Company's predecessor, Dynalyst Manufacturing Corporation.
NOTE 12 – INCOME TAXES
At December 31, 2015 and 2014,
the Company had approximately $4.9 million and $3.5 million, respectively, of net operating losses ("NOL") carry forwards
for federal and state income tax purposes. These losses are available for future years and expire through 2033. Utilization
of these losses may be severely or completely limited if the Company undergoes an ownership change pursuant to Internal Revenue
Code Section 382.
The provision for income taxes for continuing operations
consists of the following components for the years ended December 31, 2015 and 2014:
|
2015
|
|
2014
|
|
|
|
|
|
|
Current
|
|
$
|
-
|
|
|
$
|
-
|
|
Deferred
|
|
|
-
|
|
|
|
-
|
|
Total tax provision for (benefit from) income taxes
|
|
$
|
-
|
|
|
$
|
-
|
|
A comparison of the provision for income tax expense
at the federal statutory rate of 34% for the years ended December 31, 2015 and 2014 the Company's effective rate is as follows:
|
|
2015
|
|
|
2014
|
|
|
|
|
|
|
|
|
Federal statutory rate
|
|
|
(34.0
|
) %
|
|
|
(34.0
|
) %
|
State tax, net of federal benefit
|
|
|
(0.0
|
)
|
|
|
(0.0
|
)
|
Permanent differences and other including surtax exemption
|
|
|
0.0
|
|
|
|
0.0
|
|
Valuation allowance
|
|
|
34.0
|
|
|
|
34.0
|
|
Effective tax rate
|
|
|
0.0
|
%
|
|
|
0.0
|
%
|
F - 16
The net deferred tax assets and liabilities included
in the financial statements consist of the following amounts at December 31, 2015 and December 31, 2014:
|
|
2015
|
|
|
2014
Restated
|
|
Deferred tax assets
|
|
|
|
|
|
|
Net operating loss carry forwards
|
|
$
|
4,028,702
|
|
|
$
|
4,384,475
|
|
Deferred compensation
|
|
|
2,409,213
|
|
|
|
1,966,523
|
|
Stock based compensation
|
|
|
4,898,968
|
|
|
|
1,887,431
|
|
Other
|
|
|
1,121,248
|
|
|
|
191,000
|
|
Total
|
|
|
12,458,131
|
|
|
|
8,429,429
|
|
Less valuation allowance
|
|
|
(12,458,131
|
)
|
|
|
(8,429,429
|
)
|
Deferred tax asset
|
|
|
-
|
|
|
|
-
|
|
Deferred tax liabilities
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
$
|
-
|
|
|
$
|
-
|
|
Net long-term deferred tax asset
|
|
$
|
-
|
|
|
$
|
-
|
|
The change in the valuation allowance
was $4,028,702 and $4,384,475 for the years ended December 31, 2015 and 2014, respectively. The Company has recorded a 100%
valuation allowance related to the deferred tax asset for the loss from operations, interest expense, interest income and other
income subsequent to the change in ownership, which amounted to $12,458,131 and $8,429,429 at December 31, 2015 and 2014, respectively.
The ultimate realization of deferred tax assets is dependent
upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management
considers the scheduled reversal of deferred tax liabilities, historical taxable income including available net operating loss
carry forwards to offset taxable income, and projected future taxable income in making this assessment.
NOTE 13 – DISCONTINUED OPERATIONS
In November 2015, the Company completed the sale (entered
into on October 1, 2015) of its wholly owned subsidiary, Mamaki of Hawaii, Inc., ("Mamaki") to Hawaiian Beverages, Inc.
("HBI"). Under the agreement, HBI acquired 100% of the common stock of Mamaki in exchange for seven hundred thousand
dollars ($700,000) and the assumption of eighty-four thousand two hundred seventy- five thousand dollars ($84,275) of UMED debts.
HBI paid two hundred forty-five thousand five hundred dollars ($245,400) at closing towards the first installment due of two hundred
fifty thousand ($250,000) and with three installments of one hundred fifty thousand dollars ($150,000) on each due thirty, sixty
and ninety days from the closing date. The Company has not received any payment on the $454,600 and has determined that
the collection is doubtful and wrote the receivable off at December 31, 2015 against the gain calculated on the sale.
The following is a summary of the calculation of the
gain from the sale of Mamaki of Hawaii, Inc.:
|
|
|
|
Mamaki of Hawaii historical operations
|
|
$
|
2,008,794
|
|
Contract receivable from Hawaiian Beverages
|
|
|
700,000
|
|
UMED note payable assumed by Hawaiian Beverages
|
|
|
64,697
|
|
Write off Mamaki of Hawaii Intercompany receivable
|
|
|
(777,255
|
)
|
Write off UMED investment in Mamaki of Hawaii stock
|
|
|
(778,430
|
)
|
Write off contract receivable
|
|
|
(454,600
|
)
|
Gain from discontinued operations for 2015
|
|
$
|
763,206
|
|
F - 17
The following statements of the discontinued operations
(Mamaki of Hawaii, Inc.) for the nine months ended September 30, 2015 (date Hawaiian Beverages took over the operations of Mamaki)
and year ended December 31, 2014:
|
|
2015
|
|
|
2014
|
|
Sales
|
|
$
|
47,275
|
|
|
$
|
24,581
|
|
Cost of sales
|
|
|
8,407
|
|
|
|
54,696
|
|
Gross profit
|
|
|
38,868
|
|
|
|
(30,115
|
)
|
|
|
|
|
|
|
|
|
|
Operating Expenses:
|
|
|
|
|
|
|
|
|
General and administrative expenses
|
|
|
395,824
|
|
|
|
415,009
|
|
Depreciation
|
|
|
89,218
|
|
|
|
118,954
|
|
Total Operating Expenses
|
|
|
485,042
|
|
|
|
533,963
|
|
Operating Loss
|
|
|
(446,174
|
)
|
|
|
(564,078
|
)
|
|
|
|
|
|
|
|
|
|
Other Income (Expense)
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
(115,238
|
)
|
|
|
(150,756
|
)
|
|
|
|
|
|
|
|
|
|
Loss from discontinued operations
|
|
$
|
(561,412
|
)
|
|
$
|
(714,834
|
)
|
Loss per share – discontinued operations
|
|
$
|
(0.00
|
)
|
|
$
|
(0.00
|
)
|
|
|
|
|
|
|
|
|
|
Assets and liabilities retained relating to discontinued
operations (Mamaki of Hawaii, Inc.) consisted of the following at December 31, 2014;
|
|
12/31/2014
|
|
|
|
|
|
Current assets relating to discontinued operations:
|
|
|
|
Cash
|
|
$
|
5,153
|
|
Accounts receivable
|
|
|
780
|
|
Prepaid expenses and deposits
|
|
|
32,700
|
|
Property, plant and equipment, net
|
|
|
1,719,009
|
|
Total assets related to discontinued operations
|
|
$
|
1,757,643
|
|
|
|
|
|
|
Current liabilities relating to discontinued operations:
|
|
|
|
|
Bank overdrafts
|
|
$
|
4,896
|
|
Notes payable
|
|
|
1,245,211
|
|
Accounts payable
|
|
|
35,582
|
|
Accrued interest payable
|
|
|
36,450
|
|
Accrued expenses
|
|
|
538,380
|
|
Total liabilities related to discontinued operations
|
|
$
|
1,860,518
|
|
NOTE 14 – COMMITMENTS
Employment Agreements
In May 2011, the Company entered
into employment agreements with its chief executive officer, president and chief financial officer. The Agreements
are for a term of 5 years with compensation of $180,000 the first year, $240,000 the second year, $300,000 the third year, $350,000
the four2th year and the fifth year at a salary commensurate with those in similar industries. The employment agreements
also provide for the officers to receive 1,250,000 shares of restricted common stock annually for each year of the employment
agreement. During the years ended December 31, 2015 and 2014, with consent of management, the Company accrued a total
of $405,000 and $360,000, respectively, as management fees in accordance with the terms of these agreements. On April 8,
2015, the Company's chief executive officer resigned and relinquished his claim to receive $518,300 of deferred compensation,
which the Company treated as debt forgiveness.
F - 18
In August 2012, the Company entered into employment
agreements with the president and chairman of the board of Greenway Innovative Energy, Inc. for a term of 5 years with compensation
of $90,000 per year. In June of 2014, the president's employment agreement was amended to increase his annual pay to $180,000.
On March 31, 2015, accrual on the Greenway chairman of the board agreement was ceased due to his absence from the company for
more than a year. During the years ended December 31, 2015 and 2014, respectively, the Company accrued $191,250 and $168,700 towards
the employment agreements.
Leases
In July 2015, the Company reduced
its office lease space from 3,500 to 1,800 square feet on a month-to-month basis at $3,200 per month. In October 2015, the Company
signed a new two-year lease for new office space of approximately 1,800 square feet at the rate of $2,417 for the first twelve
months and $2,495 for the second twelve months. During the years ended December 31, 2015 and 2014, the Company expensed
$55,836 and $76,800, respectively, in rent expense.
The Company is obligated to
pay approximately $11,800 in annual maintenance fees on its mining leases, in addition to 10% royalties based on production.
Legal
From time to time, the Company
may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. However, litigation
is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm
our business. The Company currently is not aware of any such legal proceedings that we believe will have, individually or in the
aggregate, a material adverse effect on its business, financial condition or operating results.
NOTE 15-SUBSEQUESNT EVENTS
During the period form January
1, 2015 through March 24, 2015, the Company issued 3,500,002 shares of restricted class A common stock to four individuals for
$245,000 cash.
During the period form January
1, 2015 through March 24, 2015, the Company issued 400,000 shares of restricted class A common stock services rendered.
The shares were valued at $36,000, or $0.09 per share.
During the period form January 1,
2015 through March 24, 2015, the Company issued 664,285 shares of restricted class A common stock for conversion of $53,145
of advances from shareholder.
F - 19