7.
Fair Value of Financial Instruments
ASC 825-10 defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact and considers assumptions that market participants would use when pricing the asset or liability, such as inherent risk, transfer restrictions, and risk of nonperformance. ASC 825-10 establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 825-10 establishes three levels of inputs that may be used to measure fair value:
Level 1 - Quoted prices in active markets for identical assets or liabilities.
Level 2 - Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which all significant inputs are observable or can be derived principally from or corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3 - Unobservable inputs to the valuation methodology that are significant to the measurement of fair value of assets or liabilities.
To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement is disclosed is determined based on the lowest level input that is significant to the fair value measurement.
Items recorded or measured at fair value on a recurring basis in the accompanying consolidated financial statements consisted of the following items as of December 31, 2016:
|
|
|
Fair Value Measurements at December 31, 2016 using:
|
|
December 31,
2016
|
|
Quoted Prices in Active
Markets for
Identical
Assets
(Level 1)
|
|
Significant
Other
Observable
Inputs
(Level 2)
|
|
Significant
Unobservable Inputs
(Level 3)
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative Liabilities
|
$ 1,432,650
|
$
|
-
|
$
|
-
|
|
$ 1,432,650
|
|
|
|
Fair Value Measurements at December 31, 2015 using:
|
|
December 31,
2015
|
|
Quoted Prices in Active
Markets for
Identical
Assets
(Level 1)
|
|
Significant
Other
Observable
Inputs
(Level 2)
|
|
Significant
Unobservable Inputs
(Level 3)
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative Liabilities
|
$ 1,046,635
|
$
|
-
|
$
|
-
|
|
$ 1,046,635
|
F-19
The debt and warrant derivative liabilities are measured at fair value using quoted market prices and estimated volatility factors based on historical prices for the Companys common stock and are classified within Level 3 of the valuation hierarchy.
The following table provides a summary of changes in fair value of the Companys Level 3 financial liabilities as of December 31, 2016:
|
|
Derivative Liability
|
Balance, December 31, 2015
|
|
$
|
1,046,635
|
Extinguishment of derivative liability upon conversion of debt
|
|
|
(188,408)
|
Change in fair value of derivative liabilities
|
|
|
574,423
|
Balance, December 31, 2016
|
|
$
|
1,432,650
|
8.
Prepaid Assets
During the year ended December 31, 2013, the Company entered into various agreements for future services such as financial management, radio and news spots highlighting the use of the Companys product, and news release services. The contracts ranged in length from six months to two years.
At their inception, the Company issued common stock in exchange for these services. The Company treats the cost of the stock issuance as a prepaid expense to be amortized over the life of the agreement.
Balance at
December 31, 2015
|
Amortized in 2016
|
Balance at
December 31, 2016
|
Current Asset
|
Long Term Asset
|
$7,000
|
$ 5,000
|
$ 2,000
|
$ 2,000
|
$ 0
|
9.
Related Party Transactions
During the years ended December 31, 2016 and 2015, the Company received $0 and $22,967, respectively, in cash loans from its president, and made cash payments on these amounts owing totaling $10,324 and $0, respectively during the same periods. As of December 31, 2016, and 2015, the Company owed $16,132 and $26,456 respectively, to its President. The amount owing is unsecured, non-interest bearing and due on demand.
On December 9, 2015, the Company issued 1,000,000 Series D Convertible Preferred shares each as compensation to its CEO and Kaufman & Associates a consultant.
As of December 31, 2016, and 2015, the Company owes its president $360,000 and $240,000, respectively, of accrued compensation.
As of December 31, 2016, and 2015, the Company owes $307,270 and $213,480, respectively to Kaufman & Associates (holding more than 5% shares of the Company) in connection with a consulting agreement and included in accrued compensation on the balance sheet.
F-20
10.
Stockholders Deficit
a)
Authorized
Authorized capital stock consists of:
· 5,500
,000,000 common shares with a par value of $0.001 per share; and
· 10
0,000,000 preferred shares with a par value of $0.001 per share;
o
The Company has designated 12,000,000 shares as Series A Convertible Preferred Series Stock. Each share of Series A Preferred Stock is convertible into fifty (50) shares of Common Stock.
o
The Company has designated 70,000,000 shares as Series B Convertible Preferred Series Stock. Each share of Series B Preferred Stock is convertible into one (1) share of Common Stock.
o
The Company has designated 10,000,000 shares as Series C Convertible Preferred Series Stock. Each share of Series C Preferred Stock is convertible into $1.00 of Common Shares at the market price on the date of conversion.
o
The Company has designated 4,000,000 shares as Series D Convertible Preferred Series Stock. Each share of Series D Preferred Stock is convertible into ten (10) shares of Common Stock. See additional description and preferences under Series D Preferred Stock below.
o
The Company has designated 1,250,000 shares as Series E Convertible Preferred Series Stock, par value $1.00 per share. Each share of Series E Preferred Stock is convertible into common stock, subject to adjustments, at a conversion price equal to a 50% discount to the VWAP per share for the 5 trading days prior to written notice of conversion. See additional description and preferences under Series E Preferred Stock below.
Increase in authorized shares
On January 24, 2014, the Company filed a Certificate of Amendment to the Companys Articles of Incorporation (the Certificate of Amendment) with the Nevada Secretary of State. The Certificate of Amendment amends Article III of the Companys Articles of Incorporation to authorize the issuance of up to one hundred million (100,000,000) shares of Preferred Stock, par value $0.001 per share, which may be issued in one or more series, with such rights, preferences, privileges and restrictions as shall be fixed by the Companys Board of Directors from time to time. As a result of the Certificate of Amendment, we now have one billion (1,000,000,000) authorized shares, par value $0.001 per share, consisting of two classes designated as Common Stock and Preferred Stock. The total number of shares of Common Stock that we have authority to issue is nine hundred million (900,000,000) shares and the total number of shares of Preferred Stock that we have authority to issue is one hundred million (100,000,000) shares. The Companys Board of Directors and a majority of our shareholders approved the Certificate of Amendment.
On May 10, 2016, we filed with the Secretary of State of the State of Nevada a Certificate of Amendment to the Articles of Incorporation to increase the authorized shares of Common Stock of our company (the Amendment). The Amendment authorizes us to issue 5,500,000,000 shares of Common Stock, par value $0.001 per share. The Amendment did not increase our authorized shares of Preferred Stock.
F-21
Series A Preferred Stock:
1.
Designation and Rank.
This series of Preferred Stock shall be designated and known as Series A Preferred Stock. The number of shares constituting the Series A Preferred Stock shall be twelve million (12,000,000) shares. Except as otherwise provided herein, the Series A Preferred Stock shall, with respect to rights on liquidation, winding up and dissolution, rank
pari passu
to the common stock, par value $0.001 per share (the Common Stock).
2.
Dividends.
The holders of shares of Series A Preferred Stock have no dividend rights except as may be declared by the Board in its sole and absolute discretion, out of funds legally available for that purpose.
3. Liquidation Preference.
(a) In the event of any dissolution, liquidation or winding up of the Corporation (a Liquidation), whether voluntary or involuntary, the Holders of Series A Preferred Stock shall be entitled to participate in any distribution out of the assets of the Corporation on an equal basis per share with the holders of the Common Stock.
(b) A sale of all or substantially all of the Corporations assets or an acquisition of the Corporation by another entity by means of any transaction or series of related transactions (including, without limitation, a reorganization, consolidated or merger) that results in the transfer of fifty percent (50%) or more of the outstanding voting power of the Corporation (a Change in Control Event), shall not be deemed to be a Liquidation for purposes of this Designation.
4. Voting.
The holders of Series A Preferred Stock shall have the right to cast one hundred (100) votes for each share held of record on all matters submitted to a vote of holders of the Corporations common stock, including the election of directors, and all other matters as required by law. There is no right to cumulative voting in the election of directors. The holders of Series A Preferred Stock shall vote together with all other classes and series of common stock of the Corporation as a single class on all actions to be taken by the common stock holders of the Corporation except to the extent that voting as a separate class or series is required by law.
On October 7, 2013, the Company filed an Amendment to the Certificate of Designation of the Series A Preferred Stock of the Company with the Secretary of State of Nevada. Paragraph 1 of the Certificate of Designation was amended to change the name of the Series A Preferred Stock to Series A Convertible Preferred Stock and to increase the number of authorized Series A Convertible Preferred Stock from 10,000,000 shares to 12,000,000 shares. The Company also added a new Paragraph 5 to include conversion rights of the Series A Convertible Preferred Stock. Each share of Series A Convertible Preferred Stock may convert into fifty (50) shares of common stock of the Company.
Series B Convertible Preferred Stock
On January 24, 2014, pursuant to Article III of our Articles of Incorporation, the Companys Board of Directors voted to designate a class of preferred stock entitled Series B Preferred Stock, consisting of up to seventy million (70,000,000) shares, par value $0.001. Under the Certificate of Designation, holders of Series B Preferred Stock will participate on an equal basis per-share with holders of our common stock and Series A Preferred Stock in any distribution upon winding up, dissolution, or liquidation. Holders of Series B Preferred Stock are entitled to convert each share of Series B Preferred Stock into one (1) share of common stock. Holders of Series B Preferred Stock are also entitled to vote together with the holders of our common stock and Series A Preferred Stock on all matters submitted to shareholders at a rate of one (1) vote for each share held.
The rights of the holders of Series B Preferred Stock are defined in the relevant Certificate of Designation filed with the Nevada Secretary of State on January 24, 2014.
F-22
Series C Convertible Preferred Stock
On January 24, 2014,
pursuant to Article III of our Articles of Incorporation, the Companys Board of Directors voted to designate a class of preferred stock entitled Series C Preferred Stock, consisting of up to ten million (10,000,000) shares, par value $0.001. Under the Certificate of Designation, holders of Series C Preferred Stock will be entitled to receive the Stated Value per share ($1.00) in any distribution upon winding up, dissolution, or liquidation. Holders of Series C Preferred Stock are entitled to convert such number of shares of Common Stock equal to the quotient of the Stated Value per share divided by the closing price of our common stock on the day of conversion. Holders of Series C Preferred Stock are also entitled to vote together with the holders of our common stock, Series A Preferred Stock and Series B Preferred Stock on all matters submitted to shareholders at a rate of one (1) vote for each share held.
The rights of the holders of Series C Preferred Stock are defined in the relevant Certificate of Designation filed with the Nevada Secretary of State on January 24, 2014.
Series D Convertible Preferred Stock
On December 2, 2015,
pursuant to Article III of our Articles of Incorporation, the Companys Board of Directors voted to designate a class of preferred stock entitled Series D Preferred Stock, consisting of up to four million (4,000,000) shares, par value $0.001. Under the Certificate of Designation, holders of Series D Preferred Stock will be entitled to receive the value at which they were issued ($0.003 per share) in any distribution upon winding up, dissolution, or liquidation. Holders of Series D Preferred Stock are entitled to convert such number of shares to Common Stock equal to the number of Series D Preferred Stock held multiplied by ten (10). Holders of Series D Preferred Stock are also entitled to vote together with the holders of our common stock, Series A Preferred Stock and Series B Preferred Stock on all matters submitted to shareholders at a rate of twenty-five thousand (25,000) votes for each share held.
The rights of the holders of Series D Preferred Stock are defined in the relevant Certificate of Designation filed with the Nevada Secretary of State on December 2, 2015.
Series E Convertible Preferred Stock
On May 10, 2016, pursuant to Article III of our Articles of Incorporation, our Board of Directors voted to designate a class of preferred stock entitled Series E Preferred Stock, consisting of up to 1,250,000 shares. The Certificate of Designation for the Series E Preferred Stock contains the following features:
1.
No voting rights;
2.
Dividends on an as converted basis along with the holders of common stock as and when declared by our Board of Directors;
3.
Rank junior to all other issued and outstanding shares of preferred stock in any liquidation;
4.
A liquidation preference over common stock equal to the greater of: $1.00 per share and any unpaid dividends; and the as converted amount;
5.
Convertible into common stock, subject to adjustments, at a conversion price equal to a 50% discount to the VWAP per share for the 5 trading days prior to written notice of conversion;
6.
Redeemable by us at $1.00 per share; and
7.
Protective provisions requiring prior approval to: issue additional shares of preferred stock in an already existing and designated series; liquidate the business; pay dividends; or take any other action under Nevada law that would require prior approval of the holders of Series E Preferred Stock.
The full rights afforded to the holders of Series E Preferred Stock are defined in the relevant Certificate of Designation filed with the Nevada Secretary of State on May 10, 2016, attached to the Current Report on Form 8-K as Exhibit 3.1 filed on May 11, 2016.
F-23
b)
Share Issuances
As of December 31, 2016, and 2015, there were 1,178,551,804 and 198,485,547 shares of common stock issued and outstanding, respectively.
2016:
On February 9, 2016, the Company issued 4,500,000 common shares upon conversion of $7,020 of accounts payable in connection with a settlement under the Section 3(a)10 of the Rules of the SEC. The shares were issued at a price of $0.00156 per share.
On February 12, 2016, the Company issued 5,000,000 common shares upon conversion of $6,750 of convertible debt. The shares were issued at a price of $0.00135 per share.
On February 16, 2016, the Company issued 5,454,545 common shares upon conversion of $7,500 of convertible debt. The shares were issued at a price of $0.00138 per share.
On February 16, 2016, the Company issued 2,027,396 common shares upon conversion of $2,686 of convertible debt and accrued interest. The shares were issued at a price of $0.00132 per share.
On February 17, 2016, the Company issued 10,226,900 common shares upon conversion of $8,949 of convertible debt. The shares were issued at a price of $0.00088 per share.
On February 18, 2016, the Company issued 5,952,381 common shares upon conversion of $5,000 of convertible debt. The shares were issued at a price of $0.00084 per share.
On February 22, 2016, the Company issued 18,552,879 common shares upon conversion of $10,000 of convertible debt. The shares were issued at a price of $0.00054 per share.
On February 22, 2016, the Company issued 11,904,762 common shares upon conversion of $5,000 of convertible debt. The shares were issued at a price of $0.00042 per share.
On February 22, 2016, the Company issued 9,904,429 common shares upon conversion of $4,160 of convertible debt. The shares were issued at a price of $0.00042 per share.
On February 23, 2016, the Company issued 7,500,000 common shares upon conversion of $2,625 of convertible debt. The shares were issued at a price of $0.00035 per share.
On February 24, 2016, the Company issued 21,636,364 common shares upon conversion of $5,950 of convertible debt. The shares were issued at a price of $0.000275 per share.
On February 25, 2016, the Company issued 9,901,698 common shares upon conversion of $2,099 of convertible debt and accrued interest. The shares were issued at a price of $0.00021 per share.
On February 26, 2016, the Company issued 10,226,909 common shares upon conversion of $818 of convertible debt. The shares were issued at a price of $0.00008 per share.
On February 29, 2016, the Company issued 23,787,879 common shares upon conversion of $3,925 of convertible debt. The shares were issued at a price of $0.00016 per share.
On February 29, 2016, the Company issued 7,500,000 common shares upon conversion of $1,125 of convertible debt. The shares were issued at a price of $0.00015 per share.
F-24
On March 1, 2016, the Company issued 9,904,429 common shares upon conversion of $1,189 of convertible debt. The shares were issued at a price of $0.00012 per share.
On March 2, 2016, the Company issued 23,852,814 common shares upon conversion of $2,755 of convertible debt. The shares were issued at a price of $0.00012 per share.
On March 7, 2016, the Company issued 21,715,522 common shares upon conversion of $1,194 of convertible debt. The shares were issued at a price of $0.00005 per share.
On March 7, 2016, the Company issued 2,102,660 common shares upon conversion of $116 of convertible debt. The shares were issued at a price of $0.000055 per share.
On March 7, 2016, the Company issued 23,818,182 common shares upon conversion of $1,310 of convertible debt. The shares were issued at a price of $0.000055 per share.
On March 8, 2016, the Company issued 9,725,791 common shares upon conversion of $195 of convertible debt. The shares were issued at a price of $0.00002 per share.
On March 10, 2016, the Company issued 9,904,429 common shares upon conversion of $594 of convertible debt. The shares were issued at a price of $0.00006 per share.
On March 10, 2016, the Company issued 23,818,182 common shares upon conversion of $1,310 of convertible debt. The shares were issued at a price of $0.000055 per share.
On March 11, 2016, the Company issued 9,725,000 common shares upon conversion of $195 of convertible debt. The shares were issued at a price of $0.00002 per share.
On March 15, 2016, the Company issued 9,904,429 common shares upon conversion of $594 of convertible debt. The shares were issued at a price of $0.00006 per share
On March 16, 2016, the Company issued 23,818,182 common shares upon conversion of $1,310 of convertible debt. The shares were issued at a price of $0.00005 per share.
On March 17, 2016, the Company issued 16,318,490 common shares upon conversion of $865 of convertible debt and accrued interest. The shares were issued at a price of $0.00005 per share.
On March 18, 2016, the Company issued 9,904,429 common shares upon conversion of $594 of convertible debt. The shares were issued at a price of $0.00006 per share
On March 23, 2016, the Company issued 20,500,000 common shares upon conversion of $12,300 of accounts payable in connection with a settlement under the Section 3(a)10 of the Rules of the SEC. The shares were issued at a price of $0.0006 per share.
On March 23, 2016, the Company issued 9,904,429 common shares upon conversion of $594 of convertible debt. The shares were issued at a price of $0.00006 per share.
On May 24, 2016, the Company issued 28,800,000 common shares upon conversion of $6,912 of accounts payable in connection with a settlement under the Section 3(a)10 of the Rules of the SEC. The shares were issued at a price of $0.00024 per share.
On June 16, 2016, the Company issued 30,250,000 common shares upon conversion of $3,630 of accounts payable in connection with a settlement under the Section 3(a)10 of the Rules of the SEC. The shares were issued at a price of $0.00012 per share.
F-25
On July 11, 2016, the Company issued 31,750,000 common shares upon conversion of $3,810 of accounts payable in connection with a settlement under the Section 3(a)10 of the Rules of the SEC. The shares were issued at a price of $0.00012 per share.
On July 25, 2016, the Company issued 33,300,000 common shares upon conversion of $3,996 of accounts payable in connection with a settlement under the Section 3(a)10 of the Rules of the SEC. The shares were issued at a price of $0.00012 per share.
On September 13, 2016, the Company issued 35,000,000 common shares upon conversion of $4,200 of accounts payable in connection with a settlement under the Section 3(a)10 of the Rules of the SEC. The shares were issued at a price of $0.00012 per share.
On October 13, 2016, the Company issued 36,500,000 common shares upon conversion of $4,380 of accounts payable in connection with a settlement under the Section 3(a)10 of the Rules of the SEC. The shares were issued at a price of $0.00012 per share.
On October 16, 2016, the Company issued 36,533,396 common shares upon conversion of $1,936 of convertible debt and accrued interest. The shares were issued at a price of $0.000053 per share.
On October 25, 2016, the Company issued 38,500,000 common shares upon conversion of $4,620 of accounts payable in connection with a settlement under the Section 3(a)10 of the Rules of the SEC. The shares were issued at a price of $0.00012 per share.
On October 27, 2016, the Company issued 36,687,169 common shares upon conversion of $3,889 of convertible debt and accrued interest. The shares were issued at a price of $0.00011 per share.
On October 28, 2016, the Company issued 42,300,000 common shares upon conversion of $7,614 of accounts payable in connection with a settlement under the Section 3(a)10 of the Rules of the SEC. The shares were issued at a price of $0.00018 per share.
On November 1, 2016, the Company issued 46,200,000 common shares upon conversion of $8,316 of accounts payable in connection with a settlement under the Section 3(a)10 of the Rules of the SEC. The shares were issued at a price of $0.00018 per share.
On November 1, 2016, the Company issued 19,827,273 common shares upon conversion of $2,181 of convertible debt. The shares were issued at a price of $0.00011 per share.
On November 7, 2016, the Company issued 32,525,312 common shares upon conversion of $3,903 of convertible debt and accrued interest. The shares were issued at a price of $0.00012 per share.
On November 14, 2016, the Company issued 48,500,000 common shares upon conversion of $29,100 of accounts payable in connection with a settlement under the Section 3(a)10 of the Rules of the SEC. The shares were issued at a price of $0.0006 per share.
On November 18, 2016, the Company issued 50,900,000 common shares upon conversion of $12,216 of accounts payable in connection with a settlement under the Section 3(a)10 of the Rules of the SEC. The shares were issued at a price of $0.00024 per share.
On December 7, 2016, the Company issued 53,500,000 common shares upon conversion of $9,630 of accounts payable in connection with a settlement under the Section 3(a)10 of the Rules of the SEC. The shares were issued at a price of $0.00018 per share.
F-26
2015:
On January 12, 2015, the Company issued 3,600,000 common shares upon conversion of $69,336 of accounts payable in connection with a settlement under the Section 3(a)10 of the Rules of the SEC. The shares were issued at a price of $0.01926 per share.
On February 4, 2015, the Company issued 3,000,000 common shares upon conversion of $54,000 of accounts payable in connection with a settlement under the Section 3(a)10 of the Rules of the SEC. The shares were issued at a price of $0.018 per share.
On February 9, 2015, the Company issued 2,000,000 common shares upon conversion of $36,210 of convertible debt. The shares were issued at a price of $0.01806 per share.
On February 17, 2015, the Company issued 1,428,571 common shares upon conversion of $25,000 of convertible debt. The shares were issued at a price of $0.0175 per share.
On February 20, 2015, the Company issued 3,500,000 common shares upon conversion of $56,910 of accounts payable in connection with a settlement under the Section 3(a)10 of the Rules of the SEC. The shares were issued at a price of $0.01626 per share.
On February 23, 2015, the Company issued 1,481,481 common shares upon conversion of $20,000 of convertible debt. The shares were issued at a price of $0.0135 per share.
On February 24, 2015, the Company issued 1,750,000 common shares upon conversion of $17,850 of convertible debt. The shares were issued at a price of $0.0102 per share.
On February 25, 2015, the Company issued 2,500,000 common shares upon conversion of $32,500 of convertible debt. The shares were issued at a price of $0.013 per share.
On February 25, 2015, the Company issued 2,686,667 common shares upon conversion of $22,837 of convertible debt and accrued interest. The shares were issued at a price of $0.0085 per share.
On February 26, 2015, the Company issued 1,518,333 common shares upon conversion of $18,220 of convertible debt and accrued interest. The shares were issued at a price of $0.012 per share.
On March 5, 2015, the Company issued 1,800,000 common shares upon conversion of $13,500 of convertible debt. The shares were issued at a price of $0.0075 per share.
On March 10, 2015, the Company issued 4,500,000 common shares upon conversion of $31,860 of accounts payable in connection with a settlement under the Section 3(a)10 of the Rules of the SEC. The shares were issued at a price of $0.00708 per share.
On March 12, 2015, the Company issued 3,424,658 common shares upon conversion of $25,000 of convertible debt. The shares were issued at a price of $0.0073 per share.
On March 12, 2015, the Company issued 3,653,013 common shares upon conversion of $25,863 of convertible debt. The shares were issued at a price of $0.00708 per share.
On March 12, 2015, the Company issued 4,955,500 common shares upon conversion of $33,797 of convertible debt and accrued interest. The shares were issued at a price of $0.00682 per share.
On March 12, 2015, the Company issued 1,736,111 common shares upon conversion of $12,500 of convertible debt. The shares were issued at a price of $0.0072 per share.
F-27
On March 16, 2015, the Company issued 1,000,000 common shares upon conversion of $6,700 of convertible debt and accrued interest. The shares were issued at a price of $0.0067 per share.
On March 18, 2015, the Company issued 5,000,000 common shares upon conversion of $21,600 of accounts payable in connection with a settlement under the Section 3(a)10 of the Rules of the SEC. The shares were issued at a price of $0.00432 per share.
On March 26, 2015, the Company issued 5,697,909 common shares upon conversion of $19,886 of convertible debt and accrued interest. The shares were issued at a price of $0.00349 per share.
On March 30, 2015, the Company issued 2,106,545 common shares upon conversion of $4,880 of convertible debt and accrued interest. The shares were issued at a price of $0.00231 per share.
On March 31, 2015, the Company issued 6,600,000 common shares upon conversion of $15,048 of accounts payable in connection with a settlement under the Section 3(a)10 of the Rules of the SEC. The shares were issued at a price of $0.00228 per share.
On April 15, 2015, the Company issued 6,000,000 common shares upon conversion of $14,400 of accounts payable in connection with a settlement under the Section 3(a)10 of the Rules of the SEC. The shares were issued at a price of $0.0024 per share.
On May 4, 2015, the Company issued 7,400,000 common shares upon conversion of $29,748 of accounts payable in connection with a settlement under the Section 3(a)10 of the Rules of the SEC. The shares were issued at a price of $0.00402 per share.
On June 2, 2015, the Company issued 5,118,865 common shares upon conversion of $30,713 of accounts payable in connection with a settlement under the Section 3(a)10 of the Rules of the SEC. The shares were issued at a price of $0.006 per share.
On June 17, 2015, the Company issued 5,000,000 common shares upon conversion of $39,900 of accounts payable in connection with a settlement under the Section 3(a)10 of the Rules of the SEC. The shares were issued at a price of $0.00798 per share.
On August 5, 2015, the Company issued 8,000,000 common shares upon conversion of $26,880 of accounts payable in connection with a settlement under the Section 3(a)10 of the Rules of the SEC. The shares were issued at a price of $0.00336 per share.
On August 25, 2015, the Company issued 7,000,000 common shares upon conversion of $21,000 of accounts payable in connection with a settlement under the Section 3(a)10 of the Rules of the SEC. The shares were issued at a price of $0.003 per share.
On September 28, 2015, the Company issued 5,482,288 common shares upon conversion of $10,855 of accounts payable in connection with a settlement under the Section 3(a)10 of the Rules of the SEC. The shares were issued at a price of $0.00198 per share.
On September 30, 2015 the Company recorded additional $24,718 as value of shares sold in payment of debt in excess of value in connection with the August and September 2015 settlements under the Section 3(a)10 of the Rules of the SEC.
On November 12, 2015, the Company issued 9,000,000 common shares upon conversion of $17,280 of accounts payable in connection with a settlement under the Section 3(a)10 of the Rules of the SEC. The shares were issued at a price of $0.00192 per share.
F-28
On December 9, 2015, the Company issued 2,000,000 Series D Convertible Preferred shares as compensation to its CEO and a consultant. The shares were issued at a price of $0.003 per common share into which they are convertible.
On December 29, 2015, the Company issued 7,500,000 common shares upon conversion of $18,000 of accounts payable in connection with a settlement under the Section 3(a)10 of the Rules of the SEC. The shares were issued at a price of $0.0024 per share.
On December 31, 2015 the Company recorded additional $21,056 as value of shares sold in payment of debt in excess of value in connection with the November and December 2015 settlements under the Section 3(a)10 of the Rules of the SEC.
c) Warrants
The following table summarizes the changes in warrants outstanding and related prices for the shares of the Companys common stock issued to shareholders at December 31, 2016:
Exercise
Price
|
|
Number
Outstanding
|
|
Warrants
Outstanding
Weighted Average
Remaining
Contractual
Life (years)
|
|
Weighted
Average
Exercise price
|
|
Number
Exercisable
|
|
Warrants
Exercisable
Weighted
Average
Exercise Price
|
$
0.24
|
|
1,587,302
|
|
2.87
|
|
$
0.24
|
|
1,587302
|
|
$
0.24
|
Transactions involving the Companys warrant issuance are summarized as follows:
|
Number of
Shares
|
|
Weighted Average
Price Per Share
|
Outstanding at December 31, 2014
|
1,587,302
|
|
$
0.24
|
Issued
|
|
|
|
Exercised
|
|
|
|
Expired
|
|
|
|
Outstanding at December 31, 2015
|
1,587,302
|
|
$
0.24
|
Issued
|
|
|
|
Exercised
|
|
|
|
Expired
|
|
|
|
Outstanding at December 31, 2016
|
1,587,302
|
|
$
0.24
|
Warrants outstanding as of December 31, 2016, as disclosed in the above table, have an intrinsic value of $0.
11.
Income Taxes
Deferred income tax assets as of December 31, 2016 of $3,927,500 resulting from net operating losses and future amortization deductions, have been fully offset by valuation allowances. The valuation allowances have been established equal to the full amounts of the deferred tax assets, as the Company is not assured that it is more likely than not that these benefits will be realized.
F-29
Reconciliation between the statutory United States corporate income tax rate (34% for 2016 and 2015) and the effective income tax rates based on continuing operations is as follows:
Year ended December 31,
|
2016
|
|
2015
|
Expected Federal Income tax benefit
|
$
(653,400)
|
|
$
(1,532,300)
|
Expected State Income Tax benefit, net
|
(126,800)
|
|
(297,500)
|
Impairment of intangible assets
|
-
|
|
783,800
|
Amortization of beneficial conversion feature
|
18,100
|
|
290,000
|
Change in fair value of derivative liability
|
233,200
|
|
(117,700)
|
Other permanent differences
|
6,300
|
|
41,100
|
Change in valuation allowance
|
522,600
|
|
832,600
|
Total
|
$
-
|
|
$
-
|
Components of deferred tax assets were approximately as follows:
As at December 31,
|
2016
|
|
2015
|
Net operating loss carry forward
|
$
3,524,100
|
|
$
3,290,630
|
Accrued liabilities
|
403,400
|
|
114,300
|
Valuation allowance
|
(3,927,500)
|
|
(3,404,900)
|
Total
|
$
-
|
|
$
-
|
At December 31, 2016, the Company has available net operating losses of approximately $8,680,000 which may be carried forward to apply against future taxable income. These losses will expire in 2036. Deferred tax assets related to these losses have not been recorded due to uncertainty regarding their utilization.
The provisions of ASC 740 require companies to recognize in their financial statements the impact of a tax position if that position is more likely than not to be sustained upon audit, based upon the technical merits of the position. ASC 740 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken on a tax return. ASC 740 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods and disclosure.
Management does not believe that the Company has any material uncertain tax positions requiring recognition or measurement in accordance with the provisions of ASC 740. Accordingly, the adoption of these provisions of ASC 740 did not have a material effect on the Companys financial statements. The Companys policy is to record interest and penalties on uncertain tax positions, if any, as income tax expense.
The Company has not filed its applicable Federal and State tax returns for the years ended December 31, 2012, 2013, 2014, 2015, and 2016 and may be subject to penalties for noncompliance. The Company has filed an extension for the 2017 filing and is retaining a tax accountant to complete the necessary filings.
As a result of stock issuances in 2013, 2015, and 2016 the future utilization of the Companys net operating losses is likely limited pursuant to Internal Revenue Code section 382. The deferred tax asset derived from these tax loss carryforwards have been included in consolidated deferred tax assets - net operating loss carryforwards, and a full valuation allowance has been established since it is not more likely than not that such benefits will be recovered.
F-30
12.
Inventory
Inventory
Inventories are stated at cost, with cost being determined on the First in First Out (FIFO) cost method. Inventory costs include material, import control costs, unpacking at the warehouse facility, and freight charges. The Company provides inventory allowances based on excess and obsolete inventories determined primarily by future demand forecasts.
Inventory in Transit
Inventory in transit is stated at actual cost invoiced by the supplier at time of shipment.
Cost of Sales
At the time of sale, the Cost of Sales is computed at actual cost based on first-in, first-out accounting.
Inventory consisted of:
|
December 31, 2016
|
|
December 31, 2015
|
Inventory Raw Materials
|
$
-
|
|
$
30,886
|
Inventory Finished Goods
|
-
|
|
29,018
|
Total
|
$
-
|
|
$
59,904
|
At December 31, 2016, the Company recorded a reserve for impairment of inventory $36,097. At December 31, 2015, the Company wrote off $90,878 of unused inventory of its Xtreme subsidiary.
13.
Commitments and Contingencies
Litigation
a)
In April 2014, we were notified that a note holder disputes the balance of his note as recorded on the books of our company. The discrepancy arises from a question regarding expenses that the holder claims were paid on behalf of our company and subsequent payments that we recorded as payments against the note. We have no record of the expenses claimed to be due, and we are in negotiations to settle this matter. We have accrued $28,000 to cover the potential expenses and adjustments to accrued interest if the claim is substantiated. We believe it has properly accounted for all payments made to the individual and have provided documentation to him substantiating our position.
b)
In May 2014, the Company received notice that a complaint was filed in District Court, Clark County, NV alleging that the Company and various unnamed defendants are liable to a Mr. Renard Wiggins with regard to commissions and equity purportedly owed Mr. Wiggins, for services allegedly rendered in raising capital on behalf of the Company prior to the reverse merger between Alkame Holdings, Inc. (fka Pinacle Enterprises Inc.) and Alkame Water, Inc. in June 2013. After initial review, the Company has filed for a dismissal of the case with the District Court, does not believe there is any validity to the claims of Mr. Wiggins, and intends to vigorously continue defending against these claims. As of December 31, 2015, all but two claims have been dismissed, and the Company is in court mandated settlement talks to determine if the remaining counts can be dismissed or will require further litigation. On November 15, 2016, the Company entered into a stipulated settlement agreement to issue 200,000,000 common shares in full and final settlement of this matter and all legal complaints are withdrawn. In June 2018, the Company issued 92,780,388 shares of the agreed upon settlement.
The Company may, from time to time, 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
F-31
is currently not aware of any such legal proceedings that it believes will have, individually or in the aggregate, a material adverse effect on its business, financial condition or operating results.
Commitments
In July 2015, the Company terminated the employment agreements with Keith Fuqua and Timm Ott. Under the terms of the agreements, the Company will continue to make severance payments and provide health insurance through January 2016.
On January 19, 2016, the Company filed an 8-K announcing the formal termination of its January 22, 2015 MOU with Ready Made, Inc. due to the inability to come to mutually agreeable terms.
Material Agreements
Stock Purchase Definitive Agreement with Xtreme Technologies, Inc.
On April 21, 2014, we entered into a Stock Purchase Definitive Agreement (the Agreement) with Xtreme Technologies, Inc., an Idaho corporation (Xtreme). Pursuant to the terms of the Agreement, we agreed to acquire all of the issued and outstanding capital stock of Xtreme in exchange for certain consideration as set forth in the Agreement.
On January 16, 2015, the parties to the Agreement entered into an amendment (the Amendment) that changed, among other things, the Closing Date of the transaction.
On April 15, 2015, the parties to the Agreement entered into a second amendment (the Second Amendment) that changed, among other things, the 120-day time period to pay monetary consideration under the Agreement to 240 days after the Closing Date of the transaction.
In accordance with the terms of the Agreement, the Amendment and the Second Amendment, we agreed to purchase all of the outstanding shares of Xtreme for the purchase price of $2,000,000, payable as follows:
A cash payment of $50,000 has been previously paid as a non-refundable deposit;
The Closing Date is effective as of January 13, 2015;
An additional cash payment of $525,000 shall be paid within two hundred and forty (240) days of the Closing Date, which, along with the initial $50,000 deposit, shall pay the obligations on Xtremes balance sheet;
The balance of $1,425,000 shall be payable by the issuance of shares of the Companys Series B Preferred Stock to be divided
pro rata
among the Companys shareholders of record as of the Closing Date. The Series B Preferred Stock shall include an option to convert each share of Series B Preferred Stock into one share of the Companys Common Stock. The Series B Preferred Stock shall be held in escrow along with the issued and outstanding shares of Xtremes capital stock pending the full payment of $525,000. As of the date of this report, the balance of $525,000 has been fully paid to Xtreme; and
One of Xtremes previous officers and directors holds outstanding options to purchase up to 1,009,000 shares of Xtremes common stock at the price of $0.10 per share. At the Closing Date, pursuant to Idaho law, Xtreme shall notify this previous officer and director of his 30-day right to exercise any or all of his remaining options. If he elects to exercise any of his options within such 30-day period, the Company agrees to issue additional shares of Series B Preferred Stock in exchange for such Xtreme shares. Xtreme notified the option holder and the 30-day period expired unanswered. The options expired unexercised.
F-32
The Amendment also requires that the Company guarantee the obligations on employment agreements for Xtremes key employees, namely, Keith Fuqua, Timm Ott and Casey Henry. The employment agreements with Messrs. Fuqua, Ott and Henry have the terms set forth in the following table.
Employee
|
Position
|
Term
|
Compensation
|
Commission
|
Benefits
|
Severance
|
Keith Fuqua
|
Operations Director
|
One year
|
$70,000 annually and annual bonus
|
5% on gross sales made to Walmart
|
Benefit plans
|
6 months severance for termination in certain instances; residual commissions for 1 year
|
Timm Ott
|
Sales and Marketing Director and Treasurer
|
One year
|
$2,700 per month salary and annual bonus
|
$1.00 per case of product sold
|
Benefit plans
|
6 months severance for termination in certain instances
|
Casey Henry
|
Manufacturing Director
|
One year
|
$4,350 per month and annual bonus
|
$1.00 per case of product sold
|
Benefit plans
|
6 months severance for termination in certain instances
|
In addition, after the Closing Date, Xtremes current officers and directors, namely, Jeffery J. Crandall, John N. Marcheso and Michael J. Bibin, shall continue to serve in that capacity until the $525,000 is paid in full. Our President and CEO, Robert K. Eakle and two (2) additional representatives of our company shall be appointed as directors of Xtreme and shall serve together with the other directors until the $525,000 is paid in full. In addition, Mr. Eakle shall be named as President and Chief Executive Officer of Xtreme. Until the $525,000 is paid in full, the officers and directors of Xtreme shall not make any material change in the companys business and operations without unanimous consent of the directors. If the $525,000 is not paid in full within two hundred and forty (240) days of the Closing Date, as may be extended, then the appointments of Mr. Eakle and the other two representatives as interim officers and directors shall be terminated. Upon payment of $525,000 in full to Xtreme, all former officers and directors of Xtreme shall resign and full control of Xtreme shall be tendered to us. Provided that certain representations are accurate, Jeffery J. Crandall, John N. Marcheso and Michael J. Bibin shall be released by us and Xtreme from any liability as officers and directors of Xtreme for their fiduciary obligations occurring prior to the Closing Date.
We previously held a three-year limited exclusive distribution agreement with Xtreme for the consumer market. We were permitted to distribute the technologically enhanced bottled water in the consumer market in the United States, Canada and Mexico. As a result of the Agreement, Amendment, and Second Amendment, Xtreme became our wholly owned subsidiary and we acquired the patents on the proprietary process that we believe is the most technologically advanced in water treatment systems for complete hydration. We will now assume the operations of Xtreme and continue its business of distributing technologically enhanced bottled water.
Upon closing of the acquisition, we discovered that Xtreme was operating at a loss for the prior year and that it required a substantial cash infusion. We have begun a program of upgrading the production line, reorganized personnel, and began an effort to increase sales of the division so that it returns to profitability as quickly as possible.
Our primary objective now is to introduce, promote, aggressively market and establish channels of distribution to sell our product to a wide range of consumers, first in the United States, Canada and Mexico, and then globally.
As of the date of this filing, the Company has closed down this division, and written the asset values off in their entirety.
F-33
Series C Convertible Preferred Stock to be issued:
During the year ended December 31, 2015, the Company committed to issue 1,425,000 shares of Series C Preferred stock valued at $1.00 per share as part of the Stock Purchase Agreement entered into with Xtreme Technologies, Inc
Employment Agreements
On November 25, 2015, we entered into an employment agreement with our executive officer and director, Robert Eakle, (the 2015 Employment Agreement).
Pursuant to the terms and conditions of the 2015 Employment Agreement with Mr. Eakle:
For the fiscal year ended December 31, 2015, we agreed to retain Mr. Eakle as Chief Executive Officer of our company and Mr. Eakle agreed to accept this senior officer position.
The initial term of the Agreement is for a period of three years commencing January 1, 2015.
Mr. Eakle shall receive an annual compensation of $120,000.
Mr. Eakle received a one-time 1,000,000 shares of our newly created Series D Preferred Stock.
In the event of insufficient liquidity, Mr. Eakle will be allowed to receive any unpaid and accrued portion of his cash compensation in the form of common stock or Series D Preferred Stock, as he may choose.
On December 31, 2015, we entered into a consulting agreement with Kaufman & Associates Inc. (Kaufman) retroactive for the year ended 2015 (the 2015 Consulting Agreement).
Pursuant to the terms and conditions of the 2015 Consulting Agreement with Kaufman:
For the fiscal year ended December 31, 2015, we agreed to retain Kaufman as a consultant and Kaufman agreed to act as a consultant.
The initial term of the Agreement is for a period of three years commencing January 1, 2015.
Kaufman shall receive an annual compensation of $120,000.
Kaufman received a one-time 1,000,000 shares of our newly created Series D Preferred Stock.
In the event of insufficient liquidity, Kaufman will be allowed to receive any unpaid and accrued portion of his cash compensation in the form of common stock or Series D Preferred Stock, as it may choose.
The foregoing description of the 2015 Employment Agreement and 2015 Consulting Agreement does not purport to be complete and is qualified in its entirety by reference to the complete text of the agreements filed as Exhibits 10.1 and 10.2 to an 8K filed November 30, 2015 and incorporated herein by reference
High County Shrimp
On October 26, 2014, we acquired all 100% of the outstanding shares of High Country Shrimp Company (HCS), a Colorado LLC in exchange for one hundred thousand (100,000) shares of our common stock. The shares are recorded as to be issued and priced at the closing price of the stock on October 27, 2014.
It is expected that HCS will incorporate their patented technology for producing and selling high quality shrimp with our unique water treatment systems to create an intensive indoor aquaculture farming process.
The transaction is structured as a triangular merger with HCS becoming a wholly owned subsidiary of Alkame Holdings, Inc., however, after the year end, the principal of High Country Shrimp decided to abandon the current effort and asked if Alkame would enter a joint venture to support development of the technology through licensing of the water treatment system. The Company will provide a limited license for development of the technology.
As of the date of this report, the Company has abandoned this transaction and recorded an impairment of $13,500.
F-34
14.
Concentration of credit risk
Concentration of credit risk with respect to trade receivables is inherent as the Company begins the ramp up of its sales. Long term, the Company does not foresee a concentrated credit risk associated with its trade receivables. While repayment is dependent upon the financial stability of the various customers to which shipment takes place, major customers in the water industry are typically distributors or chain stores each with large, per shipment sales, but also with significant history and excellent credit. In the year ended December 31, 2016, approximately 67% of sales came from seven customers. The Company expects these percentages to drop significantly as it expands the number and territories covered by distributors and retailers.
15.
Subsequent Events
We have evaluated subsequent events through the date the consolidated financial statements were available to be issued, and did not have any material recognizable subsequent events, other than the following:
Stock Issuances
On January 4, 2017, the Company issued 56,100,000 common shares upon conversion of $28,050 of accounts payable in connection with a settlement under the Section 3(a)10 of the Rules of the SEC. The shares were issued at a price of $0.0005 per share.
On January 19, 2017, the Company issued 58,900,000 common shares upon conversion of $70,680 of accounts payable in connection with a settlement under the Section 3(a)10 of the Rules of the SEC. The shares were issued at a price of $0.0012 per share.
On January 25, 2017, the Company issued 121,212,121 common shares upon conversion of $20,000 of convertible debt. The shares were issued at a price of $0.000165 per share.
On January 26, 2017, the Company issued 61,900,000 common shares upon conversion of $105,230 of accounts payable in connection with a settlement under the Section 3(a)10 of the Rules of the SEC. The shares were issued at a price of $0.0017 per share.
On January 31, 2017, the Company issued 106,791,056 common shares upon conversion of $19,222 of convertible debt and accrued interest. The shares were issued at a price of $0.00018 per share.
On February 1, 2017, the Company issued 60,000,000 common shares upon conversion of $10,800 of convertible debt. The shares were issued at a price of $0.000185 per share.
On February 3, 2017, the Company issued 13,949,500 common shares upon conversion of $50,218 of accounts payable in connection with a settlement under the Section 3(a)10 of the Rules of the SEC. The shares were issued at a price of $0.0036 per share.
On February 7, 2017, the Company issued 135,000,000 common shares upon conversion of $20,308 of convertible debt. The shares were issued at a price of $0.00015 per share.
On February 7, 2017, the Company issued 124,642,333 common shares upon conversion of $22,436 of convertible debt and accrued interest. The shares were issued at a price of $0.00018 per share.
On February 9, 2017, the Company issued 135,459,267 common shares upon conversion of $20,319 of convertible debt and accrued interest. The shares were issued at a price of $0.00015 per share.
On February 10, 2017, the Company issued 45,279,174 common shares upon conversion of $2,717 of convertible debt. The shares were issued at a price of $0.00006 per share.
F-35
On February 16, 2017, the Company issued 176,545,455 common shares upon conversion of $29,130 of convertible debt and accrued interest. The shares were issued at a price of $0.000165 per share.
On February 16, 2017, the Company issued 70,000,000 common shares upon conversion of $7,000 of convertible debt and accrued interest. The shares were issued at a price of $0.0001 per share.
On February 17, 2017, the Company issued 78,306,444 common shares upon conversion of $14,095 of convertible debt and accrued interest. The shares were issued at a price of $0.00018 per share.
On February 17, 2017, the Company issued 164,931,500 common shares upon conversion of $29,688 of convertible debt and accrued interest. The shares were issued at a price of $0.00018 per share.
On February 17, 2017, the Company issued 39,206,833 common shares upon conversion of $11,762 of convertible debt. The shares were issued at a price of $0.0003 per share.
On February 17, 2017, the Company issued 86,936,364 common shares upon conversion of $28,689 of convertible debt and accrued interest. The shares were issued at a price of $0.00033 per share.
On February 24, 2017, the Company issued 240,000,000 common shares upon conversion of $43,200 of convertible debt. The shares were issued at a price of $0.00018 per share.
On February 24, 2017, the Company issued 125,000,000 common shares upon conversion of $22,500 of convertible debt. The shares were issued at a price of $0.00018 per share.
On February 28, 2017, the Company issued 74,586,446 common shares upon conversion of $23,718 of convertible debt. The shares were issued at a price of $0.000318 per share.
On March 1, 2017, the Company issued 108,085,525 common shares upon conversion of $40,100 of convertible debt and accrued interest. The shares were issued at a price of $0.000371 per share.
On March 10, 2017, the Company issued 120,000,000 common shares upon conversion of $28,800 of convertible debt and accrued interest. The shares were issued at a price of $0.00024 per share.
On March 13, 2017, the Company issued 159,978,301 common shares upon conversion of $33,915 of convertible debt and accrued interest. The shares were issued at a price of $0.000212 per share.
On March 16, 2017, the Company issued 100,000,000 common shares upon conversion of $24,000 of accrued interest. The shares were issued at a price of $0.00024 per share.
On March 22, 2017, the Company issued 131,344,669 common shares upon conversion of $27,845 of convertible debt and accrued interest. The shares were issued at a price of $0.000212 per share.
On March 23, 2017, the Company issued 166,666,667 common shares upon conversion of $44,700 of accrued interest. The shares were issued at a price of $0.000268 per share.
On May 19, 2017, the Company issued 171,500,000 common shares upon conversion of $44,590 of convertible debt and accrued interest. The shares were issued at a price of $0.00026 per share.
On June 2, 2017, the Company issued 57,692,307 common shares upon conversion of $15,000 of convertible debt and accrued interest. The shares were issued at a price of $0.00026 per share.
On June 5, 2017, the Company issued 171,153,846 common shares upon conversion of $44,500 of convertible debt and accrued interest. The shares were issued at a price of $0.00026 per share.
F-36
On August 16, 2017, the Company issued 122,500,000 common shares upon conversion of $14,700 of convertible debt and accrued interest. The shares were issued at a price of $0.00012 per share.
On February 22, 2018, the Company issued 215,000,000 common shares upon conversion of $21,500 of convertible debt and accrued interest. The shares were issued at a price of $0.0001 per share.
On March 8, 2018, the Company issued 220,000,000 common shares upon conversion of $22,000 of convertible debt and accrued interest. The shares were issued at a price of $0.0001 per share.
On March 23, 2018, the Company issued 135,000,000 common shares upon conversion of $13,500 of convertible debt and accrued interest. The shares were issued at a price of $0.0001 per share.
On April 11, 2018, the Company issued 320,000,000 common shares upon conversion of $32,000 of convertible debt and accrued interest. The shares were issued at a price of $0.0001 per share.
On May 8, 2018, the Company issued 55,000,000 common shares upon conversion of $5,500 of convertible debt and accrued interest. The shares were issued at a price of $0.0001 per share.
On June 8, 2018, the Company issued 92,780,388 common shares in connection with a stipulated settlement agreement entered into by the Company in early 2017. The shares were issued at a price of $0.0019 per share.
Convertible Debts:
On April 17, 2017, the Company entered into a Stock Purchase Agreement (the SPA) with an accredited investor group (the Investor or Buyer). Under the terms of the SPA, the Investor will purchase up to $550,000 of convertible debentures in a series of four tranches. The first tranche will be in the amount of $220,000, with each of the three successive tranches in the amount of $110,000.
Each note will be issued with a 10% Original Issue Discount (OID) such that the net amount received by the Company will be either $200,000 or $100,000 per debenture. The convertible debentures are due and payable one year from date of issuance and will carry interest at a rate of 8% per annum from the date of issuance. Each debenture will be convertible into common stock of the Company at the lower of (i) 70% of the lowest trading price of the Common Stock as reported on the OTCPK marketplace which the Company's shares are traded or any market upon which the Common Stock may be traded in the future ("Exchange"), during the twenty (20) trading days immediately preceding the closing date or (ii) 70% of the lowest trading price of the Common Stock as reported on the OTCPK marketplace which the Company's shares are traded or any market upon which the Common Stock may be traded in the future ("Exchange"), during the twenty 20 trading days immediately preceding the receipt of a notice of conversion.
Subsequent fundings after the second tranche are conditioned on the Company completing the filing of its audits within 59 days of the date of the first funding, and subsequent tranches will require completion of the remaining filings necessary to bring the Company current in its reporting obligations.
Additionally, while the Notes are outstanding, the Company is prohibited from entering into any convertible debentures or 3(A)(10) financings with another party without prior written consent of the Buyer.
The Buyer has, for a period of 6 months from the sale of the first note purchased, to invest up to an additional $500,000, in one or more tranches, on the same terms as those in the first four notes being purchased.
On October 17, 2017, the Company entered into a nine-month convertible debenture for $16,500 with an accredited institutional investor. The debenture carries a 10% original issue discount, and interest at a rate of 8% per annum. The debenture is convertible at 70% of the lowest trading price in the 20 trading days prior to conversion.
F-37
On October 25, 2017, the Company entered into a nine-month convertible debenture for $27,500 with an accredited institutional investor. The debenture carries a 10% original issue discount, and interest at a rate of 8% per annum. The debenture is convertible at 70% of the lowest trading price in the 20 trading days prior to conversion.
On October 30, 2017, the Company entered into a nine-month convertible debenture for $22,000 with an accredited institutional investor. The debenture carries a 10% original issue discount, and interest at a rate of 8% per annum. The debenture is convertible at 70% of the lowest trading price in the 20 trading days prior to conversion.
On November 5, 2017, the Company entered into a nine-month convertible debenture for $22,000 with an accredited institutional investor. The debenture carries a 10% original issue discount, and interest at a rate of 8% per annum. The debenture is convertible at 70% of the lowest trading price in the 20 trading days prior to conversion.
On November 9, 2017, the Company entered into a nine-month convertible debenture for $90,000 with an accredited institutional investor. The debenture carries a 10% original issue discount, and interest at a rate of 8% per annum. The debenture is convertible at 70% of the lowest trading price in the 20 trading days prior to conversion.
On December 31, 2017, the Company entered into a nine-month convertible debenture for $22,000 with an accredited institutional investor. The debenture carries a 10% original issue discount, and interest at a rate of 8% per annum. The debenture is convertible at the lower of (a) $0.0001; or (b) 70% of the lowest trading price in the 20 trading days prior to conversion.
On January 3, 2018, the Company entered into a nine-month convertible debenture for $30,000 with an accredited institutional investor. The debenture carries a 10% original issue discount, and interest at a rate of 8% per annum. The debenture is convertible at 70% of the lowest trading price in the 20 trading days prior to conversion.
On January 13, 2018, the Company entered into a nine-month convertible debenture for $22,000 with an accredited institutional investor. The debenture carries a 10% original issue discount, and interest at a rate of 8% per annum. The debenture is convertible at 70% of the lowest trading price in the 20 trading days prior to conversion.
On January 17, 2018, the Company entered into a nine-month convertible debenture for $16,500 with an accredited institutional investor. The debenture carries a 10% original issue discount, and interest at a rate of 8% per annum. The debenture is convertible at the lower of (a) $0.0002; or (b) 70% of the lowest trading price in the 20 trading days prior to conversion.
On January 25, 2018, the Company entered into a nine-month convertible debenture for $27,500 with an accredited institutional investor. The debenture carries a 10% original issue discount, and interest at a rate of 8% per annum. The debenture is convertible at the lower of (a) $0.0003; or (b) 70% of the lowest trading price in the 20 trading days prior to conversion.
On January 30, 2018, the Company entered into a nine-month convertible debenture for $22,000 with an accredited institutional investor. The debenture carries a 10% original issue discount, and interest at a rate of 8% per annum. The debenture is convertible at 70% of the lowest trading price in the 20 trading days prior to conversion.
On February 5, 2018, the Company entered into a nine-month convertible debenture for $22,000 with an accredited institutional investor. The debenture carries a 10% original issue discount, and interest at a rate of 8% per annum. The debenture is convertible at the lower of (a) $0.0003; or (b) 70% of the lowest trading price in the 20 trading days prior to conversion.
On February 9, 2018, the Company entered into a nine-month convertible debenture for $90,200 with an accredited institutional investor. The debenture carries a 10% original issue discount, and interest at a rate of 8% per annum. The debenture is convertible at the lower of (a) $0.0003; or (b) 70% of the lowest trading price in the 20 trading days prior to conversion.
F-38
On February 16, 2018, the Company entered into a nine-month convertible debenture for $55,000 with an accredited institutional investor. The debenture carries a 10% original issue discount, and interest at a rate of 8% per annum. The debenture is convertible at 70% of the lowest trading price in the 20 trading days prior to conversion.
On February 23, 2018, the Company entered into a nine-month convertible debenture for $55,000 with an accredited institutional investor. The debenture carries a 10% original issue discount, and interest at a rate of 8% per annum. The debenture is convertible at 70% of the lowest trading price in the 20 trading days prior to conversion.
On February 26, 2018, the Company entered into a nine-month convertible debenture for $55,000 with an accredited institutional investor. The debenture carries a 10% original issue discount, and interest at a rate of 8% per annum. The debenture is convertible at 70% of the lowest trading price in the 20 trading days prior to conversion.
On March 8, 2018, the Company entered into a nine-month convertible debenture for $55,000 with an accredited institutional investor. The debenture carries a 10% original issue discount, and interest at a rate of 8% per annum. The debenture is convertible at 70% of the lowest trading price in the 20 trading days prior to conversion.
On March 15, 2018, the Company entered into a nine-month convertible debenture for $22,000 with an accredited institutional investor. The debenture carries a 10% original issue discount, and interest at a rate of 8% per annum. The debenture is convertible at 70% of the lowest trading price in the 20 trading days prior to conversion.
On March 30, 2018, the Company entered into a 30-Day convertible debenture for $33,000 with an accredited institutional investor. The debenture carries a 10% original issue discount, and interest at a rate of 8% per annum. The debenture was repaid prior to 30-day periods expiration.
On May 16, 2018, the Company entered into a one-month, secured note for $50,000 with an accredited investor. The note carries 13.5% interest and was repaid prior to its due date.
On June 6, 2018, the Company entered into a one-month, secured note for $50,000 with an accredited investor. The note carries 12.5% interest and is due July 6, 2018.
On June 8, 2018, the Company entered into a nine-month convertible debenture for $55,000 with an accredited institutional investor. The debenture carries a 10% original issue discount, and interest at a rate of 8% per annum. The debenture is convertible at 70% of the lowest trading price in the 20 trading days prior to conversion.
Others:
On May
1, 2017, the Company entered into a five-year Commercial Sublease (the Sublease) with Bell Foods and Bell Northside, LLC. Pursuant to the Sublease, the Property is approximately seventeen (17) acres and includes approximately twelve (12) acres of farm ground. On the remaining five (5) acres is where the production facility is located, and the company subleased a majority portion of that processing facility. A portion of the property has a food processing facility. The Company is required to pay $7,000 per month under the Sublease, which increases to $10,000 per month after three months.
On the same date, the Company entered into an Equipment Lease Agreement (the Equipment Lease) with Bell Foods to use certain equipment located on the property located in the food processing facility for a nominal fee. A Letter Agreement that predated the Equipment Lease, but effective as of May 1, 2017, was designed to supplement the Equipment Lease with an assignment by Bell Foods of its accounts receivables, with the assumption by the Company of accounts payable, including a loan payable to Craig Bell in the sum of $150,000.
Further under the Letter Agreement, Bell Foods was required to use the accounts receivable, prior to the effective date, to pay portions of the accounts payable. In the event there were insufficient funds to pay off the accounts payable, Craig Bell agreed to loan additional funds to Bell Foods, which would become part of the unpaid balance of the outstanding note.
F-39
Prior to the effective date, Bell Foods used approximately $60,438.76 in accounts receivables to retire $60,438.76 in accounts payables, namely $49,000.00 paid to the Craig Bell note. On the effective date, May 1, the remaining accounts receivable, valued at approximately $117,248.70, and remaining accounts payable, valued at approximately $48,797.46, were transferred to the Company and the Company released Bell Foods from all liability associated with the accounts payable. The company retired the remaining balance of the Craig Bell note on May 22nd. As of July 31, 2017, the accounts payable was $169,722.96, with the accounts receivable at $178,158.10.
The Company also entered into a Wastewater Disposal Agreement, effective as of May 1, 2017, with Bell Foods, Jones Place, LLC (Jones Place) and Bell Farms, Inc. This agreement concerns the right to use brine wastewater ponds that reside at the property. The Company executed this agreement to deliver wastewater to the ponds located on the property under the specifications mandated by the Oregon Department of Environmental Quality.
Prior to entering into these agreements, the Company had been searching for a larger facility for increased warehousing and productions space for its water products. The Company was also interested in the property to diversify its water product line and possibly enter into the flavored beverages segment of the market for unique teas and health beverages. The Company believes that the foregoing agreements will afford the Company a unique opportunity to lease not only warehousing space, but also use the existing equipment and infrastructure to manufacture on a hot fill and healthy beverage production line, as well as install the Companys bottling line, which due to added automation and redesigned layout, is expected to provide for more cost-efficient production.
As mentioned above, the Company received a discount on the first three months lease cost. This was provided as an offset for removing or disposing of various manufacturing supplies left behind from Bell Foods production operations.
In the Companys original Current Report on Form 8-K (May 8, 2017), the Company had indicated that the deal was structured as an assumption of the operations of Bell Foods, and with it significant revenue opportunities. In fact, as stated in the Letter Agreement, the Company is simply assisting Bell Foods close out its outstanding payables. The Company has chosen to employ several members of the previous staff that previously worked for Bell Foods in connection with the Companys water business.
The Companys main focus has always been in utilizing the patented water treatment technology for as many applications and market segments as possible, creating more revenue streams. Growing its co-packing and private label business opportunities, and utilizing its water technology whenever possible, should begin to grow substantially due to the new location and added capabilities the facility has. The Company may choose, in the future, to expand its water business with hot drinks and health beverages, which the new facility is capable of providing with added resources.
This assumption of operations may add approximately $1.5 million in annual revenue to Alkame. In addition to the added revenue, all customers accounts, accounts payable and receivables, inventory, internet properties, and an extensive library of product formulations, along with the continuation to offer private label programs and customized co-packing solutions for a selected variety of specialty gourmet items. Along with the acquisition brings the ownership and title to the product expansion product offerings of the brands: Everyday Gourmet Fine Foods, Everyday Organic Fine Foods, Mr. Jalapeno, and NutraBell Gourmet Fine Foods.
On May 1, 2017, the Company entered into a purchase agreement to acquire the OmegaHemp brand and associated intellectual property consisting of, but not limited to, the application for the registration of the trademark name, logos, labels, artwork, web URL and associated domains, packaging configurations and promotional materials and formulations. The purchase price of $25,000 is payable over a period of twelve months from date of closing.
In April 2019, the Company entered into a settlement agreement with a vendor under which the Company has agreed to a payment schedule over a four-month period to liquidate the agree to balance of $45,000. The Company has made the first payment, and so long as the remaining three payments are made in a timely manner, no further collection activity will occur.
In May 2019, the Company was made aware of a judgement totaling approximately $36,679 for past due invoices from a vendor. The Company is contacting the attorney to make arrangements for the payment of the amounts due.
F-40
Item 9. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure
None
Item 9A. Controls and Procedures
Disclosure Controls and Procedures
As required by Rule 13a-15 under the Securities Exchange Act of 1934, we have carried out an evaluation of the effectiveness of our disclosure controls and procedures as of the end of the period covered by this annual report, being December 31, 2016. This evaluation was carried out under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer.
Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commissions rules and forms. Disclosure controls and procedures include controls and procedures designed to ensure that information required to be disclosed in our companys reports filed under the Securities Exchange Act of 1934 is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.
Based upon that evaluation, including our Chief Executive Officer and Chief Financial Officer, we have concluded that our disclosure controls and procedures were not effective as of the end of the period covered by this annual report.
Managements Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934). Management has assessed the effectiveness of our internal control over financial reporting as of December 31, 2016 based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. As a result of this assessment, management concluded that, as of December 31, 2016, our internal control over financial reporting was not effective. Our management identified the following material weaknesses in our internal control over financial reporting, which are indicative of many small companies with small staff: (i) inadequate segregation of duties and effective risk assessment; and (ii) insufficient written policies and procedures for accounting and financial reporting with respect to the requirements and application of both US GAAP and SEC guidelines.
We have begun to take steps to enhance and improve the design of our internal control over financial reporting. During the period covered by this annual report on Form 10-K, we have not been able to remediate the material weaknesses identified above. To remediate such weaknesses, we have begun the implementation of the following changes during our fiscal year ending December 31, 2016: (i) appointed additional qualified personnel to address inadequate segregation of duties and ineffective risk management; and (ii) adopt sufficient written policies and procedures for accounting and financial reporting. The remediation efforts set out in (i) and (ii) are largely dependent upon our securing additional financing to cover the costs of implementing the changes required. If we are unsuccessful in securing such funds, remediation efforts may be adversely affected in a material manner.
Our internal control over financial reporting was not subject to attestation by our independent registered public accounting firm pursuant to the rules of the SEC that permit us, as an emerging growth company, to provide only managements report in this annual report.
71
Remediation of Material Weakness
With our subsequent acquisition of the Bell Foods and Beverages operations and facility, we have added a full-time bookkeeper to handle the majority of the day-to-day posting and administrative work in the office. In early 2019, we added a second experiences bookkeeper to assist with catching up our delinquent workload and to work with our outsourced financial advisor to complete or delinquent reporting obligations. While this may take several months to accomplish, we are well on our way to becoming current with all our reporting obligations.
Limitations on the Effectiveness of Internal Controls
Our management, including our Chief Executive Officer and our Chief Financial Officer, does not expect that our disclosure controls and procedures or our internal control over financial reporting are or will be capable of preventing or detecting all errors or all fraud. Any control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control systems objectives will be met. The design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Further, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements, due to error or fraud will not occur or that all control issues and instances of fraud, if any, within the company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns may occur because of simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of controls. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Projections of any evaluation of controls effectiveness to future periods are subject to risk.
Changes in Internal Control
There has been no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) that occurred during our year ended December 31, 2016 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Item 9B. Other Information
None
PART III
Item 10. Directors, Executive Officers and Corporate Governance
The following table contains information with respect to our current executive officers and directors:
Name
|
Age
|
Principal Positions With Us
|
Robert Eakle
|
45
|
President, Chief Executive Officer and Director
|
Robert Eakle
is our President, Chief Executive Officer, and Director. Robert has dedicated the last six years pursuing his passion for alkaline waters. Mr. Eakle formed Alkame Water, Inc. on March 1, 2012. From that point on, he had been the President, CEO and director of Alkame. Prior to that, in 2008, Mr. Eakle formed US Beverages Service, LLC, and was the owner/manager of that company.
72
Term of Office
Our directors are appointed for a one-year term to hold office until the next annual general meeting of our shareholders or until removed from office in accordance with our bylaws. Our officers are appointed by our board of directors and hold office until removed by the board.
Family Relationships
There are no family relationships between or among the directors, executive officers or persons nominated or chosen by us to become directors or executive officers.
Involvement in Certain Legal Proceedings
During the past ten years, none of the following occurred with respect to a present or former director, executive officer, or employee: (1) any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time; (2) any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offenses); (3) being subject to any order, judgment or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his or her involvement in any type of business, securities or banking activities; and (4) being found by a court of competent jurisdiction (in a civil action), the SEC or the Commodities Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended or vacated.
Committees of the Board
Our company currently does not have nominating, compensation or audit committees or committees performing similar functions nor does our company have a written nominating, compensation or audit committee charter. Our directors believe that it is not necessary to have such committees, at this time, because the functions of such committees can be adequately performed by the board of directors.
Our company does not have any defined policy or procedural requirements for shareholders to submit recommendations or nominations for directors. The board of directors believes that, given the stage of our development, a specific nominating policy would be premature and of little assistance until our business operations develop to a more advanced level. Our company does not currently have any specific or minimum criteria for the election of nominees to the board of directors and we do not have any specific process or procedure for evaluating such nominees. The board of directors will assess all candidates, whether submitted by management or shareholders, and make recommendations for election or appointment.
A shareholder who wishes to communicate with our board of directors may do so by directing a written request addressed to our CEO and director, Robert Eakle, at the address appearing on the first page of this annual report.
Code of Ethics
We have not adopted a Code of Ethics that applies our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions.
73
Item 11. Executive Compensation
The table below summarizes all compensation awarded to, earned by, or paid to our officers for all services rendered in all capacities to us for our fiscal years ended December 31, 2016 and 2015.
SUMMARY COMPENSATION TABLE
|
Name and principal position
|
Year
|
Salary ($)
|
Bonus
($)
|
Stock
Awards
($)
|
Option
Awards
($)
|
Non-Equity
Incentive Plan
Compensation
($)
|
Nonqualified
Deferred
Compensation
Earnings ($)
|
All Other
Compensation
($)
|
Total
($)
|
Robert Eakle
President, Chief Executive Officer, Chief Financial Officer, and Director
|
2016
2015
|
120,000
120,000
|
0
0
|
0
30,000
|
0
0
|
0
0
|
0
0
|
0
0
|
120,000
150,000
|
Narrative Disclosure to Summary Compensation Table
On November 25, 2015, we entered into an employment agreement with our executive officer and director, Robert Eakle, retroactive for the year ended 2015 (the 2015 Employment Agreement).
Pursuant to the terms and conditions of the 2015 Employment Agreement with Mr. Eakle:
For the fiscal year ended December 31, 2015, we agreed to retain Mr. Eakle as Chief Executive Officer of our company and Mr. Eakle agreed to accept this senior officer position.
The initial term of the Agreement is for a period of three years commencing January 1, 2015.
Mr. Eakle shall receive an annual compensation of $120,000.
Mr. Eakle received a one-time 1,000,000 shares of our newly created Series D Preferred Stock.
In the event of insufficient liquidity, Mr. Eakle will be allowed to receive any unpaid and accrued portion of his cash compensation in the form of common stock or Series D Preferred Stock, as he may choose.
The foregoing description of the 2015 Employment Agreement does not purport to be complete and is qualified in its entirety by reference to the complete text of the agreements filed as Exhibit 10.1 to an 8K filed November 30, 2015 and incorporated herein by reference
On December 9, 2015, we issued 1,000,000 Series D Preferred shares to our CEO. The shares were issued at the market price of the common shares on the date of issuance multiplied by the number of common shares into which the Series D Preferred could convert or $0.03 per preferred share.
Outstanding Equity Awards at Fiscal Year-End
There were no unexercised options, stock that has not vested, and equity incentive plan awards for any officer or employee as of December 31, 2016 and 2015, respectively.
74
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The following table sets forth, as of May 10, 2019, certain information as to shares of our common stock, Series A Convertible Preferred Stock and Series B Convertible Preferred Stock owned by (i) each person known by us to beneficially own more than 5% of our outstanding common stock, (ii) each of our directors, and (iii) all of our executive officers and directors as a group.
Except as otherwise indicated, all shares are owned directly, and the shareholders listed possesses sole voting and investment power with respect to the shares shown. Unless otherwise indicated below, each entity or person listed below maintains an address of 3651 Lindell Road, Suite D # 356, Las Vegas, Nevada 89103.
|
Common Stock
|
|
Series
A
Preferred Stock
|
|
Series
B
Preferred Stock
|
|
Series D
Preferred Stock
|
Name and Address of Beneficial Owner
|
Number of Shares Owned (1)
|
|
Percent of Class (2)
|
|
Number of Shares Owned (1)
|
|
Percent of Class (2)
|
|
Number of Shares Owned
(1)
|
|
Percent of Class
(2)
|
|
Number of Shares Owned
(1)
|
|
Percent of Class
(2)
|
Robert Eakle (3)
|
450,000
|
|
0.0008%
|
|
10,000,000
|
|
83.33%
|
|
46,412,964
|
|
70.97%
|
|
1,000,000
|
|
50.0%
|
All Directors and Executive Officers as a Group (1 person)
|
450,000
|
|
0.0008%
|
|
10,000,000
|
|
83.33%
|
|
46,412,964
|
|
70.97%
|
|
1,000,000
|
|
50.0%
|
5% Holders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kaufman & Associates Inc. (4)
|
500,000
|
|
0.0009%
|
|
2,000,000
|
|
16.67%
|
|
7,277,500
|
|
11.12%
|
|
1,000,000
|
|
50.0%
|
(1) Except as otherwise indicated, the persons named in this table have sole voting and investment power with respect to all shares of
common stock shown as beneficially owned by them, subject to community property laws where applicable and to the information contained in the footnotes to this table.
(2) Pursuant to Rules 13d-3 and 13d-5 of the Exchange Act, beneficial ownership includes any shares as to which a shareholder has sole or shared voting power or investment power, and also any shares which the shareholder has the right to acquire within 60 days, including upon exercise of
common shares purchase options or warrants. There are 5,500,000,000 shares of common stock, 12,000,000 shares of Series A Convertible Preferred Stock, 65,398,334 shares of Series B Preferred stock and 2,000,000 shares of Series A Convertible Preferred Stock issued and outstanding as of May 10, 2019 including securities exercisable or convertible into shares of Common Stock within sixty (60) days hereof for each stockholder.
(3) Includes 450,000 shares of common stock, 10,000,000 shares of Series A Convertible Stock that may be converted into 500,000,000 shares of common stock, 46,412,964 shares of Series B Preferred Stock that may be converted into 46,412,964 shares of common stock, and 1,000,000 shares of Series D Preferred Stock that may be converted into 10,000,000 shares of common stock.
(4) Includes 500,000 shares of common stock, 2,000,000 shares of Series A Convertible Stock that may be converted into 100,000,000 shares of common stock, 7,277,500 shares of Series B Preferred Stock that may be converted into 7,277,500 shares of common stock, and 1,000,000 shares of Series D Preferred Stock that may be converted into 10,000,000 shares of common stock.
75
Item 13. Certain Relationships and Related Transactions, and Director Independence
Other than the transactions described below and under the heading Executive Compensation (or with respect to which such information is omitted in accordance with SEC regulations), for the past two fiscal years there have not been, and there is not currently proposed, any transaction or series of similar transactions to which we were or will be a participant in which the amount involved exceeded or will exceed $120,000, and in which any director, executive officer, holder of 5% or more of any class of our capital stock or any member of the immediate family of any of the foregoing persons had or will have a direct or indirect material interest.
During the year ended December 31, 2016 and 2015, the Company received $0 and $22,967 respectively, in cash loans from its President, and made cash payments on these amounts owing totaling $10,324 and $0, respectively during the same periods.
As of December 31, 2016, and 2015, the Company owes $16,132 and $26,456 respectively to its President. The amounts owing are unsecured, non-interest bearing and due on demand.
As of December 31, 2016, and 2015, the Company owes its president $360,000 and $240,000, respectively, of accrued compensation.
On December 31, 2015, we entered into a consulting agreement with Kaufman & Associates Inc. (Kaufman) retroactive for the year ended 2015 (the 2015 Consulting Agreement).
Pursuant to the terms and conditions of the 2015 Consulting Agreement with Kaufman:
For the fiscal year ended December 31, 2015, we agreed to retain Kaufman as a consultant and Kaufman agreed to act as a consultant.
The initial term of the Agreement is for a period of three years commencing January 1, 2015.
Kaufman shall receive an annual compensation of $120,000.
Kaufman received a one-time 1,000,000 shares of our newly created Series D Preferred Stock.
In the event of insufficient liquidity, Kaufman will be allowed to receive any unpaid and accrued portion of his cash compensation in the form of common stock or Series D Preferred Stock, as it may choose.
The foregoing description of the 2015 Consulting Agreement does not purport to be complete and is qualified in its entirety by reference to the complete text of the agreement filed as Exhibit 10.2 to an 8K filed November 30, 2015 and incorporated herein by reference.
On December 9, 2015, we issued 1,000,000 Series D Preferred shares each to our consultant, Kaufman & Associates Inc. The shares were issued at the market price of the common shares on the date of issuance multiplied by the number of common shares into which the Series D Preferred could convert or $0.03 per preferred share.
As of December 31, 2016, and 2015, the Company owes $307,270 and $213,480, respectively to Kaufman & Associates (holding more than 5% shares of the Company) in connection with a consulting agreement and included in accrued compensation on the balance sheet.
76
Item 14. Principal Accounting Fees and Services
The following table shows the fees that were billed for the audit and other services provided by RBSM LLP for the fiscal years ended December 31, 2016 and 2015.
Financial Statements for the Year Ended December 31,
|
Audit Services
|
Audit Related Fees
|
Tax Fees
|
Other Fees
|
2016
|
$ 40,000
|
$-
|
$-
|
$-
|
2015
|
$ 40,000
|
$-
|
$-
|
$-
|
Audit Fees
This category includes the audit of our annual consolidated financial statements, review of consolidated financial statements included in our Quarterly Reports on Form 10-Q and services that are normally provided by the independent registered public accounting firm in connection with engagements for those fiscal years. This category also includes advice on audit and accounting matters that arose during, or as a result of, the audit or the review of interim financial statements.
Audit-Related Fees
This category consists of assurance and related services by the independent registered public accounting firm that are reasonably related to the performance of the audit or review of our financial statements and are not reported above under Audit Fees. The services for the fees disclosed under this category include consultation regarding our correspondence with the Securities and Exchange Commission and other accounting consulting.
Tax Fees
This category consists of professional services rendered by our independent registered public accounting firm for tax compliance and tax advice. The services for the fees disclosed under this category include tax return preparation and technical tax advice.
All Other Fees
This category consists of fees for other miscellaneous items.
Our Board of Directors has adopted a procedure for pre-approval of all fees charged by our independent registered public accounting firm. Under the procedure, the Board approves the engagement letter with respect to audit, tax and review services. Other fees are subject to pre-approval by the Board, or, in the period between meetings, by a designated member of Board. Any such approval by the designated member is disclosed to the entire Board at the next meeting.
77
PART IV
Item 15. Exhibits, Financial Statements Schedules
(a)
|
Financial Statements and Schedules
|
The following consolidated financial statements and schedules listed below are included in this Form 10-K.
Financial Statements (See Item 8)
Exhibit Number
|
Description
|
3.1
|
Articles of Incorporation, as amended
(1)
|
3.2
|
Certificate of Amendment
(2)
|
3.3
|
Certificate of Change
(2)
|
3.4
|
Certificate of Amendment
(3)
|
3.5
|
Certificate of Designation
(3)
|
3.6
|
Certificate of Designation
(3)
|
3.7
|
Bylaws, as amended
(1)
|
10.1
|
Stock Purchase Definitive Agreement
(4)
|
10.1
|
Convertible debenture dated August 6, 2014
(5)
|
10.2
|
Convertible debenture dated August 6, 2014
|
10.3
|
Convertible debenture dated August 11, 2014
(5)
|
10.4
|
Agreement and Plan of Merger
(6)
|
10.5
|
Retroactive Employment Agreement
(7)
|
10.6
|
Retroactive Consulting Agreement
(7)
|
10.7
|
Settlement Agreement and Stipulation
(8)
|
10.8
|
Amendment to Stock Purchase Definitive Agreement
(9)
|
10.9
|
Memorandum of Understanding Joint Venture
(10)
|
10.10
|
Amendment to Stock Purchase Definitive Agreement
(11)
|
10.11
|
Convertible debenture dated September 4, 2014
|
10.12
|
Convertible debenture dated September 5, 2014
|
10.13
|
Convertible debenture dated September 11, 2014
|
10.14
|
Convertible debenture dated October 24, 2014
|
10.15
|
Convertible debenture dated October 27, 2014
|
10.16
|
Convertible debenture dated October 29, 2014
|
10.17
|
Convertible debenture dated November 12, 2014
|
10.18
|
Convertible debenture dated December 16, 2014
|
10.19
|
Convertible debenture dated January 7, 2015
|
10.20
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Convertible debenture dated February 20, 2015
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31.1
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Certification of Chief Executive Officer pursuant to Securities Exchange Act Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
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|
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32.1
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Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
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Incorporated by reference to the Registration Statement on Form S-1 filed on June 21, 2011; also incorporated by reference to the Current Report on Form 8-K filed on October 29, 2010.
Incorporated by reference to the Form 8-K filed on January 8, 2014
Incorporated by reference to the Form 8-K filed on January 27, 2014
Incorporated by reference to the Form 8-K filed on April 22, 2014
Incorporated by reference to the Form 8-K filed on August 22, 2014
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Incorporated by reference to the Form 8-K filed on November 4, 2014
Incorporated by reference to the Form 8-K filed on January 7, 2015
Incorporated by reference to the Form 8-K filed on January 13, 2015
Incorporated by reference to the Form 8-K filed on January 20, 2015
Incorporated by reference to the Form 8-K filed on January 26, 2015
Incorporated by reference to the Form 8-K filed on June 9, 2015
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SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Alkame Holdings, Inc.
By:
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/s/ Robert Eakle
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Robert Eakle
President, Chief Executive Officer, Principal Executive Officer, and Director
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May 24, 2019
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In accordance with Section 13 or 15(d) of the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated:
By:
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/s/ Robert Eakle
|
|
Robert Eakle
President, Chief Executive Officer, Principal Executive Officer, and Director
|
|
May 24, 2019
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80