Table of
Contents
Filed Pursuant to Rule 253(g)(2)
File No. 024-11053
Offering Circular Supplement dated January 29, 2020
DNA Brands,
Inc.
MAXIMUM OFFERING AMOUNT:
$2,500,000
This is a public offering (the “Offering”) of securities of DNA
Brands, Inc., a Colorado corporation (the “Company”). We are
offering a maximum of 3125000000 shares (the “Maximum Offering”) of
our common stock, par value $0.00001 (the “Common Stock”) at an
offering price of $0.0008 per share (the “Shares”) on a “best
efforts” basis. This Offering will expire on the first to occur
of (a) the sale of all 3125000000 shares of Common Stock offered
hereby, (b) February 15, 2020, subject to extension for up to one
hundred-eighty (180) days in the sole discretion of the Company, or
(c) when the Company’s board of directors elects to terminate the
Offering (as applicable, the “Termination Date”). There is no
escrow established for this Offering. We will hold closings upon
the receipt of investors’ subscriptions and acceptance of such
subscriptions by the Company. If, on the initial closing date, we
have sold less than the Maximum Offering, then we may hold one or
more additional closings for additional sales, until the earlier
of: (i) the sale of the Maximum Offering or (ii) the Termination
Date. There is no aggregate minimum requirement for the Offering to
become effective, therefore, we reserve the right, subject to
applicable securities laws, to begin applying “dollar one”
of the proceeds from the Offering in accordance with the Use of
Proceeds section of this Offering Circular (See section “Use of
Proceeds”) and such other uses as more specifically set forth
in this offering circular (“Offering Circular”). We expect to
commence the sale of the Shares as of the date on which the
offering statement of which this Offering Circular is a part
(the “Offering Statement”) is qualified by the United States
Securities and Exchange Commission (the “SEC”).
The Company’s Common Stock is listed on the Over The Counter
Bulletin Board (“OTCPNK”) under the symbol “DNAX,” and qualified
Pink Current Information Tier. For further information, see
“Plan of Distribution – Exchange Listing” of this Offering
Circular.
Such Offering price and our valuation was determined by management
in order to attract investors in this Offering. The valuation of
our currently outstanding shares of Common Stock and the $0.001 per
share Offering price of the Common Stock has been based upon the
trading price and volume of trading of our Common Stock on the
OTCPNK exchange and is not based on book value, assets, earnings or
any other recognizable standard of value.
Investing in our Common Stock involves a high degree of risk.
See “Risk Factors”
for a discussion of certain risks that you should consider in
connection with an investment in our Common Stock.
THE U.S. SECURITIES AND EXCHANGE COMMISSION DOES NOT PASS UPON
THE MERITS OF OR GIVE ITS APPROVAL TO ANY SECURITIES OFFERED OR THE
TERMS OF THE OFFERING, NOR DOES IT PASS UPON THE ACCURACY OR
COMPLETENESS OF ANY OFFERING CIRCULAR OR OTHER SOLICITATION
MATERIALS. THESE SECURITIES ARE OFFERED PURSUANT TO AN EXEMPTION
FROM REGISTRATION WITH THE COMMISSION; HOWEVER, THE COMMISSION HAS
NOT MADE AN INDEPENDENT DETERMINATION THAT THE SECURITIES OFFERED
ARE EXEMPT FROM REGISTRATION.
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Price to Public |
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Commissions |
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Proceeds to the Company |
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| Per Share |
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$ |
0.0008 |
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$ |
0.00 |
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|
$ |
0.0008 |
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| Maximum Offering |
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$ |
2,500,000.00 |
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|
$ |
0.00 |
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|
$ |
2,500,000.00 |
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THE SECURITIES UNDERLYING THIS OFFERING STATEMENT MAY NOT BE
SOLD UNTIL QUALIFIED BY THE SECURITIES AND EXCHANGE COMMISSION.
THIS OFFERING CIRCULAR IS NOT AN OFFER TO SELL, NOR SOLICITING AN
OFFER TO BUY, ANY SHARES OF OUR COMMON STOCK IN ANY STATE OR OTHER
JURISDICTION IN WHICH SUCH SALE IS PROHIBITED.
INVESTMENT IN SMALL BUSINESS INVOLVES A HIGH DEGREE OF RISK, AND
INVESTORS SHOULD NOT INVEST ANY FUNDS IN THIS OFFERING UNLESS THEY
CAN AFFORD TO LOSE THEIR ENTIRE INVESTMENT. SEE “RISK FACTORS” FOR
A DISCUSSION OF CERTAIN RISKS YOU SHOULD CONSIDER BEFORE PURCHASING
ANY SHARES IN THIS OFFERING.
AN OFFERING STATEMENT PURSUANT TO REGULATION A RELATING TO THESE
SECURITIES HAS BEEN FILED WITH THE U.S. SECURITIES AND EXCHANGE
COMMISSION, WHICH WE REFER TO AS THE COMMISSION. INFORMATION
CONTAINED IN THIS PRELIMINARY OFFERING CIRCULAR IS SUBJECT TO
COMPLETION OR AMENDMENT. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED BEFORE THE OFFERING STATEMENT FILED WITH
THE COMMISSION IS QUALIFIED. THIS PRELIMINARY OFFERING CIRCULAR
SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN
OFFER TO BUY NOR MAY THERE BE ANY SALES OF THESE SECURITIES IN ANY
STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL
BEFORE REGISTRATION OR QUALIFICATION UNDER THE LAWS OF ANY SUCH
STATE. WE MAY ELECT TO SATISFY OUR OBLIGATION TO DELIVER A FINAL
OFFERING CIRCULAR BY SENDING YOU A NOTICE WITHIN TWO (2) BUSINESS
DAYS AFTER THE COMPLETION OF OUR SALE TO YOU THAT CONTAINS THE URL
WHERE THE FINAL OFFERING CIRCULAR OR THE OFFERING STATEMENT IN
WHICH SUCH FINAL OFFERING CIRCULAR WAS FILED MAY BE
OBTAINED.
GENERALLY, NO SALE MAY BE MADE TO YOU IN THIS OFFERING IF THE
AGGREGATE PURCHASE PRICE YOU PAY IS MORE THAN TEN PERCENT (10%) OF
THE GREATER OF YOUR ANNUAL INCOME OR YOUR NET WORTH. DIFFERENT
RULES APPLY TO ACCREDITED INVESTORS AND NON-NATURAL PERSONS. BEFORE
MAKING ANY REPRESENTATION THAT YOUR INVESTMENT DOES NOT EXCEED
APPLICABLE THRESHOLDS, WE ENCOURAGE YOU TO REVIEW RULE
251(D)(2)(I)(C) OF REGULATION A. FOR GENERAL INFORMATION ON
INVESTING, WE ENCOURAGE YOU TO REFER TO WWW.INVESTOR.GOV.
This Offering Circular follows the disclosure format prescribed by
Part I of Form S-1 pursuant to the general instructions of Part
II(a) (1)(ii) of Form 1-A.
The date of this Offering Circular is January 29, 2020
The Company
has not determined if it will require these services or such
selected service providers. The Company reserves the right to
engage one or more FINRA-member broker-dealers or placement agents
in its discretion. Does not include expenses of the Offering,
including fees for administrative, accounting, audit and legal
services, FINRA filing fees, fees for EDGAR document conversion and
filing, and website posting fees, estimated to be as much as
$25,000.
TABLE OF
CONTENTS
We are offering to sell, and seeking offers to buy, our securities
only in jurisdictions where such offers and sales are permitted.
You should rely only on the information contained in this Offering
Circular. We have not authorized anyone to provide you with any
information other than the information contained in this Offering
Circular. The information contained in this Offering Circular is
accurate only as of its date, regardless of the time of its
delivery or of any sale or delivery of our securities. Neither the
delivery of this Offering Circular nor any sale or delivery of our
securities shall, under any circumstances, imply that there has
been no change in our affairs since the date of this Offering
Circular. This Offering Circular will be updated and made available
for delivery to the extent required by the federal securities
laws.
Unless otherwise indicated, data contained in this Offering
Circular concerning the business of the Company are based on
information from various public sources. Although we believe that
these data are generally reliable, such information is inherently
imprecise, and our estimates and expectations based on these data
involve a number of assumptions and limitations. As a result, you
are cautioned not to give undue weight to such data, estimates or
expectations.
In this Offering Circular, unless the context indicates otherwise,
references to “DNA Brands,” “we,” the
“Company,” “our,” and “us” refer to the
activities of and the assets and liabilities of the business and
operations of DNA Brands, Inc.
CAUTIONARY STATEMENT REGARDING
FORWARD-LOOKING STATEMENTS
Some of the statements under “Summary,” “Risk
Factors,” “Management’s Discussion and Analysis of Financial
Condition and Results of Operations,” "Our Business" and
elsewhere in this Offering Circular constitute forward-looking
statements. Forward- looking statements relate to expectations,
beliefs, projections, future plans and strategies, anticipated
events or trends and similar matters that are not historical facts.
In some cases, you can identify forward-looking statements by terms
such as “anticipate”, “believe,” “could,”
“estimate,” “expect,” “intend,” “may,”
“plan,” “potential,” “should,” “will”
and “would” or the negatives of these terms or other
comparable terminology.
You should not place undue reliance on forward-looking statements.
The cautionary statements set forth in this Offering Circular,
including in “Risk Factors” and elsewhere, identify
important factors that you should consider in evaluating our
forward-looking statements. These factors include, among other
things:
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Our ability to effectively operate our business segments; |
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Our ability to manage our research, development, expansion,
growth and operating expenses; |
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Our ability to evaluate and measure our business, prospects and
performance metrics; |
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Our ability to compete, directly and indirectly, and succeed in
the highly competitive and evolving ridesharing industry; |
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Our ability to respond and adapt to changes in technology and
customer behavior; and |
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Our ability to protect our intellectual property and to
develop, maintain and enhance a strong brand. |
Although the forward-looking statements in this Offering Circular
are based on our beliefs, assumptions and expectations, taking into
account all information currently available to us, we cannot
guarantee future transactions, results, performance, achievements
or outcomes. No assurance can be made to any investor by anyone
that the expectations reflected in our forward-looking statements
will be attained, or that deviations from them will not be material
and adverse. We undertake no obligation, other than as may be
required by law, to re-issue this Offering Circular or otherwise
make public statements updating our forward-looking statements.
OFFERING CIRCULAR SUMMARY
This Offering Circular contains a fair summary of the material
terms of documents summarized herein. All concepts, goals,
estimates and business intentions are revealed and disclosed as
such are known to management as of the date of this Offering
Circular. Circumstances may change so as to alter the information
presented herein at a later date. This material will be updated by
Amendment to this document and by means of press releases and other
communications to Shareholders. You should carefully read the
entire Offering Circular, including the risks associated with an
investment in the company discussed in the “Risk Factors” section
of this Offering Circular, before making an investment decision.
Some of the statements in this Offering Circular are
forward-looking statements. See the section entitled “Cautionary
Statement Regarding Forward-Looking Statements.”
As used in this Offering Circular, all references to “DNA Brands,”
“capital stock,” “Common Stock,” “Shares,” “preferred stock,”
“stockholders,” “shareholders” applies only to DNA Brands, Inc. As
used in this Offering Circular, the terms “Company,” “we,” “our” or
words of like import mean DNA Brands, Inc., and its direct and
indirect subsidiaries. All references in this Offering Circular to
“years” and “fiscal years” means the twelve-month period ended
December 31.
Corporate History and Information
The Company was formed in the state of Colorado with the filing of
Articles of Incorporation on May 23, 2007 with the name of Famous
Products, Inc. At formation, the principal operations of the
Company were as a full service, brand-marketing organization whose
activities are centered around its client's products, principally
in the liquor industry. Brand marketing builds the value of the
brand by connecting it with target audiences to achieve strategic
marketing objectives. It was comprised of one corporation with a
wholly-owned subsidiary, Fancy Face Promotions, Inc., a Colorado
corporation. All of our operations are conducted through this
subsidiary. On January 22, 2008, the Company filed a registration
statement on Form SB-2 reporting $26,648 in assets which however
consisted mostly of cash, $24,170. The company’s operations however
consisted mostly of providing services out of one principal
location in the downtown Denver metropolitan area. These operations
continued until July 7, 2010 when the Company changed to its
current name, DNA Brands, Inc. Through to this name change event,
though it was never profitable, the Company was current in its
filings requirements with the SEC reporting on its assets and
operations in its fiscal year reports for 2007, 2008 and 2009 (it
has a fiscal year end date of Oct. 31). For its period ending Oct.
31, 2007, it reported losses of $47,850 from its operations. For
its fiscal year ending Oct. 31, 2008, it reported total revenues of
$35,825 but reported a net loss of $18,4883. For its fiscal year ending Oct. 31,
2009, it reported total revenues of $6,214 and had operating
expenses of $33,3614.
On July 6, 2010, the Company changed its business plan acquiring
Grass Roots Beverage Company, Inc. and all of the remaining assets,
liabilities and contract rights of DNA Beverage Corporation, and
the Company amended its name to DNA Brands, Inc. on July 7,
2010.
Our mailing address is DNA Brands, Inc., 6245 N. Federal Highway,
Suite 504, Fort Lauderdale, FL 33308 and our telephone number is
(561) 654-5722. Our website address is
www.dnabrandsinc.com. The information contained
therein or accessible thereby shall not be deemed to be
incorporated into this Offering Circular.
Business Overview
On March 25, 2019, we announced that we were shifting our primary
corporate focus to the transportation/ridesharing industry with the
signing of a fleet agreement with the rideshare platform,
Ridesharerental.com (http://www.Ridesharerental.com) (the
“Rideshare Platform”). As of the date of this Offering Circular,
the Company’s operating business segments will be primarily focused
on our Fleet Agreement with Rideshare rental.com and the
maintenance of a fleet of standard passenger vehicles to be made
commercially available for rent to rent to Uber and Lyft drivers in
the South Florida Region (“Fleet Management”). Initially
concentrating in the South Florida region, DNA Brands is the First
fleet operator in the State of Florida with
www.RideshareRentals.com and anticipates covering the whole state
by years’ end.
The Company’s Fleet Management business focuses on the maintenance
of a fleet of standard passenger vehicles, to be subsequently
rented directly to drivers in the ridesharing economy. The Fleet
Management business and vehicles are made commercially available
through the Rideshare Platform, which is available at
www.ridesharerental.com. DNA Brands has obtained financing
(discussed in more detail below) in order to begin the fleet
purchase process. The company fully intends to continue adding cars
to its fleet monthly. The most significant portion of the use of
proceeds of this offering will be to add additional vehicles to our
Fleet Management business.
The Company now has four vehicles in service.
Prior Financing
From mid-2013 through the third quarter of 2019, the Company has
been financed principally by four main investors, Dr. Thomas
Rutherford, Kerry Goodman, GPL Ventures, and Barry Romich (or
related entities), two of whom (Dr. Rutherford and Mr. Goodman) are
also shareholders of the Company. The promissory notes and
debentures representing their investments are included as exhibits
to this Registration Statement. The majority of the prior
promissory notes and debentures issued by the Company, excluding
those issued in 2019, were in default as of the date of this
Offering Circular. The Company has spoken with nearly all of the
holders of the defaulted instruments and other creditors of the
Company, and feels that it has a good relationship with the holders
and creditors. There can be no guarantee that one or more
noteholders or other creditors of the Company will not seek to
enforce the Company’s payment obligations.
Additional information about the notes and debentures can be found
in the Section below entitled “DNA Brands Inc., Recent Financing
Activities.” Other investors also provided financing,
information about which can also be found in the Section entitled
“DNA Brands Inc., Recent Financing Activities.”
The Ridesharing Industry
At the most basic level, real-time ridesharing is a service that
arranges one-time shared rides on very short notice. The
internet-connected, global positioning system (“GPS”)
enabled device automatically detects your current location, takes
the home location that you have programmed in previously and
searches the database for drivers traveling a similar route and
willing to pick up passengers. According to Wikipedia.org,
“real-time” ridesharing is defined as “a single, or
recurring Rideshare trip with no fixed schedule, organized on a
one-time basis, with matching of participants occurring as little
as a few minutes before departure or as far in advance as the
evening before a trip is scheduled to take place”.
The growth of the ridesharing economy has resulted in increasing
consumer demand for ridesharing services, provided by
transportation network companies (“TNC”) such as Lyft, DIDI,
VIA, Juno, Gett and Uber, that offer a ridesharing economy service
through mobile applications. Ridesharing apps connect people who
need a ride with people who have a vehicle and time to drive -
notably, not necessarily people who are licensed taxi drivers.
Companies like Lyft, DIDI, VIA, Juno, Gett and Uber provide a
smartphone app that lets consumers hail a ride, set their
destination, and pay without leaving the app itself. The benefits
to the consumer is ease of use, availability of rides, and
sometimes lower prices than traditional taxis. Many companies
require at least some sort of certification for the drivers and
take a portion of the drivers’ fares. Drivers can choose when they
work (though they can receive bonuses for logging a certain number
of hours) and provide their own vehicles. Early entrants in the TNC
app space, like Uber and Flywheel, were founded around 2009.
Overall, the industry has raised more than $10 billion in venture
funding.
We believe that we have strong economic prospects by virtue of the
following dynamics of the industry:
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Continued Growth in
Ridesharing Market. The ridesharing services market has
grown faster, gone to more places and has produced robust growth
and consumer traffic figures since commercial introduction in
approximately 2009. The pace of growth is also picking up. It has
been reported that Uber took six (6) years before it reached a
billion rides in December of 2015, but it took only six (6) months
for Uber to get to two billion rides. In the U.S., the number of
users of ridesharing services is estimated to increase from 8.2
million in 2014 to 20.4 million in 2020, producing a compounded
annual growth rate (“CAGR”) of approximately 13.92% over the
seven-year period. |
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Globalization of
Ridesharing. In the same vein, ridesharing which started as
an experiment in California has grown into a global marketplace
over a short period of time. Asia has emerged as a geographical
territory to drive future growth. For example, Didi Chuang, the
Chinese ridesharing company, completed 1.43 billion rides just in
2015 and it now claims to have 250 million users in 360 Chinese
cities. Ridesharing is also acquiring deep roots in both India and
Malaysia, and is making advances in Europe and Latin America,
despite regulatory pushback. |
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Expanding Choices.
Consumer options in ridesharing are expanding to attract an even
larger audience, such as carpooling and private bus services. The
expansion of consumer options has also attracted mass transit
customers to more expensive luxury options. In addition, it has
been reported that dominant TNC businesses are experimenting with
pre-scheduled rides and multiple stops on single trip gain to meet
customer needs. Our Fleet Management business and fleet of rental
vehicles are designed to put more certified ridesharing vehicles on
the roadways to meet the increasing consumer demand of the
availability of ridesharing services. |
Our Opportunity
The increasing demand for ridesharing services has produced an
increase in demand by TNC businesses for more ridesharing drivers
and vehicles on the road at any given time. The growing demographic
of ridesharing drivers, as determined on a global basis, has drawn
ridesharing drivers to the ridesharing marketing to perform
services for a host of private TNC businesses focused on
ridesharing, such as Uber and Lyft. The Company believes that
private ridesharing TNC businesses are hiring more than an
estimated 50,000 drivers a month to keep pace with the current
commercial demand for ridesharing services.
Complicating this matter further, many potential ridesharing
drivers drawn to the ridesharing market are being rejected or
turned away from driving for the private ridesharing TNCs on
account of the fact that many potential ridesharing driver’s
personal vehicles are failing to meet the Ridesharing Qualification
Requirements imposed on all ridesharing drivers and vehicles by the
private ridesharing TNCs. The Ridesharing Qualification
Requirements include not only certain requirements on all
ridesharing drivers and their respective vehicles (the “Driver
Qualification Requirements”) but also additional vehicle safety
tests, inspections and precautions on all ridesharing vehicles to
be utilized by drivers under employment with the private
ridesharing TNCs. Generally, the vehicle safety tests, inspections
and precautions require all vehicles to pass a standard vehicle
inspection test administered by the respective TNC employer (the
“Vehicle Qualification Requirements”, together with the
Driver Qualification Requirements, the “Ridesharing
Qualification Requirements”). For more information, see
“Ridesharing Qualification Requirements”. The Company
estimates that approximately 30%-50% of potential ridesharing
drivers do not own or have access to a car or vehicle that will
meet the Ridesharing Qualification Requirements. Further, the
Company believes that this issue surrounding the Ridesharing
Qualifications Requirements are exacerbating the problem and
resulting in a shortfall of ridesharing drivers on the road at any
given time. Private ridesharing TNCs have responded to this issue
by actively pursuing programs to get eligible ridesharing drivers
into qualified cars that meet the Ridesharing Qualification
Requirements. The Company believes that the TNC line of business
and immense capital requirements in developing a fleet management
business to service the growing ridesharing industry on such a
large scale will restrict the ability of the private ridesharing
TNCs to dominate the ridesharing vehicle rental market.
Additionally, under the general rules being enforced by the leading
TNCs, TNCs are restricted from owning a fleet of vehicles or
partaking in the fleet management business. Further, despite the
financial resources and scale of the dominant TNCs in the
ridesharing business, the Company believes that third-party vehicle
rental providers are a necessity to the growth and service of a
robust ridesharing market.
Our Concurrent and Recent Financing Activities.
DNA Brands Inc., Recent Financing Activities
In February 2011, the Company issued a convertible debenture to an
existing shareholder in the amount of $500,000. The debenture bears
interest at 12% per annum and carries an annual transaction fee of
$30,000, of which both are payable in quarterly installments
commencing in May 2011. These costs are recorded as interest
expense in the Company's financial statements. In addition, as
further inducement for loaning the Company funds, the Company
issued 125,000 restricted shares of its common stock to the holder
upon execution. The common shares were valued at $31,250, their
fair market value, and recorded as discount to the debenture. These
costs will be amortized using the effective interest method over
the term of the debenture and recorded as interest expense in the
Company's financial statements.
In June 2011, the Company issued a convertible debenture to an
existing shareholder in the amount of $125,000. The debenture bears
interest at 12% per annum, which is payable in the Company’s common
stock at the time of maturity. The debenture is convertible at any
time prior to maturity into 150,000 shares of the Company’s common
stock. This beneficial conversion feature was valued at $90,750,
using Black-Scholes methodology, and recorded as a discount to the
debenture. These costs will be amortized using the effective
interest method over the term of the debenture and recorded as
interest expense in the Company's financial statements.
In July and August 2011, the Company issued a series of secured
convertible debentures to accredited investors aggregating $275,000
in gross proceeds. All proceeds from these debentures are to be
utilized solely for the purpose of funding raw materials and
inventory purchases through the use of an escrow agent. The
debentures bear interest at 12% per annum, payable in monthly
installments. The debentures are convertible at any time prior to
maturity at a conversion price equal to 80% of the average share
price of the Company’s common stock for the 10 previous trading
days prior to conversion, but not less than $0.70. In addition, as
further inducement for loaning the Company funds, the Company
issued the lenders 68,750 restricted shares of its common stock and
137,500 common stock warrants exercisable at $1.25 per share. As a
result, the Company had to allocate fair market value to each the
beneficial conversion feature, restricted shares and warrants. The
common shares were valued at $30,938, their fair market value. The
Company determined the fair market value of the warrants as $94,255
using the Black-Scholes valuation model. Since the combined fair
market value allocated to the warrants and beneficial conversion
feature cannot exceed the convertible debenture amount, the
beneficial conversion feature was valued at $149,807, the ceiling
of its intrinsic value. These costs will be amortized using the
effective interest method over the term of the debenture and
recorded as interest expense in the Company's financial
statements.
In February 2012, the Company issued a convertible debenture to an
existing shareholder in the amount of $75,000. The debenture bears
interest at 12% per annum, which is payable in the Company’s common
stock at the time of maturity. The debenture is convertible at any
time prior to maturity into 280,000 shares of the Company’s common
stock. As further inducement, the Company issued the lender 280,000
common stock warrants exercisable at $1.50 per share. If
unexercised, the warrants will expire on January 31, 2017. Using
the Black-Scholes model, the warrants were valued at $63,620 and
recorded as a discount to the principal amount of the debenture.
This discount is amortized using the effective interest method over
the term of the debenture and recorded as interest expense in the
Company's financial statements.
In February and June 2012, the Company converted $524,950 of its
loans payable to officers into convertible debentures. These
debentures were offered by the Company’s officers to certain
accredited investors and a majority portion of the proceeds
therefrom were deposited with the Company. The debentures had no
maturity date and bear no interest. Therefore, these debentures
were payable on demand and were originally classified as a current
liability. The debentures were convertible at any time into
3,499,667 shares, or $0.15 per share of common stock. The Company
determined that these terms created a beneficial conversion
feature. Using the Black- Scholes model, the beneficial conversion
feature was valued at $524,950, the ceiling of its intrinsic value.
Due to the nature of the debentures, the full value of the
beneficial conversion feature was immediately recorded as interest
expense in the Company’s financial statements. In August 2012,
these convertible debentures were converted into 3,499,666 shares
of the Company’s common stock.
On April 9, 2012, the Company executed an Investment Banking and
Advisory Agreement with Charles Morgan Securities, Inc., New York,
NY (“CMI”), wherein CMI agreed to provide consulting, strategic
business planning, financing on a “best efforts” basis and investor
and public relations services, as well as to assist the Company in
its efforts to raise capital through the issuance of debt or
equity. The agreement provided for CMI to engage in two separate
private offerings with the initial private placement offering up to
$3.0 million and the second private placement offering up to an
additional $3.0 million; each on a “best efforts” basis. In
connection with this agreement the Company issued 750,000 shares
valued at $0.25 per share or a total value of $187,500. This amount
was fully amortized in the Company's financial statements as of
December 31, 2012.
In July 2012, the Company received proceeds from convertible
debentures totaling $182,668 in connection with the CMI agreement.
The debentures bear interest at 12% per annum, which is payable in
cash or the Company’s common stock at the time of conversion or
maturity. The debentures are convertible at any time prior to
maturity at a conversion price equal to the lesser of 75% of the
average share price of the Company’s common stock for the five
previous trading days prior to conversion or $0.35, but not less
than $0.15. In the event that the Company offers or issues shares
of its common stock at a share price less than $0.15, the floor
conversion price will adjust to the new lower price. The Company
determined that the terms of the debentures created a beneficial
conversion feature. Using the Black-Scholes model, the beneficial
conversion feature was valued at $160,813 and recorded as a
discount to the principal amount of the debentures. The discount is
amortized using the effective interest method over the term of the
debenture and recorded as interest expense in the Company's
financial statements.
On August 7, 2012, the Company issued a convertible debenture in
the amount of $50,000. The debenture does not bear interest. As an
inducement, the Company agreed to issue the lender 20,000 shares of
its common stock. The common shares were valued at their trading
price on the date of the agreement and recorded as interest expense
in the Company’s results of operations. The Company determined that
the terms of the debenture created a beneficial conversion feature.
Using the Black-Scholes model, the beneficial conversion feature
was valued at $50,000, the ceiling of its intrinsic value, and
recorded as a discount to the principal amount of the debenture.
The discount is amortized using the effective interest method over
the term of the debenture and recorded as interest expense in the
Company's financial statements. During the second quarter of 2013,
the conversion terms of this note were modified and the note was
converted into 1,500,000 shares of common stock.
On September 25, 2012, the Company issued a convertible debenture
in the amount of $50,000. The debenture bears interest at 6% per
annum, which is payable in the Company’s common stock at the time
of conversion or maturity. The debenture is convertible at any time
prior to maturity at a conversion price equal to 70% of the lowest
closing bid price of the Company’s common stock on the four
previous trading days prior to and day of conversion, but not less
than $0.0001. The Company determined that the terms of the
debenture created a beneficial conversion feature. Using the
Black-Scholes model, the beneficial conversion feature was valued
at $50,000, the ceiling of its intrinsic value, and recorded as a
discount to the principal amount of the debenture. The discount is
amortized using the effective interest method over the term of the
debenture and recorded as interest expense in the Company's
financial statements. During the second quarter of 2013, the lender
converted $23,000 of principal into 919,403 shares of common stock
in accordance with the conversion terms of the debenture.
On November 1, 2012, the Company issued a convertible debenture in
the amount of $80,000. The debenture bears interest at 12% per
annum, which is payable in the Company’s common stock at the time
of conversion or maturity. The debenture is convertible at any time
prior to maturity at a conversion price equal to 70% of the average
closing bid price of the Company’s common stock on the 30 previous
trading days prior to the day of conversion. The Company determined
that the terms of the debenture created a beneficial conversion
feature. Using the Black-Scholes model, the beneficial conversion
feature was valued at $56,286, the ceiling of its intrinsic value,
and recorded as a discount to the principal amount of the
debenture. The discount is amortized using the effective interest
method over the term of the debenture and recorded as interest
expense in the Company's financial statements.
During the second quarter of 2013, the Company recorded $65,000 in
gross proceeds from the issuance of three convertible debentures.
The debentures bear interest at 12% per annum, which is payable in
cash at the time of maturity. The debentures are convertible at any
time prior to maturity into 216,667 shares of the Company’s common
stock. As further inducement, the Company issued the lenders
216,667 common stock warrants exercisable at $1.50 per share. If
unexercised, the warrants will expire on February 28, 2017. Using
the Black-Scholes model, the warrants were valued at $69,455 and
recorded as a discount up to the principal amount of the
debentures. This discount is amortized using the effective interest
method over the term of the debenture and recorded as interest
expense in the Company's financial statements. As of December 31,
2013, two of the debentures totaling $35,000 in principal value
were converted into 316,667 shares of common stock. Some of the
original conversion terms were modified prior to the notes’
conversions. The remaining $30,000 debenture is in default, as its
maturity date was April 25, 2013.
On September 17, 2013, the Company issued a convertible debenture
in the amount of $50,000. The debenture bears interest at 6% per
annum, which is payable in the Company’s common stock at the time
of conversion or maturity. The debenture is convertible at any time
prior to maturity at a conversion price equal to 70% of the lowest
closing bid price of the Company’s common stock on the four
previous trading days prior to and day of conversion, but not less
than $0.0001. The Company determined that the terms of the
debenture created a beneficial conversion feature. Using the
Black-Scholes model, the beneficial conversion feature was valued
at $50,000, the ceiling of its intrinsic value, and recorded as a
discount to the principal amount of the debenture. The discount is
amortized using the effective interest method over the term of the
debenture and recorded as interest expense in the Company's
financial statements.
On October 31, 2013, the Company issued a convertible debenture in
the amount of $204,000. The debenture bears interest at 18% per
annum, which is payable in the Company’s common stock at the time
of conversion or maturity. The debenture is convertible at any time
prior to maturity at a conversion price equal to 50% of the lowest
closing bid price of the Company’s common stock on the twenty
previous trading days prior to and day of conversion. The Company
determined that the terms of the debenture created a beneficial
conversion feature. Using the Black-Scholes model, the beneficial
conversion feature was valued at $204,000, the ceiling of its
intrinsic value, and recorded as a discount to the principal amount
of the debenture. The discount is amortized using the effective
interest method over the term of the debenture and recorded as
interest expense in the Company's financial statements.
On November 6, 2013, the Company issued a convertible debenture in
the amount of $53,000. The debenture bears interest at 8% per
annum, which is payable in the Company’s common stock at the time
of conversion or maturity. The debenture is convertible at any time
prior to maturity at a conversion price equal to 58% of the average
of the 3 lowest share closing bid prices of the Company’s common
stock on the ten previous trading days prior to and day of
conversion. The Company determined that the terms of the debenture
created a beneficial conversion feature. Using the Black-Scholes
model, the beneficial conversion feature was valued at $48,533, its
intrinsic value, and recorded as a discount to the principal amount
of the debenture. The discount is amortized using the effective
interest method over the term of the debenture and recorded as
interest expense in the Company's financial statements.
On November 6, 2013, the Company issued a convertible debenture in
the amount of $125,000. The debenture bears interest at 10% per
annum, which is payable in the Company’s common stock at the time
of conversion or maturity. The debenture is convertible at any time
prior to maturity at a conversion price equal to 50% of the lowest
share closing bid price of the Company’s common stock on the twenty
previous trading days prior to and day of conversion. The Company
determined that the terms of the debenture created a beneficial
conversion feature. Using the Black-Scholes model, the beneficial
conversion feature was valued at $125,000, the ceiling of its
intrinsic value, and recorded as a discount to the principal amount
of the debenture. The discount is amortized using the effective
interest method over the term of the debenture and recorded as
interest expense in the Company's financial statements.
On November 6, 2013, the Company issued a convertible debenture in
the amount of $80,000. The debenture bears no interest and is
payable in the Company’s common stock at the time of conversion or
maturity. The debenture is convertible at any time prior to
maturity at a conversion price equal to 50% of the average share
closing bid price of the Company’s common stock on the thirty
previous trading days prior to and day of conversion. The Company
determined that the terms of the debenture created a beneficial
conversion feature. Using the Black-Scholes model, the beneficial
conversion feature was valued at $80,000, the ceiling of its
intrinsic value, and recorded as a discount to the principal amount
of the debenture. The discount is amortized using the effective
interest method over the term of the debenture and recorded as
interest expense in the Company's financial statements.
On November 21, 2013, the Company issued a convertible debenture in
the amount of $100,000. The debenture bears interest at 12% per
annum, which is payable in the Company’s common stock at the time
of conversion or maturity. The debenture is convertible at any time
prior to maturity at a conversion price equal to 50% of the lowest
share intra-day price of the Company’s common stock on the ten
previous trading days prior to and day of conversion. The Company
determined that the terms of the debenture created a beneficial
conversion feature. Using the Black-Scholes model, the beneficial
conversion feature was valued at $100,000, the ceiling of its
intrinsic value, and recorded as a discount to the principal amount
of the debenture. The discount is amortized using the effective
interest method over the term of the debenture and recorded as
interest expense in the Company's financial statements.
June 10, 2014, the Company issued a convertible debenture of
$75,000 to Coventry Enterprises LLC bearing 8% interest per annum.
This debenture is in default.
April 22, 2014, the Company issued a 1 year convertible debenture
of $77,500, maturing April 22, 2015, to Tidepool Ventures Inc.
Bearing 10% interest per annum. This note has a Conversion factor
of 45% of market price. Market price is calculated by the average
of the lowest Bid price for the trailing ten business days to the
market. (Representing a 55% discount to market price). This note
was sold to World Market Ventures LLC and converted into common
stock.
April 22, 2014, the Company issued a 1 year maturity convertible
debenture of $110,000 to Iconic Holding LLC. Bearing 5% interest
per annum, maturing April 22 2015. This note has a Conversion
factor of 50% of market price. Market price is calculated by the
average of the lowest Bid price for the trailing ten business days.
(Representing a 50% discount to market price). $32,250 Was
converted into Common stock for 2016. This note is in default.
May 2, 2014, the Company issued a 1 year convertible debenture to
LG Capital funding LLC of $37,500 maturing May 2, 2015. Bearing 8%
annual interest. This note has a conversion factor of 50% of market
price. Market price is calculated by taking the average of the
lowest Bid price for the trailing ten business days. (Representing
a 50% discount to market price). This note is in default.
June 10, 2014, the Company issued a 1 year maturity convertible
debenture of $75,000 to Coventry Enterprises LLC bearing 8%
interest per annum maturing June 10, 2015. This note has a
conversion factor of 60% of market price. Market price is
calculated by taking the average of the lowest Bid price for the
trailing ten business days. (Representing a 40% discount to market
price). This note is in default. $63K, was converted into Common
stock for the year 2016.
Oct. 7, 2014, the Company issued a 1 year Convertible Debenture to
Coventry Enterprises LLC for $30,000. Bearing 8% per annum.
Maturing Oct. 7, 2015. This note has a Conversion ratio with a 50%
of market price. Market price is Calculated by taking the average
of the lowest Bid price for the trailing ten business days.
(Representing a 50% discount to market price). This note is in
default.
Jan. 14, 2016 the company issued a convertible debenture to Darren
Marks for $25,000 bearing 8% interest per annum. Maturing Jan. 14,
2015. This note has a Conversion factor of 40% of market price.
Market price is calculated by the average of the lowest bid price
of the trailing 5 business days (Representing a 60% discount to
market). This note is in default.
Jan. 14, 2016 the company issued a convertible debenture to Darren
Marks for $50,000 bearing 8% interest per annum. Maturing Jan. 14,
2015. This note has a Conversion factor of 40% of market price.
Market price is calculated by taking the average of the lowest bid
price of the trailing 5 business days. (Representing a 60% discount
to market price). This note is in default.
Jan. 14, 2016 the company issued a convertible debenture to Melvin
Leiner for $50,000 bearing 8% interest per annum. Maturing Jan. 14,
2017. This note has a Conversion factor of 40% of market price.
Market price is calculated by taking the average of the lowest bid
price of the trailing 5 business days. (Representing a 60% discount
to market price). This note is in default.
Feb. 1, 2016 the company issued a convertible debenture to Andrew
Telsey for $30,000, bearing 8% Interest per annum. Maturing Feb. 1,
2017. This note has a conversion of 60% of market value. Market
price is calculated by taking the average of the lowest bid price
of the trailing 5 business days. (Representing a 40% discount to
market price). This Note is in default.
Feb. 1, 2016, the Company issued a convertible Note to Darren Marks
for $70,500, bearing 8% interest per annum. Maturing Feb. 1, 2017.
This note has a conversion factor of 40% of market price. Market
price is calculated by taking the average of the lowest bid price
of the trailing 5 business days. (Representing a 60% discount to
market Price). This Note is in default.
Feb. 1, 2016, the Company issued a convertible Note to Melvin
Leiner for $106,632.70, bearing 8% interest, with a conversion
ratio, of 40% market price. Maturing Feb. 1, 2017. Market price is
calculated by taking the average of the lowest bid price of the
trailing 5 business days. Discount to market. (Representing a 60%
discount to market price). This Note is in default.
April 16, 2016, the Company issued a convertible debenture to
Tidepool Ventures group for $10,000 bearing 5% interest per annum.
Maturing April 16, 2017. This note has a conversion ratio of 45% of
market price. Market price is calculated by taking the average of
the lowest bid price of the trailing 5 business days. (Representing
a 55% discount to market). This debenture is in default.
April 26, 2016, the Company issued a convertible debenture to
Iconic Holdings LLC for $25,000 bearing 10% interest per annum
Maturing April 26, 2017. This note has a conversion ratio of 50% of
market price. Market price is calculated by taking the average of
the lowest bid price of the trailing 5 business days. (Representing
a 50% discount to market price). This note is in default.
June 10, 2016, the Company issued a convertible debenture to
Tidepool Ventures LLC for $3,000 bearing 5% interest per annum.
Maturing June 10, 2017. This note has a conversion ratio of 50% of
market price. Market price is calculated by taking the average of
the lowest bid price of the trailing 5 business days. (Representing
50% discount to market price). This note is in default.
June 29, 2016, the Company issued a convertible debenture to
Tidepool Ventures LLC of Eight thousand seven hundred fifty dollars
($8,750) bearing 5% interest per annum. Maturing June 29, 2017.
This Note has a conversion factor of 50% of market price. Market
price is calculated by taking the average of the lowest bid price
of the trailing 5 business days. (Representing a 50% discount to
market price). This note is in default.
August 12, 2016, the Company issued a convertible debenture to
Tidepool Ventures LLC $3,000 bearing 5% interest per annum.
Maturing August 12, 2017. This note has a conversion factor of 50%
of market price. Market price is calculated by taking the average
of the lowest bid price of the trailing 5 business days.
(Representing a 50% discount to market price). This debenture is in
default.
Sept 7, 2016, the Company issued a convertible debenture to Dr.
Rutherford for $20,000 Bearing 5% interest per annum. Maturing
September 7, 2017. This note has a conversion of 50% discount of
market price. Market price is calculated by taking the average of
the lowest bid price of the trailing 5 business days. (Representing
a 50% discount to market price). This note is in default.
May 21, 2017, Company issued a convertible Promissory Note to Heidi
Michitsch for One Hundred Thousand Dollars, bearing 9.875% interest
($100K). This note is in default.
November 24, 2017, the Company issued a convertible debenture to
Mr. Fred Rosen for Four Thousand Dollars ($4,000), for funds loaned
to the company. This note is in default.
On November 25, 2017, the Company issued a Convertible Note for
Twenty Thousand Dollars USD ($20,000) Dr. Thomas Rutherford, for
funds loaned to the company. This note is in default.
On November 29, 2017, company issued a Convertible Promissory Note
to Mr. Joseph Gibson, for Five Thousand Dollars USD ($5,000) USD.
This note is in default.
On or about November 30, 2017, the Company issued a Convertible
Promissory Note to Dr. Doug Engers Five Thousand USD ($5K) for
funds loaned to the Company. This note is in default.
On or about December 13, 2017, the Company issued a Convertible
Promissory Note to Barry Romich of Ten Thousand dollars USD
($10,000), for funds loaned to the company. This note is in
default.
On or about December 15, 2017, the Company issued a Convertible
Promissory Note to Mr. Kerry Goodman for One hundred Thousand
Dollars USD ($100K, $50K cashed late December, $50K cashed early
February). This note is in default.
On or about December 31, 2017, company issued a Convertible
promissory Note payable to Ms. Heidi Michitsch of Six thousand
Dollars USD ($6K) for Back Salaries Due, Q4 2017. This note is in
default.
On Dec. 31, 2017, the Company issued a Convertible promissory Note
to CEO Adrian P. McKenzie or his company PBDC LLC in the amount of
Thirty One Thousand, two hundred and Eighty USD ($31,280). This
Promissory Note covers monies loaned to the company for the Token
Talk Acquisition and Back Salaries owed to Mr. McKenzie over the
given time period. This note is in default.
On or about August 13, 2018, the Company issued a Convertible Note
of Fifty Thousand Dollars USD in exchange for Fifty Thousand Dollar
USD ($50,000) Loan to the Company, to the BA Romich Trust. This
note is in default.
On or about August 13, 2018, the Company issued a Convertible note
in the amount of Fifty Thousand Dollars USD ($50,000) as a
Charitable donation to the Romich Foundation. This note is in
default.
On or November 18, 2018, the Company issued a convertible
promissory Note to Dr. Thomas Rutherford for One Hundred Thousand
Dollars USD ($100,000), for funds loaned to the company. This note
is in default.
Risks Related to Our Business
Our business and our ability to execute our business strategy are
subject to a number of risks as more fully described in the section
titled “Risk Factors.” These risks include, but are not
limited to the following:
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Our limited operating history by which potential investors may
measure our chances of achieving success in under our business
model. In addition, our executive officers have a lack of
experience in managing companies similar to the Company. |
|
· |
Federal or state regulations concerning the ridesharing
industry or adoption of new regulations that could have a material
adverse effect on our business segments. |
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Our ability to pay significant indebtedness. |
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Our ability to effectively operate our business segments and
respond to the highly competitive and rapidly evolving marketplace
and regulatory environment in which we intend to operate. |
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· |
Our ability to manage our expansion, growth and operating
expenses. |
|
· |
Our management team’s lack of prior managerial experience
within a highly competitive industry, such as the vehicle rental
business or transportation industry, subjects our Company to
certain qualitative risks and uncertainties. |
|
· |
Our ability to compete, directly and indirectly, and succeed in
the highly competitive and evolving ridesharing industry. |
|
· |
No active market for our common stock exists or may develop,
and you may not be able to resell your common stock at or above the
initial public offering price. |
|
· |
Our ability to protect our intellectual property and to
develop, maintain and enhance a strong brand. |
REGULATION A+
We are offering our Common Stock pursuant to recently adopted rules
by the Securities and Exchange Commission mandated under the
Jumpstart Our Business Startups Act of 2012, or the JOBS Act. These
offering rules are often referred to as “Regulation A+.” We
are relying upon “Tier 1” of Regulation A+, which allows us
to offer of up to $20 million in a 12-month period.
In accordance with the requirements of Tier 1 of Regulation A+, we
will be required to update certain issuer information by
electronically filing a Form 1-Z exit report with the Commission on
EDGAR not later than 30 calendar days after termination or
completion of an offering.
THE OFFERING
| Issuer: |
|
DNA Brands, Inc. |
| |
|
|
| Shares Offered: |
|
A maximum of 3125000000 shares of our
Common Stock (the “Maximum Offering”), at an offering price
of $0.0008 per share (the “Shares”).
|
| |
|
|
| Number of shares of Common Stock Outstanding before the
Offering: |
|
147,046,461 shares of Common Stock. |
| |
|
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| Number of shares of Common Stock to be Outstanding after the
Offering: |
|
3,272,046,461 shares of Common Stock if the Maximum Offering is
sold. |
| |
|
|
| Price per Share: |
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$0.0008. |
| |
|
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| Listing: |
|
Our shares of Common Stock are listed on Over the Counter Pink
Sheets exchange under the symbol “DNAX.” |
| |
|
|
| |
|
There can be no assurance that the Company Common Stock sold in
this Offering will be continue to be approved for listing on OTCPNK
or other recognized securities exchange. For more information see
the section “Risk Factors.” |
| |
|
|
| Maximum Offering: |
|
3,125,000,000 shares of our Common Stock (the “Maximum
Offering”), at an offering price of ($0.0008)
per share (the “Shares”), for total gross proceeds of Two
Hundred and fifty Thousand Dollars ($2,500,000) . |
| |
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| Use of Proceeds: |
|
If we sell all of the Shares being offered, our net proceeds
(after our estimated Offering expenses) will be $2,500,000. We will
use these net proceeds for the operation of our business segments,
working capital and general corporate purposes, and such other
purposes described in the “Use of Proceeds” section of this
Offering Circular. |
| |
|
|
| Risk Factors: |
|
Investing in our Common Stock involves a high degree of risk.
See “Risk Factors”. |
RISK FACTORS
An investment in our Common Stock involves a high degree of
risk. You should carefully consider the risks described below,
together with all of the other information included in this
Offering Circular, before making an investment decision. If any of
the following risks actually occurs, our business, financial
condition or results of operations could suffer. In that case, the
trading price of our shares of common stock could decline and you
may lose all or part of your investment.
The discussions and information in this Offering Circular may
contain both historical and forward-looking statements. To the
extent that the Offering Circular contains forward-looking
statements regarding the financial condition, operating results,
business prospects, or any other aspect of our business, please be
advised that our actual financial condition, operating results, and
business performance may differ materially from that projected or
estimated by us in forward-looking statements. We have attempted to
identify, in context, certain of the factors we currently believe
may cause actual future experience and results to differ from our
current expectations. See “Cautionary Note Regarding Forward
Looking Statements” above for a discussion of forward-looking
statements and the significance of such statements in the context
of this Offering Circular.
RISKS RELATED TO OUR COMPANY
We have a limited operating history in the rideshare industry
on which to judge our business prospects and
management.
We have limited operating history as a rideshare company upon which
to base an evaluation of our business and prospects. You must
consider the risks and difficulties we face as a small operating
company with limited operating history.
On March 25, 2019, we announced that we were shifting our primary
corporate focus in the transportation/ridesharing industry towards
the vehicle rental business with a focus on the maintenance of a
fleet of standard passenger vehicles to be made commercially
available for rent to rideshare drivers. We have limited operating
history in the vehicle rental, fleet management and transportation
industry.
If we do not successfully address these risks, our business,
prospects, operating results and financial condition will be
materially and adversely harmed. Operating results for future
periods are subject to numerous uncertainties and we cannot assure
you that the Company will achieve or sustain profitability. The
Company’s prospects must be considered in light of the risks
encountered by small operating companies with limited operating
history, particularly companies in new and rapidly evolving
markets. Operating results will depend upon many factors, including
our success in attracting and retaining motivated and qualified
personnel, our ability to establish short term credit lines or
obtain financing from other sources, such as the contemplated
Regulation A+ offering, our ability to develop and market new
products, control costs, and general economic conditions. We cannot
assure you that the Company will successfully address any of these
risks.
We will need but may be unable to obtain additional funding
on satisfactory terms, which could dilute our shareholders or
impose burdensome financial restrictions on our
business.
We have relied upon cash from financing activities and in the
future, we hope to rely more predominantly on revenues generated
from operations to fund all of the cash requirements of our
activities. However, there can be no assurance that we will be able
to generate significant cash from our operating activities in the
future to funds our continuing operations. Future financings may
not be available on a timely basis, in sufficient amounts or on
terms acceptable to us, if at all. Any debt financing or other
financing of securities senior to the Common Stock will likely
include financial and other covenants that will restrict our
flexibility. Any failure to comply with these covenants would have
a material adverse effect on our business, prospects, financial
condition and results of operations because we could lose our
existing sources of funding and impair our ability to secure new
sources of funding. However, there can be no assurance that the
Company will be able to generate any investor interest in its
securities.
We have a history of losses and we expect significant
increases in our costs and expenses to result in continuing losses
for at least the foreseeable future.
For the fiscal year ended December 31, 2018, we generated a loss of
approximately ($622,915), bringing the accumulated deficit to
approximately ($2,430,455) at December 31, 2018. Increases in costs
and expenses may result in a continuation of losses for the
foreseeable future. There can be no assurance that we will be
commercially successful.
We have outstanding debt and lease commitments, which is
secured by our assets and it may make it more difficult for us to
make payments on the notes and our other debt and lease
obligations.
As of December 31, 2018, we had outstanding indebtedness totaling
approximately $1,943,146. Our debt commitments could have important
consequences to you. For example, they could:
|
· |
make it more difficult for us to obtain additional financing in
the future for our acquisitions and operations, working capital
requirements, capital expenditures, debt service or other general
corporate requirements; |
|
· |
require us to dedicate a substantial portion of our cash flows
from operations to the repayment of our debt and the interest
associated with our debt rather than to other areas of our
business; |
|
· |
limit our operating flexibility due to financial and other
restrictive covenants, including restrictions on incurring
additional debt, creating liens on our properties, making
acquisitions or paying dividends; |
|
· |
make it more difficult for us to satisfy our obligations with
respect to the notes; |
|
· |
place us at a competitive disadvantage compared to our
competitors that have less debt; and |
|
· |
make us more vulnerable in the event of adverse economic and
industry conditions or a downturn in our business. |
Our ability to meet our debt service and lease obligations depends
on our future financial and operating performance, which will be
impacted by general economic conditions and by financial, business
and other competitive factors, many of which are beyond our
control. These factors could include operating difficulties,
increased operating costs, competition, regulatory developments and
delays in our business strategies. Our ability to meet our debt
service and lease obligations may depend in significant part on the
extent to which we can successfully execute our business strategy
and successfully operate our business segments. We may not be able
to execute our business strategy and our business operations may be
materially impacted.
If our business does not generate sufficient cash flow from
operations or future sufficient borrowings are not available to us
under our credit agreements or from other sources we might not be
able to service our debt and lease commitments, including the
notes, or to fund our other liquidity needs. If we are unable to
service our debt and lease commitments, due to inadequate liquidity
or otherwise, we may have to delay or cancel acquisitions, sell
equity securities, sell assets or restructure or refinance our
debt. We might not be able to sell our equity securities, sell our
assets or restructure or refinance our debt on a timely basis or on
satisfactory terms or at all. In addition, the terms of our
agreements with original equipment manufacturers or debt agreements
may prohibit us from pursuing any of these alternatives.
To service our debt, we will require a significant amount of
cash. Our ability to generate cash depends on many factors beyond
our control.
Our ability to make payments on our debt, and to refinance our debt
and fund planned capital expenditures will depend on our ability to
generate cash in the future. This ability, to some extent, is
subject to general economic, financial, competitive, legislative,
regulatory and other factors that are beyond our control.
We do not believe that our cash flow from operating activities and
our existing capital resources, including the liquidity provided by
our credit agreements and lease financing arrangements, will be
sufficient to fund our operations and commitments for the next
twelve months. We cannot assure you, however, that our business
will generate sufficient cash flow from operations or that future
borrowings will be available to us in an amount sufficient to pay
our debt or to fund our other liquidity needs. We may need to
refinance some or all of our debt on or before maturity, sell
assets, reduce or delay capital expenditures or seek additional
equity financing. We cannot assure you that efforts to refinance
any of our debt will be successful.
Our debt and other commitments expose us to a number of
risks, including:
Cash requirements for debt and lease obligations. A
significant portion of the cash flow we generate must be used to
service the interest and principal payments relating to our various
financial commitments, $1,943,146 of long-term debt as of December
31, 2018. A sustained or significant decrease in our operating cash
flows could lead to an inability to meet our debt service
requirements or to a failure to meet specified financial and
operating covenants included in certain of our agreements. If this
were to occur, it may lead to a default under one or more of our
commitments. In the event of a default for this reason, or any
other reason, the potential result could be the acceleration of
amounts due, which could have a significant and adverse effect on
us.
Availability. Because we finance the majority of our
operating and strategic initiatives using a variety of commitments,
including $1,943,146 in total notes payable and loan facilities, we
are dependent on continued availability of these sources of funds.
If these agreements are terminated or we are unable to access them
because of a breach of financial or operating covenants or
otherwise, we will likely be materially affected.
Interest rate variability. The interest rates we are charged
on a substantial portion of our debt, including the Second Note
payable, are variable, increasing or decreasing based on changes in
certain published interest rates. Increases to such interest rates
would likely result in significantly higher interest expense for
us, which would negatively affect our operating results. Because
many of our customers finance their vehicle purchases, increased
interest rates may also decrease vehicle sales, which would
negatively affect our operating results.
We face intense competition that may lead to downward pricing
or an inability to increase prices.
The vehicle rental and used-vehicle sale industries are highly
competitive and are increasingly subject to substitution. We
believe that price is one of the primary competitive factors in the
vehicle rental market and that technology has enabled
cost-conscious customers, including business travelers, to more
easily compare rates available from rental companies. If we try to
increase our pricing, our competitors, some of whom may have
greater resources and better access to capital than us, may seek to
compete aggressively on the basis of pricing. In addition, our
competitors may reduce prices in order to, among other things,
attempt to gain a competitive advantage, capture market share, or
to compensate for declines in rental activity. To the extent we do
not match or remain within a reasonable competitive margin of our
competitors’ pricing, our revenues and results of operations,
financial condition, liquidity and cash flows could be materially
adversely affected. If competitive pressures lead us to match any
of our competitors’ downward pricing and we are not able to reduce
our operating costs, then our margins, results of operations,
financial condition, liquidity and cash flows could be materially
adversely affected.
Further, we may in the future develop and launch other products or
services that may be in direct competition with the various players
in the ridesharing industry, such as Uber and Lyft, and all of whom
have greater resources than us. There are low barriers to entry,
and we expect that competition will intensify in the future. We
believe that numerous factors, including price, offerings,
reliability, client base, brand name and general economic trends
will affect our ability to compete successfully. Our existing and
future competitors may include many large companies that have
substantially greater market presence and financial, technical,
marketing and other resources than we do. There can be no assurance
that we will have the financial resources, technical expertise or
marketing and support capabilities to compete successfully.
Increased competition could result in significant competition,
which in turn could result in lower revenues, which could
materially adversely affect our potential profitability.
We face competition that may lead to downward pricing or an
inability to increase prices.
The markets in which we operate are highly competitive and are
increasingly subject to substitution. We believe that price is one
of the primary competitive factors in the vehicle rental market and
that the internet has enabled cost-conscious customers, including
business travelers, to more easily compare rates available from
rental companies. If we try to increase our pricing, our
competitors, some of whom may have greater resources and better
access to capital than us, may seek to compete aggressively on the
basis of pricing. In addition, our competitors may reduce prices in
order to attempt to gain a competitive advantage, capture market
share, or to compensate for declines in rental activity. To the
extent we do not match or remain within a reasonable competitive
margin of our competitors’ pricing, our revenues and results of
operations, financial condition, liquidity and cash flows could be
materially adversely affected. If competitive pressures lead us to
match any of our competitors’ downward pricing and we are not able
to reduce our operating costs, then our margins, results of
operations, financial condition, liquidity and cash flows could be
materially adversely impacted.
We face risks related to liabilities and
insurance.
Our businesses expose us to claims for personal injury, death and
property damage resulting from the use of the vehicles rented by
us, and for employment-related injury claims by our employees. We
cannot assure you that we will not be exposed to uninsured
liability potentially resulting in multiple payouts or otherwise,
liabilities in respect of existing or future claims exceeding the
level of our insurance, availability of sufficient capital to pay
any uninsured claims or the availability of insurance with
unaffiliated carriers maintained on economically reasonable terms,
if at all. While we have insurance for many of these risks, we
retain risk relating to certain of these perils and certain perils
are not covered by our insurance.
Regulatory issues. We are subject to a wide variety
of regulatory activities, including:
Governmental regulations, claims and legal proceedings.
Governmental regulations affect almost every aspect of our
business, including the fair treatment of our employees, wage and
hour issues, and our financing activities with customers. We could
also be susceptible to claims or related actions if we fail to
operate our business in accordance with applicable laws.
Vehicle Requirements. Federal and state governments in our
markets have increasingly placed restrictions and limitations on
the vehicles sold in the market in an effort to combat perceived
negative environmental effects. For example, in the U.S., vehicle
manufacturers are subject to federally mandated corporate average
fuel economy standards which will increase substantially through
2025. Furthermore, numerous states, including California, have
adopted or are considering requiring the sale of specified numbers
of zero-emission vehicles. Significant increases in fuel economy
requirements and new federal or state restrictions on emissions on
vehicles and automobile fuels in the U.S. could adversely affect
prices of and demand for the new vehicles that we sell.
Environmental regulations. We are subject to a wide range of
environmental laws and regulations, including those governing:
discharges into the air and water; the operation and removal of
storage tanks; and the use, storage and disposal of hazardous
substances. In the normal course of our operations we use, generate
and dispose of materials covered by these laws and regulations. We
face potentially significant costs relating to claims, penalties
and remediation efforts in the event of non-compliance with
existing and future laws and regulations.
Accounting rules and regulations. The Financial Accounting
Standards Board is currently evaluating several significant changes
to generally accepted accounting standards in the U.S., including
the rules governing the accounting for leases. Any such changes
could significantly affect our reported financial position,
earnings and cash flows. In addition, the Securities and Exchange
Commission is currently considering adopting rules that would
require us to prepare our financial statements in accordance with
International Financial Reporting Standards, which could also
result in significant changes to our reported financial position,
earnings and cash flows.
Changes in ridesharing Vehicle Requirements. Federal and
state governments in our markets have increasingly placed
restrictions and limitations on the vehicles sold in the market in
an effort to combat perceived negative environmental effects. For
example, in the U.S., vehicle manufacturers are subject to
federally mandated corporate average fuel economy standards which
will increase substantially through 2025. Furthermore, numerous
states, including California, have adopted or are considering
requiring the sale of specified numbers of zero-emission vehicles.
Significant increases in fuel economy requirements and new federal
or state restrictions on emissions on vehicles and automobile fuels
in the U.S. could adversely affect prices of and demand for the new
vehicles that we sell.
Changes in the U.S. legal and regulatory environment that
affect our operations, including laws and regulations relating to
taxes, automobile related liability, insurance rates, insurance
products, consumer privacy, data security, employment matters,
licensing and franchising, automotive retail sales, cost and fee
recovery and the banking and financing industry could disrupt our
business, increase our expenses or otherwise have a material
adverse effect on our results of operations, financial condition,
liquidity and cash flows.
We are subject to a wide variety of U.S. laws and regulations and
changes in the level of government regulation of our business have
the potential to materially alter our business practices and
materially adversely affect our financial condition, results of
operations, liquidity and cash flows, including our profitability.
Those changes may come about through new laws and regulations or
changes in the interpretation of existing laws and regulations.
Any new, or change in existing, U.S. law and regulation with
respect to optional insurance products or policies could increase
our costs of compliance or make it uneconomical to offer such
products, which would lead to a reduction in revenue and
profitability. If customers decline to purchase supplemental
liability insurance products from us as a result of any changes in
these laws or otherwise, our results of operations, financial
condition, liquidity and cash flows could be materially adversely
affected.
Certain proposed or enacted laws and regulations with respect to
the banking and finance industries, including the Dodd- Frank Wall
Street Reform and Consumer Protection Act (including risk retention
requirements) and amendments to the SEC's rules relating to
asset-backed securities, could restrict our access to certain
financing arrangements and increase our financing costs, which
could have a material adverse effect on our financial condition,
results of operations, liquidity and cash flows.
Inadequacy of capital.
The expected gross offering proceeds of a maximum of $2,500,000 may
never be realized. While we believe that such proceeds will
capitalize and sustain us to allow for the continued execution and
operation of our business segments, if only a fraction of this
Offering is sold, or if certain business segments financially
underperform expectations, we may have inadequate funds to fully
develop our business. Although we believe that the proceeds from
this Offering will be sufficient to help sustain our development
process and business operations, there is no guarantee that we will
raise all the funds needed to adequately fund the operations of our
business segments.
We may not be able to obtain adequate financing to continue
our operations.
We will need to raise additional funds through the issuance of
equity, equity-related, or debt securities or through obtaining
credit from government or financial institutions. This capital will
be necessary to our Fleet Management business. We cannot be certain
that additional funds will be available to us on favorable terms
when required, or at all. If we cannot raise additional funds when
we need them, our financial condition, results of operations,
business and prospects would be materially and adversely
affected.
We may pursue strategic transactions which could be difficult
to implement, disrupt our business or change our business profile
significantly.
Any future strategic acquisition or disposition of assets or a
business could involve numerous risks, including: (i) potential
disruption of our ongoing business and distraction of management;
(ii) difficulty integrating the acquired business or segregating
assets and operations to be disposed of; (iii) exposure to unknown,
contingent or other liabilities, including litigation arising in
connection with the acquisition or disposition or against any
business we may acquire; (iv) changing our business profile in ways
that could have unintended negative consequences; and (v) the
failure to achieve anticipated synergies.
If we enter into significant strategic transactions, the related
accounting charges may affect our financial condition and results
of operations, particularly in the case of an acquisition. The
financing of any significant acquisition may result in changes in
our capital structure, including the incurrence of additional
indebtedness. A material disposition could require the amendment or
refinancing of our outstanding indebtedness or a portion
thereof.
We rely on our management team, which has little experience
working together.
We depend on a small number of executive officers and other members
of management to work effectively as a team, to execute our
business strategy and operating business segments, and to manage
employees and consultants. Our success will be dependent on the
personal efforts of Howard Ullman and Adrian McKenzie, our
president and CEO respectively, and such other key personnel. Any
of our officers or employees can terminate his or her employment
relationship at any time, and the loss of the services of such
individuals could have a material adverse effect on our business
and prospects. Our management team has worked together for only a
very short period of time and may not work well together as a
management team.
Raising additional capital by issuing additional securities
may cause dilution to our current and future
shareholders.
We will need to, or desire to, raise substantial additional capital
in the future. Our future capital requirements will depend on many
factors, including, among others:
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Our degree of success in generating rental and fees from our
Fleet Management business; |
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The costs of establishing or acquiring sales, marketing, and
distribution capabilities for our services; |
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The extent to which we acquire or invest in businesses,
products, or technologies, and other strategic relationships;
and |
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The costs of financing unanticipated working capital
requirements and responding to competitive pressures. |
If we raise additional funds by issuing equity or convertible debt
securities, we will reduce the percentage of ownership of the
then-existing shareholders, and the holders of those newly-issued
equity or convertible debt securities may have rights, preferences,
or privileges senior to those possessed by our then-existing
shareholders. Additionally, future sales of a substantial number of
shares of our Common Stock, or other equity-related securities in
the public market could depress the market price of our Common
Stock and impair our ability to raise capital through the sale of
additional equity or equity-linked securities. We cannot predict
the effect that future sales of our Common Stock, or other
equity-related securities would have on the market price of our
Common Stock at any given time.
If our management is unable to accurately estimate future
levels of rental activity and adjust the number and mix of vehicles
used in our rental operations accordingly, our results of
operations, financial condition, liquidity and cash flows could
suffer.
Because vehicle costs typically represent our single largest
expense and vehicle purchases are typically made weeks or months in
advance of the expected use of the vehicle, our business is
dependent upon the ability of our management to accurately estimate
future levels of rental activity and consumer preferences with
respect to the mix of vehicles used in our rental operations. To
the extent we do not purchase sufficient numbers of vehicles, or
the right types of vehicles, to meet consumer demand, we may lose
revenue to our competitors. If we purchase too many vehicles, our
vehicle utilization could be adversely affected and we may not be
able to dispose of excess vehicles in a timely and cost-effective
manner. If our management is unable to accurately estimate future
levels of rental activity and determine the appropriate mix of
vehicles used in our rental operations, including because of
changes in the competitive environment or economic factors outside
of our control, our results of operations, financial condition,
liquidity and cash flows could suffer.
Limitations of Director Liability and Indemnification of
Directors and Officers and Employees.
Our Certificate of Incorporation limits the liability of directors
to the maximum extent permitted by Delaware law. Delaware law
provides that directors of a corporation will not be personally
liable for monetary damages for breach of their fiduciary duties as
directors, except for liability for any:
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breach of their duty of loyalty to us or our stockholders; |
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act or omission not in good faith or that involves intentional
misconduct or a knowing violation of law; |
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unlawful payments of dividends or unlawful stock repurchases or
redemptions as provided in Section 174 of the Delaware General
Corporation Law; or |
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transactions for which the directors derived an improper
personal benefit. |
These limitations of liability do not apply to liabilities arising
under the federal or state securities laws and do not affect the
availability of equitable remedies such as injunctive relief or
rescission. Our bylaws provide that we will indemnify our
directors, officers and employees to the fullest extent permitted
by law. Our bylaws also provide that we are obligated to advance
expenses incurred by a director or officer in advance of the final
disposition of any action or proceeding. We believe that these
bylaw provisions are necessary to attract and retain qualified
persons as directors and officers. The limitation of liability in
our Certificate of Incorporation and bylaws may discourage
stockholders from bringing a lawsuit against directors for breach
of their fiduciary duties. They may also reduce the likelihood of
derivative litigation against directors and officers, even though
an action, if successful, might provide a benefit to us and our
stockholders. Our results of operations and financial condition may
be harmed to the extent we pay the costs of settlement and damage
awards against directors and officers pursuant to these
indemnification provisions.
Risks of borrowing.
If we incur additional indebtedness, a portion of our future
revenues will have to be dedicated to the payment of principal and
interest on such indebtedness. Typical loan agreements also might
contain restrictive covenants, which may impair our operating
flexibility. Such loan agreements would also provide for default
under certain circumstances, such as failure to meet certain
financial covenants. A default under a loan agreement could result
in the loan becoming immediately due and payable and, if unpaid, a
judgment in favor of such lender which would be senior to our
rights. A judgment creditor would have the right to foreclose on
any of our assets resulting in a material adverse effect on our
business, ability to generate revenue, operating results or
financial condition.
Unanticipated obstacles to the operations of our business
segments.
Many of our potential business endeavors are capital intensive and
may be subject to statutory or regulatory requirements. The Board
of Directors believes that the chosen operations and strategies are
achievable in light of current economic and legal conditions with
the skills, background, and knowledge of our principals and
advisors. The Board of Directors reserve the right to make
significant modifications to our stated strategies depending on
future events.
Risks of operations.
Our operating results may be volatile, difficult to predict and may
fluctuate significantly in the future due to a variety of factors,
many of which may be outside of our control. Due to the nature of
our target market, we may be unable to accurately forecast our
future revenues and operating results. There are no assurances that
we can generate significant revenue or achieve profitability. We
anticipate having a sizeable amount of fixed expenses, and we
expect to incur losses due to the execution of our business
strategy, continued development efforts and related expenses. As a
result, we will need to generate significant revenues while
containing costs and operating expenses if we are to achieve
profitability. We cannot be certain that we will ever achieve
sufficient revenue levels to achieve profitability.
Minimal employees or infrastructure.
We will have a small number of employees and we don’t have any
operational infrastructure or prior operating history. We intent to
rely on our management team, our advisors, third-party consultants,
outside attorneys, advisors, accountants, auditors, and other
administrators. The loss of services of any of such personnel may
have a material adverse effect on our business and operations and
there can be no assurance that if any or all of such personnel were
to become unavailable, that qualified successors can be found, on
acceptable terms.
Limitation on remedies; indemnification.
Our Certificate of Incorporation, as amended from time to time,
provides that officers, directors, employees and other agents and
their affiliates shall only be liable to the Company and its
shareholders for losses, judgments, liabilities and expenses that
result from the fraud or other breach of fiduciary obligations.
Additionally, we intend to enter into corporate indemnification
agreements with each of our officers and directors consistent with
industry practice. Thus, certain alleged errors or omissions might
not be actionable by the Company. Our governing instruments also
provide that, under the broadest circumstances allowed under law,
we must indemnify its officers, directors, employees and other
agents and their affiliates for losses, judgments, liabilities,
expenses and amounts paid in settlement of any claims sustained by
them in connection with the Company, including liabilities under
applicable securities laws.
No dividends or return of profits.
We have not had any profits from any operations to date. We have
never declared or paid any cash dividends on our Common Stock. We
currently intend to retain future earnings, if any, to finance the
expansion of our operations. As a result, we do not anticipate
paying any cash dividends in the foreseeable future.
We may fail to respond adequately to changes in technology
and customer demands.
In recent years our industry has been characterized by rapid
changes in technology and customer demands. For example, in recent
years, industry participants have taken advantage of new
technologies to improve vehicle utilization, decrease customer wait
times and improve customer satisfaction. Our industry has also seen
the entry of new competitors whose businesses and efforts continue
to introduce various types of self-driving vehicles. Our ability to
continually improve our current processes, products and offerings
in response to changes in technology is essential in maintaining
our competitive position and maintaining current levels of customer
satisfaction. We may experience technical or other difficulties
that could delay or prevent the development, introduction or
marketing of new products or enhanced product offerings.
Force Majeure.
Our business is uniquely susceptible to unforeseen delays or
failures that are caused by forces of nature and related
circumstances. These factors are outside and beyond our control.
Delay or failure may be due to any act of God, fire, war,
terrorism, flood, strike, labor dispute, disaster, transportation
or laboratory difficulties or any similar or dissimilar event
beyond our control. We will not be held liable to any shareholder
in the event of any such failure.
We may not be able to manage our growth
effectively.
Our growth is expected to place, a significant strain on our
managerial, operational and financial resources. As the number of
our users, partners and other business partners grows, we must
increasingly manage multiple relationships with various customers,
strategic partners and other third parties. There can be no
assurance that our systems, procedures or controls will be adequate
to support our operations or that our management will be able to
achieve the rapid execution necessary to successfully grow and
scale our services, products and offerings. Our operating results
will also depend on our ability to expand sales and marketing
commensurate with the growth of our business and the ridesharing
industry. If we are unable to manage growth effectively, our
business, results of operations and financial condition will be
adversely affected.
Maintaining favorable brand recognition is essential to our
success, and failure to do so could materially adversely affect our
results of operations, financial condition, liquidity and cash
flows.
Our business is heavily dependent upon the favorable brand
recognition that our “DNA Brands” brand names have in the markets
in which they participate. Factors affecting brand recognition are
often outside our control, and our efforts to maintain or enhance
favorable brand recognition, such as marketing and advertising
campaigns, may not have their desired effects. In addition, it may
be difficult to monitor or enforce such requirements, particularly
in foreign jurisdictions and various laws may limit our ability to
enforce the terms of these agreements or to terminate the
agreements. Any decline in perceived favorable recognition of our
brands could materially adversely affect our results of operations,
financial condition, liquidity and cash flows.
Changes in U.S., global or regional economic
conditions.
A decrease in economic activity in the United States or in other
regions of the world in which we plan to offer our Fleet Management
offerings and related services could adversely affect demand, thus
reducing our ability to generate revenue. A decline in economic
conditions could reduce our users interest in utilizing our
products and services. In addition, an increase in price levels
generally, or in price levels in a particular sector such as the
fuel sector, could result in a shift in consumer demand away from
ridesharing services, which could also adversely affect our
revenues and, at the same time, increase our costs.
In the car rental business, a decline in economic activity
typically results in a decline in both business and leisure travel
and, accordingly, a decline in the volume of car rental
transactions. In the equipment rental business, a decline in
economic activity typically results in a decline in activity in
non-residential construction and other businesses in which our
equipment rental customers operate and, therefore, results in a
decline in the volume of equipment rental transactions. In the case
of a decline in car or equipment rental activity, we may reduce
rental rates to meet competitive pressures, which could have a
material adverse effect on our results of operations. A decline in
economic activity also may have a material adverse effect on
residual values realized on the disposition of our revenue earning
cars and/or equipment.
RISKS RELATED TO OUR BUSINESS AND INDUSTRY
If our efforts to attract prospective customers to our Fleet
Management business are not successful, or we fail to retain
customers or continue attracting existing customers to our products
and services, our growth prospects and revenue will be adversely
affected.
Our ability to grow our business and generate revenue depends on
retaining and expanding our total customer base, increasing revenue
by effectively increasing the number of customers to our Fleet
Management business. We must convince prospective customers of the
benefits of our ridesharing vehicle rental services and equipment
offerings and our existing users of the continuing value of our
products and services. Our ability to attract new users and
customers, retain existing users and customers. If we fail to keep
pace with competing offerings or technological advancements to the
ridesharing industry or our partner fails to offer compelling
product offerings and state-of-the-art delivery for its Rideshare
Platform to meet consumer demands, our ability to grow or sustain
the reach of our product and service offerings, attract and retain
users and customers may be adversely affected.
We have no control over the Vehicle Registration Requirements
or such other ridesharing vehicle requirements imposed by the major
TNC providers, and our business may be adversely affected in the
event that TNC providers restrict or limit prospective ridesharing
drivers from utilizing or registering rental vehicles with the
TNC.
We rely on the major TNC businesses that drive and service the
ridesharing economy, over whom we have no control, to impose the
Vehicle Registration Requirements and permit prospective
ridesharing drivers to utilize lease or rental vehicles, such as
our product offerings, under their employment with the major TNC
ridesharing services. We cannot guarantee that each major TNC
business will always permit prospective ridesharing drivers to use
third-party lease or rental vehicles under their employment
agreement with the TNC.
Our business may be adversely affected if our ability to rent
vehicles maintained under our Fleet Management business is limited,
impaired or delayed because of a modification to the Vehicle
Registration Requirements or any similar prohibition that prevents
prospective ridesharing drivers from renting our Fleet Management
vehicles or other third-party vehicle rentals for use under the
terms of the prospective ridesharing drivers agreement with such
TNC businesses.
We face risks of increased costs of cars and of decreased
profitability, including as a result of limited supplies of
competitively priced cars.
Certain car manufacturers, such as Ford, have adopted strategies to
de-emphasize sales to the car rental industry which they view as
less profitable due to historical sales incentive and other
discount programs that tended to lower the average cost of cars for
fleet purchasers such as us. Reduced or limited supplies of
equipment together with increased prices are risks that we also
face in our equipment rental business. We cannot offer assurance
that we will be able to pass on increased costs of cars or
equipment to our rental customers. Failure to pass on significant
cost increases to our customers would have a material adverse
impact on our results of operations and financial condition.
Fluctuations in fuel costs or reduced supplies could harm our
business.
We could be adversely affected by limitations on fuel supplies, the
imposition of mandatory allocations or rationing of fuel or
significant increases in fuel prices. A severe or protracted
disruption of fuel supplies or significant increases in fuel prices
could have a material adverse effect on our financial condition and
results of operations, either by directly interfering with our
normal activities or by disrupting the air travel on which a
significant portion of our car rental business relies.
The concentration of our reservations, accounting and
information technology functions at a limited number of facilities
in Florida creates risks for us.
We have concentrated our reservations functions for the United
States in one office location in Fort Lauderdale, Florida, and we
have concentrated our accounting functions for the United States in
one office location in Los Angeles. In addition, our major
information systems are centralized in our office location in Fort
Lauderdale. A disruption of normal business at any of our principal
office location in Fort Lauderdale, Florida, whether as the result
of localized conditions (such as a fire or explosion) or as the
result of events or circumstances of broader geographic impact
(such as an earthquake, storm, flood, epidemic, strike, act of war,
civil unrest or terrorist act), could materially adversely affect
our business by disrupting normal reservations, customer service,
accounting and systems activities.
We face risks arising from our heavy reliance on
communications networks and centralized information
systems.
We rely heavily on information systems to accept reservations,
process rental and sales transactions, manage our fleets of cars
and equipment, account for our activities and otherwise conduct our
business. We have centralized our information systems in one office
location in Fort Lauderdale, Florida, and we rely on communications
service providers to link our systems with the business locations
these systems serve. A simultaneous loss of both facilities, or a
major disruption of communications between the systems and the
locations they serve, could cause a loss of reservations, interfere
with our ability to manage our fleet, slow rental and sales
processes and otherwise materially adversely affect our ability to
manage our business effectively. Our systems back-up plans,
business continuity plans and insurance programs are designed to
mitigate such a risk, not to eliminate it. In addition, because our
systems contain information about individuals and businesses, our
failure to maintain the security of the data we hold, whether the
result of our own error or the malfeasance or errors of others,
could harm our reputation or give rise to legal liabilities leading
to lower revenues, increased costs and other material adverse
effects on our results of operations.
The misuse or theft of information we possess could harm our
reputation or competitive position, adversely affect the price at
which shares of our common stock trade or give rise to material
liabilities.
We possess non-public information with respect to individuals,
including our customers and our current and former employees, and
businesses, as well as non-public information with respect to our
own affairs. The misuse or theft of that information by either our
employees or third parties could result in material damage to our
brand, reputation or competitive position or materially affect the
price at which shares of our Common Stock trade. In addition,
depending on the type of information involved, the nature of our
relationship with the person or entity to which the information
relates, the cause and the jurisdiction whose laws are applicable,
that misuse or theft of information could result in governmental
investigations or material civil or criminal liability. The laws
that would be applicable to such a failure are rapidly evolving and
becoming more burdensome.
If we acquire any businesses in the future, they could prove
difficult to integrate, disrupt our business, or have an adverse
effect on our results of operations.
We intend to pursue growth primarily through internal growth, but
from time to time we may consider opportunistic acquisitions which
may be significant. Any future acquisition would involve numerous
risks including, without limitation:
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potential disruption of our ongoing business and distraction of
management; |
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difficulty integrating the acquired business; and |
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exposure to unknown liabilities, including litigation against
the companies we may acquire. |
If we make acquisitions in the future, acquisition-related
accounting charges may affect our balance sheet and results of
operations. In addition, the financing of any significant
acquisition may result in changes in our capital structure,
including the incurrence of additional indebtedness. We may not be
successful in addressing these risks or any other problems
encountered in connection with any acquisitions.
We are subject to a number of risks related to other payment
solution providers.
We will accept payments through various payment solution providers,
such as telco integrated billings and prepaid codes vendors. These
payment solution providers provide services to us in exchange for a
fee, which may be subject to change. Furthermore, we rely on their
accurate and timely reports on sales and redemptions. If such
accurate and timely reports are not being provided, it will affect
the accuracy of our reports to our licensors, and also affect the
accuracy of our financial reporting.
Our business is seasonal in Florida, and a disruption in
rental activity during our peak season could materially adversely
affect our results of operations.
Certain significant components of our expenses, including real
estate taxes, rent, utilities, maintenance and other facility-
related expenses, the costs of operating our information systems
and minimum staffing costs, are fixed in the short-run. Seasonal
changes in our revenues do not alter those fixed expenses,
typically resulting in higher profitability in periods when our
revenues are higher and lower profitability in periods when our
revenues are lower. The Company believes that the second and third
quarters of the year will be stronger quarters due to their
increased levels of leisure travel and construction activity. Any
occurrence that disrupts rental activity during the second or third
quarters could have a disproportionately material adverse effect on
our liquidity and/or results of operations.
Governmental regulation and associated legal uncertainties
could limit our ability to expand our product offerings or enter
into new markets and could require us to expend significant
resources, including the attention of our management, to review and
comply with such regulations.
Elements of the ridesharing industry are currently or will be
regulated by Federal, state, city and/or local governments, and our
ability to provide these services is and will continue to be
affected by government regulations. The implementation of
unfavorable regulations or unfavorable interpretations of existing
regulations by courts or regulatory bodies with respect to the
ridesharing industry or “Transportation Network Companies”
(“TNC”) could require us to incur significant compliance
costs, cause the development of the affected markets to become
impractical and otherwise have a material adverse effect on our
business, results of operations and financial condition. Moreover,
in the future, we may elect to add services or products to our
business plan that compete directly with ridesharing services, such
as Uber and Lyft, which could expose us to additional regulations,
compliance obligations and legal challenges. In addition, our
business strategy involves expansion into regions around the world,
many of which have different legislation, regulatory environments,
tax laws and levels of political stability. Compliance with foreign
legal, governmental, regulatory or tax requirements will place
demands on our time and resources, and we may nonetheless
experience unforeseen and potentially adverse legal, regulatory or
tax consequences. It is intended that our business will assist with
the processing of customer credit card transactions which would
result in us receiving and storing personally identifiable
information. This information is increasingly subject to
legislation and regulations in numerous jurisdictions around the
world. This legislation and regulation is generally intended to
protect the privacy and security of personal information, including
credit card information, that is collected, processed and
transmitted in or from the governing jurisdiction. We could be
adversely affected if government regulations require TNCs, and as a
result, us to significantly change our business practices with
respect to this type of information.
Manufacturer safety recalls could create risks to our
business.
Our Fleet Management vehicles may be subject to safety recalls by
their manufacturers. The Raechel and Jacqueline Houck Safe Rental
Car Act of 2015 prohibits us from renting vehicles with open
federal safety recalls and to repair or address these recalls prior
to renting or selling the vehicle. Any federal safety recall with
respect to our vehicles would require us to decline to rent
recalled vehicles until we can arrange for the steps described in
the recall to be taken. If a large number of vehicles are the
subject of a recall or if needed replacement parts are not in
adequate supply, we may not be able to rent recalled vehicles for a
significant period of time. Those types of disruptions could
jeopardize our ability to fulfill existing contractual commitments
or satisfy demand for our vehicles and could also result in the
loss of business to our competitors. Depending on the severity of
any recall, it could materially adversely affect our revenues,
create customer service problems, reduce the residual value of the
recalled vehicles and harm our general reputation.
If we are unable to purchase adequate supplies of
competitively priced vehicles and the cost of the vehicles we
purchase increases, our financial condition, results of operations,
liquidity and cash flows may be materially adversely
affected.
The price and other terms at which we can acquire vehicles vary
based on market and other conditions. For example, certain vehicle
manufacturers have in the past, and may in the future, utilize
strategies to de-emphasize sales to the vehicle rental industry,
which can negatively impact our ability to obtain vehicles on
competitive terms and conditions. Consequently, there is no
guarantee that we can purchase a sufficient number of vehicles at
competitive prices and on competitive terms and conditions. If we
are unable to obtain an adequate supply of vehicles, or if we
obtain less favorable pricing and other terms when we acquire
vehicles and are unable to pass on any increased costs to our
customers, then our financial condition, results of operations,
liquidity and cash flows may be materially adversely affected.
If third parties claim that we infringe their intellectual
property, it may result in costly litigation.
We cannot assure you that third parties will not claim our current
or future products or services infringe their intellectual property
rights. Any such claims, with or without merit, could cause costly
litigation that could consume significant management time. As the
number of product and services offerings in the ridesharing
industry increases and functionalities increasingly overlap,
companies such as ours may become increasingly subject to
infringement claims. Such claims also might require us to enter
into royalty or license agreements. If required, we may not be able
to obtain such royalty or license agreements or obtain them on
terms acceptable to us.
Failure to comply with federal and state privacy laws and
regulations, or the expansion of current or the enactment of new
privacy laws or regulations, could adversely affect our
business.
A variety of federal and state laws and regulations govern the
collection, use, retention, sharing and security of consumer data.
The existing privacy-related laws and regulations are evolving and
subject to potentially differing interpretations. In addition,
various federal, state and foreign legislative and regulatory
bodies may expand current or enact new laws regarding privacy
matters. Further, several states have adopted legislation that
requires businesses to implement and maintain reasonable security
procedures and practices to protect sensitive personal information
and to provide notice to consumers in the event of a security
breach. Any failure, or perceived failure, by us to comply with our
posted privacy policies or with any data-related consent orders,
Federal Trade Commission requirements or orders or other federal,
state or international privacy or consumer protection-related laws,
regulations or industry self- regulatory principles could result in
claims, proceedings or actions against us by governmental entities
or others or other liabilities, which could adversely affect our
business. In addition, a failure or perceived failure to comply
with industry standards or with our own privacy policies and
practices could adversely affect our business. Federal and state
governmental authorities continue to evaluate the privacy
implications inherent in the use of third-party web
“cookies” for behavioral advertising. The regulation of
these cookies and other current online advertising practices could
adversely affect our business.
Our business model is entirely dependent on the continued
success and viability of the ridesharing industry and
“transportation network companies”, and we may become subject to
government regulation and legal uncertainties that could reduce
demand for our products and services or increase the cost of doing
business, thereby adversely affecting our ability to generate
revenues.
The past year has seen a boom in the number of ridesharing
companies that allow customers to order rides on demand using apps
on their smartphones. Private drivers use their personal
automobiles to pick up the customers and drive them to the desired
destination in exchange for a negotiated fee. The passengers then
write reviews, similar to other peer-to-peer online services. Large
amounts of venture capital and private equity has been invested in
a handful of these new companies, which have the potential to
disrupt the traditional transportation industry. However, the
ridesharing marketplace has come under increased scrutiny from
governments and various interested groups (such as taxi drivers,
taxi companies, environmentalists, etc.) have continuously opposed
the proliferation of ridesharing services in recent years. Despite
opposition from many of these interested groups and governmental
agencies, on September 19, 2013, the California Public Utilities
Commission (“CPUC”) voted unanimously to allow these
ridesharing services to operate in California as a new category of
business called “transportation network companies”
(“TNC”).
In many states and possibly Florida, licenses will be issued to
qualifying TNCs, subject to new regulations that require drivers to
undergo criminal background checks and vehicle inspections, receive
driver training, follow a zero-tolerance policy on drugs and
alcohol, and carry insurance policies with a minimum of $1 Million
in liability coverage. Some of the companies that are expected to
receive new TNC licenses include Lyft (www.lyft.me), SideCar
(www.side.cr) and UberX (www.uber.com). The CPUC has responded to
rapidly evolving disruptive technology and its decision will likely
set an example for cities and states across the country. Its
decision is also expected to preempt ongoing efforts by some
California cities to regulate or ban peer-to-peer ridesharing under
their authority to license taxi companies. The City of Los Angeles,
however, is currently considering a possible appeal of the CPUC
decision and implementing additional regulations to TNC drivers,
which have been referred to as “Bandit cabs” by some on the
City Council. Other cities across the country are also now looking
at new regulations for Rideshare companies.
As can be gleaned from these recent events around the ridesharing
industry, this new business model is not without its opponents.
Some raise concerns about public safety and the potential for abuse
or unintended consequences, while others question whether the new
regulations require additional enforcement capability. The taxi
industry, which is less than pleased to see this new competition,
has criticized these ridesharing apps as operating essentially like
unlicensed taxi cabs. Since the new technology uses GPS to measure
the distance of a ride and the corresponding fee, the taxi industry
believes that it works similarly to a taxi meter and should
therefore comply with local taxi ordinances. Some of the primary
concerns raised by skeptics include how liability will be allocated
between the TNC and its independent contractor driver, and how the
insurance industry will adapt to this new business. Proper hiring
practices, training and oversight by the TNC also will be necessary
to ensure public safety. The extent to which the TNCs will be
inspected and the new regulations enforced is still unclear, but
this will be an important means by which the public may judge the
safety of this new industry. Based on the direction states and
cities are heading with respect to the governance of TNCs or
ridesharing services, and the ever increasing popularity and use of
ridesharing services and TNCs, it is likely that a number of laws
and regulations will become applicable to us or the TNCs which we
rely upon for the operation of products and related services or may
be adopted in the future with respect to mobile applications and/or
TNCs covering issues such as: (i) liability, (ii) unionization,
(iii) rules and standards for drivers, vehicles, and passenger
safety, (iv) licensing and insurance requirements, and (v)
environmental concerns, among others. It is difficult to predict
how existing laws will be applied to our business and the new laws
and regulations to which we and/or ridesharing services will likely
become subject. If ridesharing services are not able to comply with
these laws or regulations or if we become liable under these laws
or regulations, we could be directly harmed, and we may be forced
to implement new measures to sustain our operating business
segments. We anticipate that scrutiny and regulation of the
ridesharing industry will increase and we will be required to
devote legal and other resources to addressing such regulation,
either directly or indirectly. Changes to these laws intended to
address these issues, including some recently proposed changes,
could create uncertainty in the marketplace. Such uncertainty could
reduce demand for our services or increase the cost of doing
business due to increased costs of litigation or increased service
or operating costs.
We may be subject to a number of risks related to credit card
payments, including data security breaches and fraud that we or
third parties experience or additional regulation, any of which
could adversely affect our business financial condition and results
of operations.
We may be subject to a number of risks related to credit card
payments, including data security breaches and fraud that we or
third parties experience or additional regulation, any of which
could adversely affect our business, financial condition and
results of operations. We anticipate accepting payment from our
users primarily through credit card transactions and certain online
payment service providers. The ability to access credit card
information on a real time-basis without having to proactively
reach out to the consumer each time we process an auto-renewal
payment or a payment for the purchase of a premium feature on any
of our dating products is critical to our success. When we or a
third party experiences a data security breach involving credit
card information, affected cardholders will often cancel their
credit cards. In the case of a breach experienced by a third party,
the more sizable the third party's customer base and the greater
the number of credit card accounts impacted, the more likely it is
that our users would be impacted by such a breach. To the extent
our users are ever affected by such a breach experienced by us or a
third party, affected users would need to be contacted to obtain
new credit card information and process any pending transactions.
It is likely that we would not be able to reach all affected users,
and even if we could, some users' new credit card information may
not be obtained and some pending transactions may not be processed,
which could adversely affect our business, financial condition and
results of operations. Even if our users are not directly impacted
by a given data security breach, they may lose confidence in the
ability of service providers to protect their personal information
generally, which could cause them to stop using their credit cards
online and choose alternative payment methods that are not as
convenient for us or restrict our ability to process payments
without significant user effort. Additionally, if we fail to
adequately prevent fraudulent credit card transactions, we may face
civil liability, diminished public perception of our security
measures and significantly higher credit card-related costs, any of
which could adversely affect our business, financial condition and
results of operations. Finally, the passage or adoption of any
legislation or regulation affecting the ability of service
providers to periodically charge consumers for recurring membership
payments may adversely affect our business, financial condition and
results of operations.
We depend on the continued growth and reliability of the
internet, global positioning systems, ridesharing services and
apps.
The recent growth in the use of apps and ridesharing services may
cause periods of decreased performance for many ridesharing
services, internet providers, apps and related service providers.
If app and ridesharing usage continues to grow rapidly, the
infrastructure these services are reliant upon (i.e. the internet,
global positioning systems, and telecommunications networks and
devices) may not be able to support these demands and therefore
performance and reliability may decline. Decreased performance with
respect to some or all of these critical components of our business
model has also been attributed to illegal attacks by third parties.
If outages or delays occur frequently or increase in frequency, or
businesses are not able to protect themselves adequately from such
illegal attacks, the market for mobile apps, ridesharing services
and related technologies could grow more slowly or decline, which
may reduce the demand for our Rideshare Platform and related
services.
Our business is dependent upon consumers renting our Fleet
Management vehicles, and using the related services of our
partner’s Rideshare Platform and if we fail to obtain broad
adoption, our business would be adversely affected.
Our success will depend on our ability to monetize our fleet of
vehicles, which depends on our partner’s Rideshare Platform being
fully functional and reliable as intended, and our customers
adopting it as a ridesharing vehicle rental service provider. We do
not know if the products and services will be successful over the
long term and market acceptance may be hindered if our Rideshare
platform doesn’t function efficiently and/or our user experience
isn’t compelling and financially beneficial to our users. If
consumers do not adopt and use our Rideshare Platform and related
services, we will not be able to generate revenues and our
financial condition will suffer as a result.
No assurances of protection for proprietary rights; reliance
on trade secrets.
In certain cases, we may rely on trade secrets to protect
intellectual property, proprietary technology and processes, which
we have acquired, developed or may develop in the future. There can
be no assurances that secrecy obligations will be honored or that
others will not independently develop similar or superior products
or technology. The protection of intellectual property and/or
proprietary technology through claims of trade secret status has
been the subject of increasing claims and litigation by various
companies both in order to protect proprietary rights as well as
for competitive reasons even where proprietary claims are
unsubstantiated. The prosecution of proprietary claims or the
defense of such claims is costly and uncertain given the
uncertainty and rapid development of the principles of law
pertaining to this area. We may also be subject to claims by other
parties with regard to the use of intellectual property, technology
information and data, which may be deemed proprietary to
others.
We currently have a small sales and marketing organization.
If we are unable to expand our direct sales force in Florida to
promote our services and related products, the commercial appeal
and brand awareness for our products and services may be
diminished.
We currently have a small sales and marketing organization. The
Company may expand the core sales and marketing team to oversee the
sales and marketing of our “DNA Brands!” business. We will
incur significant additional expenses and commit significant
additional management resources to expand and grow our sales force.
We may not be able to build on the expansion of these capabilities
despite these additional expenditures. If we elect to rely on third
parties to sell our products in the U.S., we may receive less
revenue than if we sold our products directly. In addition,
although we would intend to diligently monitor their activities, we
may have little or no control over the sales efforts of those third
parties. In the event we are unable to develop and expand our own
sales force or collaborate with a third party to sell our products,
we may not be able to operate our products and/or services which
would negatively impact our ability to generate revenue. We may not
be able to enter into any marketing arrangements on favorable terms
or at all. If we are unable to enter into a marketing arrangement
for our products, we may not be able to develop an effective sales
force to successfully operate our products and/or services. If we
fail to enter into marketing arrangements for our products and are
unable to develop an effective sales force, our ability to generate
revenue would be limited.
RISKS RELATED TO THIS OFFERING
Our Offering differs significantly from an underwritten
initial public offering.
This is not an underwritten initial public offering. This listing
differs from an underwritten initial public offering in several
significant ways, which include, but are not limited to, the
following:
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There are no underwriters. Consequently, there will be no book
building process and no price at which underwriters initially sold
shares to the public to help inform efficient price discovery; |
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There can be no assurance that we will be able to stay current
with OTC Bulletin Board Pink Current Information requirements; |
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There may be low trading volume of our Common Stock limiting
their liquidity; |
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We are not currently working with a market maker, therefore is
no underwriters’ option to purchase additional shares to help
stabilize, maintain, or affect the public price of our Common
Stock; |
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Given that there will be no underwriters’ option to purchase
additional shares or otherwise underwriters in engaging in
stabilizing transactions, there could be greater volatility in the
public price of our Common Stock during the period immediately
following qualification of this Offering; and |
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We will not conduct a traditional “roadshow” with underwriters
prior to the qualification of this Offering. As a result, there may
not be efficient price discovery with respect to our ordinary
shares or sufficient demand among investors immediately after our
listing, which could result in a more volatile public price of our
ordinary shares. |
Such differences from an underwritten initial public offering could
result in a volatile market price for our Common Stock and
uncertain trading volume and may adversely affect your ability to
sell your Common Stock.
The public price of our Common Stock may be volatile, and
could, following a sale decline significantly and
rapidly.
As this Offering is taking place via a process that is not an
underwritten initial public offering, there will be no book
building process and no price at which underwriters initially sold
shares to the public to help inform efficient price discovery with
respect to the opening trades on securities exchange markets.
Following this Offering, the public price of our Common Stock on
the OTCPNK exchange may lead to price volatility.
No minimum capitalization.
We do not have a minimum capitalization and we may use the proceeds
from this Offering immediately following our acceptance of the
corresponding subscription agreements. It is possible we may only
raise a minimum amount of capital, which could leave us with
insufficient capital to operate our business segments, potentially
resulting in greater operating losses unless we are able to raise
the required capital from alternative sources. There is no
assurance that alternative capital, if needed, would be available
on terms acceptable to us, or at all.
We may not be able maintain a listing of our Common
Stock.
To maintain our listing on the OTCPNK exchange, we must meet
certain financial and liquidity criteria to maintain such listing.
If we violate the maintenance requirements for continued listing of
our Common Stock, our Common Stock may be delisted. In addition,
our board may determine that the cost of maintaining our listing on
a national securities exchange outweighs the benefits of such
listing. A delisting of our Common Stock from the OTCPNK Market may
materially impair our stockholders’ ability to buy and sell our
Common Stock and could have an adverse effect on the market price
of, and the efficiency of the trading market for, our Common Stock.
In addition, in order to maintain our listing, we will be required
to, among other things, file our regular quarterly reports on
otcmarkets.com. The post-qualification amendment of the Offering
Statement is subject to review by the SEC, and there is no
guarantee that such amendment will be qualified promptly after
filing. Any delay in the qualification of the post-qualification
amendment may cause a delay in the trading of offering Shares. For
all of the foregoing reasons, you may experience a delay between
the closing of your purchase of shares of our Common Stock and the
commencement of exchange trading of our Common Stock. In addition,
the delisting of our Common Stock could significantly impair our
ability to raise capital.
There may be significantly less trading volume and analyst coverage
of, and significantly less investor interest in, our Common Stock,
which may lead to lower trading prices for our Common Stock.
This Offering has not been reviewed by independent
professionals.
We have not retained any independent professionals to review or
comment on this Offering or otherwise protect the interest of the
investors hereunder. Although we have retained our own counsel,
neither such counsel nor any other counsel has made, on behalf of
the investors, any independent examination of any factual matters
represented by management herein. Therefore, for purposes of making
a decision to purchase our Shares, you should not rely on our
counsel with respect to any matters herein described. Prospective
investors are strongly urged to rely on the advice of their own
legal counsel and advisors in making a determination to purchase
our Shares.
There has been no public market for our Common Stock prior to
this Offering, and an active market in which investors can resell
their shares may not develop.
Prior to this Offering, there has been no public market for our
Common Stock. We cannot predict the extent to which an active
market for our Common Stock will develop or be sustained after this
Offering, or how the development of such a market might affect the
market price of our Common Stock. The initial offering price of our
Common Stock in this offering is based on a number of factors,
including market conditions in effect at the time of the offering,
and it may not be in any way indicative of the price at which our
shares will trade following the completion of this offering.
Investors may not be able to resell their shares at or above the
initial offering price.
The market price of our Common Stock may fluctuate, and you
could lose all or part of your investment.
The offering price for our Common Stock is based on a number of
factors. The price of our Common Stock may decline following this
Offering. The stock market in general, and the market price of our
Common Stock, will likely be subject to fluctuation, whether due
to, or irrespective of, our operating results, financial condition
and prospects. Our financial performance, our industry’s overall
performance, changing consumer preferences, technologies and
advertiser requirements, government regulatory action, tax laws and
market conditions in general could have a significant impact on the
future market price of our Common Stock. Some of the other factors
that could negatively affect our share price or result in
fluctuations in our share price includes:
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actual or anticipated variations in our periodic operating
results; |
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increases in market interest rates that lead purchasers of our
Common Stock to demand a higher yield; |
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changes in earnings estimates; |
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changes in market valuations of similar companies; |
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actions or announcements by our competitors; |
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adverse market reaction to any increased indebtedness we may
incur in the future; |
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additions or departures of key personnel; |
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actions by stockholders; |
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speculation in the press or investment community; and |
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our intentions and ability to list our Common Stock on a
national securities exchange and our subsequent ability to maintain
such listing. |
We do not expect to declare or pay dividends in the
foreseeable future.
We do not expect to declare or pay dividends in the foreseeable
future, as we anticipate that we will invest future earnings in the
development and growth of our business. Therefore, holders of our
Common Stock will not receive any return on their investment unless
they sell their securities, and holders may be unable to sell their
securities on favorable terms or at all.
Sales of our Common Stock under Rule 144 could reduce the
price of our stock.
In general, persons holding “restricted securities,”
including affiliates, must hold their shares for a period of at
least six (6) months, may not sell more than one percent (1%) of
the total issued and outstanding shares in any ninety (90) day
period, and must resell the shares in an unsolicited brokerage
transaction at the market price. However, Rule 144 will only be
available for resale in the ninety (90) days after the Company
files its semi-annual reports on Form 1-SA and annual reports on
Form 1-K, unless the Company voluntarily files interim quarterly
reports on Form 1-U, which the Company has not yet decided to do.
The availability for sale of substantial amounts of common stock
under Rule 144 could reduce prevailing market prices for our
securities.
Our failure to maintain effective internal controls over
financial reporting could have an adverse impact on us.
We are required to establish and maintain appropriate internal
controls over financial reporting. Failure to establish those
controls, or any failure of those controls once established, could
adversely impact our public disclosures regarding our business,
financial condition or results of operations. In addition,
management's assessment of internal controls over financial
reporting may identify weaknesses and conditions that need to be
addressed in our internal controls over financial reporting or
other matters that may raise concerns for investors. Any actual or
perceived weaknesses and conditions that need to be addressed in
our internal control over financial reporting, disclosure of
management's assessment of our internal controls over financial
reporting or disclosure of our public accounting firm's attestation
to or report on management's assessment of our internal controls
over financial reporting may have an adverse impact on the price of
our Common Stock.
Management discretion as to the actual use of the proceeds
derived from this Offering.
The net proceeds from this Offering will be used for the purposes
described under “Use of Proceeds.” However, we
reserve the right to use the funds obtained from this Offering for
other similar purposes not presently contemplated which we deem to
be in the best interests of the Company and our shareholders in
order to address changed circumstances or opportunities. As a
result of the foregoing, our success will be substantially
dependent upon the discretion and judgment of the Board of
Directors with respect to application and allocation of the net
proceeds of this Offering. Investors who purchase our Common Stock
will be entrusting their funds to our Board of Directors, upon
whose judgment and discretion the investors must depend.
The offering price of our Common Stock was arbitrarily
determined and does not reflect the value of the company, our
assets or our business.
The offering price of our Common Stock was arbitrarily determined
by our management and is not based on book value, assets, earnings
or any other recognizable standard of value. We arbitrarily
established the offering price considering such matters as the
state of our business development and the general condition of, and
opportunities present in, the industry in which we operate. No
assurance can be given that our Common Stock Shares, or any portion
thereof, could be sold for the offering price or for any amount. If
profitable results are not achieved from our operations, of which
there can be no assurance, the value of our Common Stock sold
pursuant to this Offering will fall below the offering price and
become worthless. Prospective investors should not consider the
offering price of the Common Stock as indicative of their actual
value. The offering price bears little relationship to our assets,
net worth, or any other objective criteria.
General securities investment risks.
All investments in securities involve the risk of loss of capital.
No guarantee or representation is made that an investor will
receive a return of its capital. The value of our Common Stock can
be adversely affected by a variety of factors, including
development problems, regulatory issues, technical issues,
commercial challenges, competition, legislation, government
intervention, industry developments and trends, and general
business and economic conditions.
Multiple securities offerings and potential for integration
of our offerings.
We are currently and will in the future be involved in one or more
additional offers of our securities in other unrelated securities
offerings. Any two or more securities offerings undertaken by us
could be found by the SEC, or a state securities regulator, agency,
to be “integrated” and therefore constitute a single
offering of securities, which finding could lead to a disallowance
of certain exemptions from registration for the sale of our
securities in such other securities offerings. Such a finding could
result in disallowance of one or more of our exemptions from
registration, which could give rise to various legal actions on
behalf of a federal or state regulatory agency and the Company.
Offering not reviewed by independent
professionals.
We have not retained any independent professionals to review or
comment on this Offering or otherwise protect the interest of the
investors hereunder. Although we have retained our own counsel,
neither such counsel nor any other counsel has made, on behalf of
the investors, any independent examination of any factual matters
represented by management herein. Therefore, for purposes of making
a decision to purchase our Common Stock, you should not rely on our
counsel with respect to any matters herein described. Prospective
investors are strongly urged to rely on the advice of their own
legal counsel and advisors in making a determination to purchase
our Common Stock.
We cannot guarantee that we will sell any specific number of
Common Stock shares in this Offering.
There is no commitment by anyone to purchase all or any part of the
Common Stock Shares offered hereby and, consequently, we can give
no assurance that all of the Common Stock shares in this Offering
will be sold. Additionally, there is no underwriter for this
Offering; therefore, you will not have the benefit of an
underwriter's due diligence efforts that would typically include
the underwriter being involved in the preparation of this Offering
Circular and the pricing of our Common Stock shares offered
hereunder. Therefore, there can be no assurance that this Offering
will be successful or that we will raise enough capital from this
Offering to further our development and business activities in a
meaningful manner. Finally, prospective investors should be aware
that we reserve the right to withdraw, cancel, or modify this
Offering at any time without notice, to reject any subscription in
whole or in part, or to allot to any prospective purchaser fewer
Common Stock Shares than the number for which he or she
subscribed.
Investors will experience immediate and substantial dilution
in the book value of their investment, and will experience
additional dilution in the future.
If you purchase our Common Stock in this Offering, you will
experience immediate and substantial dilution because the price you
pay will be substantially greater than the net tangible book value
per share of the shares you acquire. Since we will require funds in
addition to the proceeds of this Offering to conduct our planned
business, we will raise such additional funds, to the extent not
generated internally from operations, by issuing additional equity
and/or debt securities, resulting in further dilution to our
existing stockholders (including purchasers of our Common Stock in
this Offering).
We may be unable to meet our current and future capital
requirements from capital raised by this Offering.
Our capital requirements depend on numerous factors, including but
not limited to the rate and success of our development efforts,
marketing efforts, market acceptance of our products and services
and other related services, our ability to establish and maintain
our agreements with the ridesharing services currently operating,
our ability to maintain and expand our user base, the rate of
expansion of our user community, the level of resources required to
develop and operate our products and services, information systems
and research and development activities, the availability of
software and services provided by third-party vendors and other
factors. The capital requirements relating to development of our
technology and the continued and expanding operations of our
business segments will be significant. We cannot accurately predict
the timing and amount of such capital requirements. However, we are
dependent on the proceeds of this Offering as well as additional
financing that will be required in order to operate our business
segments and execute on our business plans. However, in the event
that our plans change, our assumptions change or prove to be
inaccurate, or if the proceeds of this Offering prove to be
insufficient to operate our business segments, we would be required
to seek additional financing sooner than currently anticipated.
There can be no assurance that any such financing will be available
to us on commercially reasonable terms, or at all. Furthermore, any
additional equity financing may dilute the equity interests of our
existing shareholders (including those purchasing shares pursuant
to this Offering), and debt financing, if available, may involve
restrictive covenants with respect to dividends, raising future
capital and other financial and operational matters. If we are
unable to obtain additional financing as and when needed, we may be
required to reduce the scope of our operations or our anticipated
business plans, which could have a material adverse effect on our
business, operating results and financial condition.
There may be little to no volume in the trading of our common
stock, and you may not be able to resell your Common Stock at or
above the initial public offering price.
There can no assurance that our Common Stock shares will maintain a
sufficient trading market sufficient for the shares in this
offering. If no active trading market for our Common Stock is
sustained following this Offering, you may be unable to sell your
shares when you wish to sell them or at a price that you consider
attractive or satisfactory. The lack of an active market may also
adversely affect our ability to raise capital by selling securities
in the future or impair our ability to license or acquire other
product candidates, businesses or technologies using our shares as
consideration.
The market price of our Common Stock may fluctuate
significantly, and investors in our Common Stock may lose all or a
part of their investment.
If a market for our Common Stock develops following this Offering,
the trading price of our Common Stock could be subject to wide
fluctuations in response to various factors, some of which are
beyond our control. The market prices for securities of
transportation ridesharing companies have historically been highly
volatile, and the market has from time to time experienced
significant price and volume fluctuations that are unrelated to the
operating performance of particular companies. The market price of
our common stock may fluctuate significantly in response to
numerous factors, some of which are beyond our control, such
as:
|
· |
actual or anticipated adverse results or delays in our research
and development efforts; |
|
· |
our failure to operate our business; |
|
· |
unanticipated serious safety concerns related to our
business; |
|
· |
adverse regulatory decisions; |
|
· |
legal disputes or other developments relating to proprietary
rights, including patents, litigation matters and our ability to
obtain patent protection for our intellectual property, government
investigations and the results of any proceedings or lawsuits,
including patent or stockholder litigation; |
|
· |
changes in laws or regulations applicable to our business and
the ridesharing industry; |
|
· |
our dependence on third parties; |
|
· |
announcements of the introduction of new products by our
competitors; |
|
· |
market conditions in the ridesharing or transportation
sectors; |
|
· |
announcements concerning product development results or
intellectual property rights of others; |
|
· |
future issuances of our Common Stock or other securities; |
|
· |
the addition or departure of key personnel; |
|
· |
actual or anticipated variations in quarterly operating
results; |
|
· |
announcements of significant acquisitions, strategic
partnerships, joint ventures or capital commitments by us or our
competitors; |
|
· |
our failure to meet or exceed the estimates and projections of
the investment community; |
|
· |
issuances of debt or equity securities; |
|
· |
trading volume of our Common Stock; |
|
· |
sales of our Common Stock by us or our stockholders in the
future; |
|
· |
overall performance of the equity markets and other factors
that may be unrelated to our operating performance or the operating
performance of our competitors, including changes in market
valuations of similar companies; |
|
· |
failure to meet or exceed any financial guidance or
expectations regarding development milestones that we may provide
to the public; |
|
· |
ineffectiveness of our internal controls; |
|
· |
general political and economic conditions; |
|
· |
effects of natural or man-made catastrophic events; |
|
· |
other events or factors, many of which are beyond our control;
and |
|
· |
publication of research reports about us or our industry or
positive or negative recommendations or withdrawal of research
coverage by securities analysts. |
Further, price and volume fluctuations result in volatility in the
price of our common stock, which could cause a decline in the value
of our Common Stock. Price volatility of our common stock might
worsen if the trading volume of our Common Stock is low. The
realization of any of the above risks or any of a broad range of
other risks, including those described in these “Risk
Factors,” could have a dramatic and material adverse impact on
the market price of our Common Stock.
A sale of a substantial number of shares of the Common Stock
may cause the price of our Common Stock to decline.
If our stockholders sell, or the market perceives that our
stockholders intend to sell for various reasons, substantial
amounts of our Common Stock in the public market, including shares
issued in connection with the exercise of outstanding options or
warrants, the market price of our Common Stock could fall. Sales of
a substantial number of shares of our Common Stock may make it more
difficult for us to sell equity or equity-related securities in the
future at a time and price that we deem reasonable or appropriate.
We may become involved in securities class action litigation that
could divert management’s attention and harm our business. The
stock markets have from time to time experienced significant price
and volume fluctuations that have affected the market prices for
the Common Stock of pharmaceutical companies. These broad market
fluctuations may cause the market price of our Common Stock to
decline. In the past, securities class action litigation has often
been brought against a company following a decline in the market
price of a company’s securities. We may become involved in this
type of litigation in the future. Litigation often is expensive and
diverts management’s attention and resources, which could adversely
affect our business.
Our semi-annual operating results may fluctuate
significantly.
We expect our operating results to be subject to semi-annual
fluctuations. Our net loss and other operating results will be
affected by numerous factors, including:
|
· |
variations in the level of expenses related to our business
segments; |
|
· |
any intellectual property infringement lawsuit in which we may
become involved; |
|
· |
regulatory developments affecting our business and industry;
and |
|
· |
our execution of any collaborative, licensing or similar
arrangements, and the timing of payments we may make or receive
under these arrangements. |
If our quarterly operating results fall below the expectations of
investors or securities analysts, the price of our Common Stock
could decline substantially. Furthermore, any quarterly
fluctuations in our operating results may, in turn, cause the price
of our Common Stock to fluctuate substantially.
Our ability to use our net operating loss carry forwards may
be subject to limitation.
Generally, a change of more than fifty percent (50%) in the
ownership of a company’s stock, by value, over a three-year period
constitutes an ownership change for U.S. federal income tax
purposes. An ownership change may limit our ability to use our net
operating loss carryforwards attributable to the period prior to
the change. As a result, if we earn net taxable income, our ability
to use our pre-change net operating loss carryforwards to offset
U.S. federal taxable income may become subject to limitations,
which could potentially result in increased future tax liability
for us.
The number of securities traded on an ATS may be very small,
making the market price more easily manipulated.
While we understand that many ATS platforms have adopted policies
and procedures such that security holders are not free to
manipulate the trading price of securities contrary to applicable
law, and while the risk of market manipulation exists in connection
with the trading of any securities, the risk may be greater for our
Common Stock because the ATS we choose may be a closed system that
does not have the same breadth of market and liquidity as the
national market system. There can be no assurance that the efforts
by an ATS to prevent such behavior will be sufficient to prevent
such market manipulation.
The preparation of our financial statements involves the use
of estimates, judgments and assumptions, and our financial
statements may be materially affected if such estimates, judgments
or assumptions prove to be inaccurate.
Financial statements prepared in accordance with accounting
principles generally accepted in the United States of America
(“GAAP”) typically require the use of estimates, judgments
and assumptions that affect the reported amounts. Often, different
estimates, judgments and assumptions could reasonably be used that
would have a material effect on such financial statements, and
changes in these estimates, judgments and assumptions may occur
from period to period over time. These estimates, judgments and
assumptions are inherently uncertain and, if our estimates were to
prove to be wrong, we would face the risk that charges to income or
other financial statement changes or adjustments would be required.
Any such charges or changes could harm our business, including our
financial condition and results of operations and the price of our
securities. See “Management’s Discussion and Analysis of
Financial Condition and Results of Operations” for a discussion
of the accounting estimates, judgments and assumptions that we
believe are the most critical to an understanding of our
consolidated financial statements and our business.
If securities industry analysts do not publish research
reports on us, or publish unfavorable reports on us, then the
market price and market trading volume of our Common Stock could be
negatively affected.
Any trading market for our Common Stock will be influenced in part
by any research reports that securities industry analysts publish
about us. We do not currently have and may never obtain research
coverage by securities industry analysts. If no securities industry
analysts commence coverage of us, the market price and market
trading volume of our Common Stock could be negatively affected. In
the event we are covered by analysts, and one or more of such
analysts downgrade our securities, or otherwise reports on us
unfavorably, or discontinues coverage or us, the market price and
market trading volume of our Common Stock could be negatively
affected.
Our management has broad discretion as to the use of certain
of the net proceeds from this Offering.
We intend to use a significant portion of the net proceeds from
this Offering (if we sell all of the shares being offered) for
working capital and other general corporate purposes. However, we
cannot specify with certainty the particular uses of such proceeds.
Our management will have broad discretion in the application of the
net proceeds designated for use as working capital or for other
general corporate purposes. Accordingly, you will have to rely upon
the judgment of our management with respect to the use of these
proceeds. Our management may spend a portion or all of the net
proceeds from this Offering in ways that holders of our Common
Stock may not desire or that may not yield a significant return or
any return at all. The failure by our management to apply these
funds effectively could harm our business. Pending their use, we
may also invest the net proceeds from this offering in a manner
that does not produce income or that loses value. Please see
“Use of Proceeds” below for more information.
Our Common Stock could be subject to the “Penny Stock” rules
of the Securities and Exchange Commission if it were publicly
traded and may be difficult to sell.
Our shares of Common Stock are considered to be “penny stocks”
because they are not registered on a national securities exchange
or listed on an automated quotation system sponsored by a
registered national securities association, pursuant to Rule 3a51-
1(a) under the Exchange Act. For any transaction involving a penny
stock, unless exempt, the rules require that a broker or dealer
approve a person’s account for transactions in penny stocks and
that the broker or dealer receives from the investor a written
agreement to the transaction, setting forth the identity and
quantity of the penny stock to be purchased. The broker or dealer
must also deliver, prior to any transaction in a penny stock, a
disclosure schedule prescribed by the Securities and Exchange
Commission relating to the penny stock market, which sets forth the
basis on which the broker or dealer made the suitability
determination and that the broker or dealer received a signed,
written agreement from the investor prior to the transaction.
Generally, brokers may be less willing to execute transactions in
securities subject to the “penny stock” rules. This may make it
more difficult for investors to dispose of our common stock and
cause a decline in the market value of our stock.
The market for penny stocks has suffered in recent years from
patterns of fraud and abuse.
Stockholders should be aware that, according to SEC Release No.
34-29093, the market for penny stocks has suffered in recent years
from patterns of fraud and abuse. Such patterns include:
|
· |
control of the market for the security by one or a few
broker-dealers that are often related to the promoter or
issuer; |
|
· |
manipulation of prices through prearranged matching of
purchases and sales and false and misleading press releases; |
|
· |
boiler room practices involving high-pressure sales tactics and
unrealistic price projections by inexperienced salespersons; |
|
· |
excessive and undisclosed bid-ask differential and markups by
selling broker-dealers; and |
|
· |
the wholesale dumping of the same securities by promoters and
broker-dealers after prices have been manipulated to a desired
level, along with the resulting inevitable collapse of those prices
and with consequential investor losses. |
The foregoing risk factors are not to be considered a
definitive list of all the risks associated with an investment in
our Offered Shares. This Offering Circular contains forward-looking
statements that are based on our current expectations, assumptions,
estimates, and projections about our business, our industry, and
the industry of our clients. When used in this Offering Circular,
the words “expects,” anticipates,” “estimates,” “intends,”
“believes” and similar expressions are intended to identify
forward-looking statements. These forward-looking statements are
subject to risks and uncertainties that could cause actual results
to differ materially from those projected. The cautionary
statements made in this Offering Circular should be read as being
applicable to all related forward-looking statements wherever they
appear in this Offering Circular.
USE OF PROCEEDS
Assuming the sale by us of the Maximum Offering of $2,500,000 and
no estimated expenses, the total net proceeds to us would be
$2,500,000, which we currently intend to use as set forth below. We
expect from time to time to evaluate the acquisition of businesses,
products and technologies for which a portion of the net proceeds
may be used, although we currently are not planning or negotiating
any such transactions. As of the date of this Offering Circular, we
cannot specify with certainty all of the particular uses for the
net proceeds to us from the sale of Common Stock. Accordingly, we
will retain broad discretion over the use of these proceeds, if
any. The following table represents management’s best estimate of
the uses of the net proceeds received from the sale of Common Stock
assuming the sale of, respectively, 100%, 75%, 50% and 25% of the
Common Stock shares offered for sale in this Offering.
Percentage of Offering Sold
| |
|
100% |
|
|
75% |
|
|
50% |
|
|
25% |
|
| Marketing
& Customer Acquisition Incentives |
|
$ |
250,000 |
|
|
$ |
187,500 |
|
|
$ |
125,000 |
|
|
$ |
62,5000 |
|
| Professional Services |
|
|
375,000 |
|
|
|
281,250 |
|
|
|
187,5000 |
|
|
|
93,750 |
|
| Strategic
Partnerships/Acquisitions |
|
|
250,000 |
|
|
|
187,500 |
|
|
|
125,000 |
|
|
|
62,500 |
|
| Leased Vehicle
Purchases |
|
|
1,250,000 |
|
|
|
937,5000 |
|
|
|
625,000 |
|
|
|
312,500 |
|
| Miscellaneous Operating
Expenses |
|
|
375,000 |
|
|
|
281,250 |
|
|
|
187,5000 |
|
|
|
93,750 |
|
| TOTAL |
|
$ |
2,500,000 |
|
|
$ |
1,875,000 |
|
|
$ |
1,250,000 |
|
|
$ |
625,000 |
|
The amounts set forth above are estimates, and we cannot be certain
that actual costs will not vary from these estimates. Our
management has significant flexibility and broad discretion in
applying the net proceeds received in this Offering. We cannot
assure you that our assumptions, expected costs and expenses and
estimates will prove to be accurate or that unforeseen events,
problems or delays will not occur that would require us to seek
additional debt and/or equity funding, which may not be available
on favorable terms, or at all. See “Risk Factors.”
This expected use of the net proceeds from this Offering represents
our intentions based upon our current financial condition, results
of operations, business plans and conditions. As of the date of
this Offering Circular, we cannot predict with certainty all of the
particular uses for the net proceeds to be received upon the
closing of this Offering or the amounts that we will actually spend
on the uses set forth above. The amounts and timing of our actual
expenditures may vary significantly depending on numerous factors.
As a result, our management will retain broad discretion over the
allocation of the net proceeds from this Offering.
We may also use a portion of the net proceeds for the investment in
strategic partnerships and possibly the acquisition of
complementary businesses, products or technologies, although we
have no present commitments or agreements for any specific
acquisitions or investments. Pending our use of the net proceeds
from this Offering, we intend to invest the net proceeds in a
variety of capital preservation investments, including short-term,
investment grade, interest bearing instruments and U.S. government
securities.
DILUTION
If you purchase shares in this Offering, your ownership interest in
our Common Stock will be diluted immediately, to the extent of the
difference between the price to the public charged for each share
in this Offering and the net tangible book value per share of our
Common Stock after this Offering.
On January 6, 2020, there were an aggregate of 147,046,461 shares
of Company Common Stock issued and outstanding. Our net book value
as of March 31, 2019, was $(2,442,040) or $(0.02) per
then-outstanding share of our Common Stock.
The following table illustrates the per share dilution to new
investors discussed above, assuming the sale of, respectively,
100%, 75%, 50% and 25% of the shares offered for sale in this
offering:
| Funding Level |
|
$ |
2,500,000 |
|
|
$ |
1,875,000 |
|
|
$ |
1,250,000 |
|
|
$ |
625,000 |
|
| Offering Price |
|
$ |
.0008 |
|
|
|
.0008 |
|
|
|
.0008 |
|
|
|
.0008 |
|
| Historical net tangible book
value per Common Stock share before the Offering |
|
$ |
0.0031 |
|
0 |
$ |
0.0031 |
|
|
|
0.0031 |
|
|
$ |
0.0031 |
|
| Increase in net tangible book
value per share attributable to new investors in this
Offering |
|
$ |
0.0028 |
|
|
$ |
0.0025 |
|
* |
$ |
0.0022 |
|
|
$ |
0.0015 |
|
| Net tangle book value per share,
after the Offering |
|
$ |
-0.0003 |
|
|
$ |
-0.0006 |
|
|
$ |
-0.0010 |
|
|
$ |
-0.0016 |
|
| Dilution per share to new
investors |
|
$ |
0.0010 |
|
|
$ |
0.0014 |
|
|
$ |
0.0018 |
|
|
$ |
0.0024 |
|
MANAGEMENT'S DISCUSSION &
ANALYSIS OF
FINANCIAL CONDITION & RESULTS OF OPERATIONS
You should read the following discussion and analysis of our
financial condition and results of our operations together with our
consolidated financial statements and the notes thereto appearing
elsewhere in this Offering Circular. This discussion contains
forward-looking statements reflecting our current expectations,
whose actual outcomes involve risks and uncertainties. Actual
results and the timing of events may differ materially from those
stated in or implied by these forward-looking statements due to a
number of factors, including those discussed in the sections
entitled “Risk Factors,” "Cautionary Statement regarding
Forward-Looking Statements" and elsewhere in this Offering
Circular. Please see the notes to our Financial Statements for
information about our Significant Accounting Policies and Recent
Accounting Pronouncements.
Overview
DNA Brands, Inc. (hereinafter referred to as “us,” “our,” “we,” the
“Company” or “DNA”) was incorporated in the State of Colorado on
May 23, 2007 under the name Famous Products, Inc. Prior to July 6,
2010 we were a beverage company. We are looking to reproduce,
market and sell a proprietary line of five carbonated blends of DNA
Energy Drink®, Citrus, Sugar Free Citrus, Original (a unique
combination of Red Bull® and Monster® energy drinks), Cryo- Berry
(a refreshing mix of cranberry and raspberry) and Molecular Melon
(a cool and refreshing taste); as well as three milk based energy
coffees with fortified with Omega 3. These flavors are Mocha,
Vanilla Latte and Caramel Macchiato.
Our business commenced in May 2006 in the State of Florida under
the name Grass Roots Beverage Company, Inc. (“Grass Roots”).
Initial operations of Grass Roots included development of our
energy drinks, sampling and other marketing efforts and initial
distribution in the State of Florida. In May 2006 we formed DNA
Beverage Corporation, a Florida corporation (“DNA Beverage”). Our
early years were devoted to brand development, creating awareness
through heavy sampling programs and creating credibility among our
then core demographic by concentrating marketing efforts on action
sports locations and events (surf, motocross, skate, etc.).
Effective July 6, 2010, we executed agreements to acquire all of
the assets, liabilities and contract rights of DNA Beverage and
100% of the common stock of DNA Beverage’s wholly owned subsidiary
Grass Roots Beverage Company, Inc. (“Grass Roots”) in exchange for
the issuance of 31,250,000 shares of our common stock. The share
issuance represented approximately 94.6% of our outstanding shares
at the time of issuance. As a result of this transaction we also
changed our name to “DNA Brands, Inc.”
Grass Roots was dissolved and ceased activity on December 31, 2013.
Whereby DNA Brands Inc has been the surviving
entity.
Financial Statement Presentation
The accompanying unaudited condensed consolidated financial
statements have been prepared in conformity with generally accepted
accounting principles in the United States (“GAAP”) for
interim financial information and with the instructions to Form
10-Q and Rule 10-01 of Regulation S-X. Pursuant to these rules and
regulations, certain information and note disclosures, normally
included in financial statements prepared in accordance with GAAP,
have been condensed or omitted. GAAP requires management to make
estimates and assumptions that affect reported amounts and related
disclosures. In the opinion of management, all adjustments
(consisting of normal recurring items) considered necessary for a
fair presentation have been included. Operating results for the
Company ended December 31, 2018. The balance sheet as of December
31, 2018 has been derived from the unaudited financial statements
at that date but does not include all of the information and
footnotes required by GAAP for complete financial statements. For
further information, refer to the Company’s financial statements
and notes thereto. The notes to the unaudited condensed
consolidated financial statements are presented on a continuing
basis unless otherwise noted.
Summary of Results
Use of Estimates
The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those
estimates.
Revenue Recognition
Prior to March 25, 2019, the Company derived revenues solely from
the sale of carbonated energy drinks and other related products.
Revenue is recognized when all of the following elements are
satisfied: (i) there are no uncertainties regarding customer
acceptance; (ii) there is persuasive evidence that an agreement
exists; (iii) delivery has occurred; (iv) legal title to the
products has transferred to the customer; (v) the sales price is
fixed or determinable; and (vi) collectability is reasonably
assured. At this time the company is in a reorganization phase and
has minimal to no revenue.
Fair Value of Financial Instruments
The Company’s financial instruments consist mainly of cash and cash
equivalents, accounts receivable, prepaid expenses, accounts
payable, accrued expenses, derivative liabilities, and loans
payable. The carrying values of the financial instruments
approximate their fair value due to the short-term nature of these
instruments. The fair values of the loans payable have interest
rates that approximate market rates.
Derivative Instruments
The Company does not enter into derivative contracts for purposes
of risk management or speculation. However, from time to time, the
Company enters into contracts, namely convertible notes payable,
that are not considered derivative financial instruments in their
entirety, but that include embedded derivative features.
In accordance with Financial Accounting Standards Board (“FASB”)
ASC Topic 815-15, Embedded Derivatives, and guidance
provided by the SEC Staff, the Company accounts for these embedded
features as a derivative liability or equity at fair value.
The recognition of the fair value of the derivative instrument at
the date of issuance is applied first to the debt proceeds. The
excess fair value, if any, over the proceeds from a debt
instrument, is recognized immediately in the statement of
operations as interest expense. The value of derivatives associated
with a debt instrument is recognized at inception as a discount to
the debt instrument and amortized to interest expense over the life
of the debt instrument. A determination is made upon settlement,
exchange, or modification of the debt instruments to determine if a
gain or loss on the extinguishment has been incurred based on the
terms of the settlement, exchange, or modification and on the value
allocated to the debt instrument at such date.
Cash and Cash Equivalents
The Company considers all highly liquid investments with a maturity
of three months or less at the date of purchase to be cash
equivalents. Cash and cash equivalents are stated at cost and
consist of bank deposits. The carrying amount of cash and cash
equivalents approximates fair value.
Accounts Receivable and Allowance for Doubtful
Accounts
The Company will bill its customers after its products are shipped.
The Company bases its allowance for doubtful accounts on estimates
of the creditworthiness of customers, analysis of delinquent
accounts, payment histories of its customers and judgment with
respect to the current economic conditions. The Company generally
does not require collateral. The Company believes the allowances
are sufficient to cover uncollectible accounts. The Company reviews
its accounts receivable aging on a regular basis for past due
accounts, and writes off any uncollectible amounts against the
allowance.
Inventory
No Inventory at present or for Fiscal year 2018
Inventory is stated at the lower of cost or market. Cost is
principally determined by using the average cost method that
approximates the First-In, First-Out (FIFO) method of accounting
for inventory. Inventory consists of raw materials as well as
finished goods held for sale. The Company’s management monitors the
inventory for excess and obsolete items and makes necessary
valuation adjustments when required. The Company is in the process
of pricing and ordering inventory.
Property and Equipment
None at present or for fiscal year 2018
Property and equipment is recorded at cost less accumulated
depreciation. Replacements, maintenance and repairs which do not
improve or extend the lives of the respective assets are charged to
expense as incurred. Depreciation is computed using the
straight-line method over the estimated useful lives of the assets
as follows:
Impairment of Long-Lived Assets
None at present or for fiscal year 2018
Long-lived assets are reviewed for impairment when events or
changes in circumstances indicate the book value of the assets may
not be recoverable. In accordance with Accounting Standards
Codification (“ASC”) 360-10-35-15 Impairment or Disposal of
Long-Lived Assets, recoverability is measured by comparing the
book value of the asset to the future net undiscounted cash flows
expected to be generated by the asset.
No events or changes in circumstances have been identified which
would impact the recoverability of the Company’s long- lived assets
reported at December 31, 2017 and 2018.
Liquidity, Capital Resources and Plan of Operations
Financings and Securities Offerings
DNA Brands, Inc., Equity Offerings
In February 2011, the Company issued a convertible debenture to an
existing shareholder in the amount of $500,000. The debenture bears
interest at 12% per annum and carries an annual transaction fee of
$30,000, of which both are payable in quarterly installments
commencing in May 2011. These costs are recorded as interest
expense in the Company's financial statements. In addition, as
further inducement for loaning the Company funds, the Company
issued 125,000 restricted shares of its common stock to the holder
upon execution. The common shares were valued at $31,250, their
fair market value, and recorded as discount to the debenture. These
costs will be amortized using the effective interest method over
the term of the debenture and recorded as interest expense in the
Company's financial statements.
In June 2011, the Company issued a convertible debenture to an
existing shareholder in the amount of $125,000. The debenture bears
interest at 12% per annum, which is payable in the Company’s common
stock at the time of maturity. The debenture is convertible at any
time prior to maturity into 150,000 shares of the Company’s common
stock. This beneficial conversion feature was valued at $90,750,
using Black-Scholes methodology, and recorded as a discount to the
debenture. These costs will be amortized using the effective
interest method over the term of the debenture and recorded as
interest expense in the Company's financial statements.
In July and August 2011, the Company issued a series of secured
convertible debentures to accredited investors aggregating $275,000
in gross proceeds. All proceeds from these debentures are to be
utilized solely for the purpose of funding raw materials and
inventory purchases through the use of an escrow agent. The
debentures bear interest at 12% per annum, payable in monthly
installments. The debentures are convertible at any time prior to
maturity at a conversion price equal to 80% of the average share
price of the Company’s common stock for the 10 previous trading
days prior to conversion, but not less than $0.70. In addition, as
further inducement for loaning the Company funds, the Company
issued the lenders 68,750 restricted shares of its common stock and
137,500 common stock warrants exercisable at $1.25 per share. As a
result, the Company had to allocate fair market value to each the
beneficial conversion feature, restricted shares and warrants. The
common shares were valued at $30,938, their fair market value. The
Company determined the fair market value of the warrants as $94,255
using the Black-Scholes valuation model. Since the combined fair
market value allocated to the warrants and beneficial conversion
feature cannot exceed the convertible debenture amount, the
beneficial conversion feature was valued at $149,807, the ceiling
of its intrinsic value. These costs will be amortized using the
effective interest method over the term of the debenture and
recorded as interest expense in the Company's financial
statements.
In February 2012, the Company issued a convertible debenture to an
existing shareholder in the amount of $75,000. The debenture bears
interest at 12% per annum, which is payable in the Company’s common
stock at the time of maturity. The debenture is convertible at any
time prior to maturity into 280,000 shares of the Company’s common
stock. As further inducement, the Company issued the lender 280,000
common stock warrants exercisable at $1.50 per share. If
unexercised, the warrants will expire on January 31, 2017. Using
the Black-Scholes model, the warrants were valued at $63,620 and
recorded as a discount to the principal amount of the debenture.
This discount is amortized using the effective interest method over
the term of the debenture and recorded as interest expense in the
Company's financial statements.
In February and June 2012, the Company converted $524,950 of its
loans payable to officers into convertible debentures. These
debentures were offered by the Company’s officers to certain
accredited investors and a majority portion of the proceeds
therefrom were deposited with the Company. The debentures had no
maturity date and bear no interest. Therefore, these debentures
were payable on demand and were originally classified as a current
liability. The debentures were convertible at any time into
3,499,667 shares, or $0.15 per share of common stock. The Company
determined that these terms created a beneficial conversion
feature. Using the Black-Scholes model, the beneficial conversion
feature was valued at $524,950, the ceiling of its intrinsic value.
Due to the nature of the debentures, the full value of the
beneficial conversion feature was immediately recorded as interest
expense in the Company’s financial statements. In August 2012,
these convertible debentures were converted into 3,499,666 shares
of the Company’s common stock.
On April 9, 2012, the Company executed an Investment Banking and
Advisory Agreement with Charles Morgan Securities, Inc., New York,
NY (“CMI”), wherein CMI agreed to provide consulting, strategic
business planning, financing on a “best efforts” basis and investor
and public relations services, as well as to assist the Company in
its efforts to raise capital through the issuance of debt or
equity. The agreement provided for CMI to engage in two separate
private offerings with the initial private placement offering up to
$3.0 million and the second private placement offering up to an
additional $3.0 million; each on a “best efforts” basis. In
connection with this agreement the Company issued 750,000 shares
valued at $0.25 per share or a total value of $187,500. This amount
was fully amortized in the Company's financial statements as of
December 31, 2012.
In July 2012, the Company received proceeds from convertible
debentures totaling $182,668 in connection with the CMI agreement.
The debentures bear interest at 12% per annum, which is payable in
cash or the Company’s common stock at the time of conversion or
maturity. The debentures are convertible at any time prior to
maturity at a conversion price equal to the lesser of 75% of the
average share price of the Company’s common stock for the five
previous trading days prior to conversion or $0.35, but not less
than $0.15. In the event that the Company offers or issues shares
of its common stock at a share price less than $0.15, the floor
conversion price will adjust to the new lower price. The Company
determined that the terms of the debentures created a beneficial
conversion feature. Using the Black-Scholes model, the beneficial
conversion feature was valued at $160,813 and recorded as a
discount to the principal amount of the debentures. The discount is
amortized using the effective interest method over the term of the
debenture and recorded as interest expense in the Company's
financial statements.
On August 7, 2012, the Company issued a convertible debenture in
the amount of $50,000. The debenture does not bear interest. As an
inducement, the Company agreed to issue the lender 20,000 shares of
its common stock. The common shares were valued at their trading
price on the date of the agreement and recorded as interest expense
in the Company’s results of operations. The Company determined that
the terms of the debenture created a beneficial conversion feature.
Using the Black-Scholes model, the beneficial conversion feature
was valued at $50,000, the ceiling of its intrinsic value, and
recorded as a discount to the principal amount of the debenture.
The discount is amortized using the effective interest method over
the term of the debenture and recorded as interest expense in the
Company's financial statements. During the second quarter of 2013,
the conversion terms of this note were modified and the note was
converted into 1,500,000 shares of common stock.
On September 25, 2012, the Company issued a convertible debenture
in the amount of $50,000. The debenture bears interest at 6% per
annum, which is payable in the Company’s common stock at the time
of conversion or maturity. The debenture is convertible at any time
prior to maturity at a conversion price equal to 70% of the lowest
closing bid price of the Company’s common stock on the four
previous trading days prior to and day of conversion, but not less
than $0.0001. The Company determined that the terms of the
debenture created a beneficial conversion feature. Using the
Black-Scholes model, the beneficial conversion feature was valued
at $50,000, the ceiling of its intrinsic value, and recorded as a
discount to the principal amount of the debenture. The discount is
amortized using the effective interest method over the term of the
debenture and recorded as interest expense in the Company's
financial statements. During the second quarter of 2013, the lender
converted $23,000 of principal into 919,403 shares of common stock
in accordance with the conversion terms of the debenture.
On November 1, 2012, the Company issued a convertible debenture in
the amount of $80,000. The debenture bears interest at 12% per
annum, which is payable in the Company’s common stock at the time
of conversion or maturity. The debenture is convertible at any time
prior to maturity at a conversion price equal to 70% of the average
closing bid price of the Company’s common stock on the 30 previous
trading days prior to the day of conversion. The Company determined
that the terms of the debenture created a beneficial conversion
feature. Using the Black-Scholes model, the beneficial conversion
feature was valued at $56,286, the ceiling of its intrinsic value,
and recorded as a discount to the principal amount of the
debenture. The discount is amortized using the effective interest
method over the term of the debenture and recorded as interest
expense in the Company's financial statements.
During the second quarter of 2013, the Company recorded $65,000 in
gross proceeds from the issuance of three convertible debentures.
The debentures bear interest at 12% per annum, which is payable in
cash at the time of maturity. The debentures are convertible at any
time prior to maturity into 216,667 shares of the Company’s common
stock. As further inducement, the Company issued the lenders
216,667 common stock warrants exercisable at $1.50 per share. If
unexercised, the warrants will expire on February 28, 2017. Using
the Black-Scholes model, the warrants were valued at $69,455 and
recorded as a discount up to the principal amount of the
debentures. This discount is amortized using the effective interest
method over the term of the debenture and recorded as interest
expense in the Company's financial statements. As of December 31,
2013, two of the debentures totaling $35,000 in principal value
were converted into 316,667 shares of common stock. Some of the
original conversion terms were modified prior to the notes’
conversions. The remaining $30,000 debenture is in default, as its
maturity date was April 25, 2013.
On September 17, 2013, the Company issued a convertible debenture
in the amount of $50,000. The debenture bears interest at 6% per
annum, which is payable in the Company’s common stock at the time
of conversion or maturity. The debenture is convertible at any time
prior to maturity at a conversion price equal to 70% of the lowest
closing bid price of the Company’s common stock on the four
previous trading days prior to and day of conversion, but not less
than $0.0001. The Company determined that the terms of the
debenture created a beneficial conversion feature. Using the
Black-Scholes model, the beneficial conversion feature was valued
at $50,000, the ceiling of its intrinsic value, and recorded as a
discount to the principal amount of the debenture. The discount is
amortized using the effective interest method over the term of the
debenture and recorded as interest expense in the Company's
financial statements.
On October 31, 2013, the Company issued a convertible debenture in
the amount of $204,000. The debenture bears interest at 18% per
annum, which is payable in the Company’s common stock at the time
of conversion or maturity. The debenture is convertible at any time
prior to maturity at a conversion price equal to 50% of the lowest
closing bid price of the Company’s common stock on the twenty
previous trading days prior to and day of conversion. The Company
determined that the terms of the debenture created a beneficial
conversion feature. Using the Black-Scholes model, the beneficial
conversion feature was valued at $204,000, the ceiling of its
intrinsic value, and recorded as a discount to the principal amount
of the debenture. The discount is amortized using the effective
interest method over the term of the debenture and recorded as
interest expense in the Company's financial statements.
On November 6, 2013, the Company issued a convertible debenture in
the amount of $53,000. The debenture bears interest at 8% per
annum, which is payable in the Company’s common stock at the time
of conversion or maturity. The debenture is convertible at any time
prior to maturity at a conversion price equal to 58% of the average
of the 3 lowest share closing bid prices of the Company’s common
stock on the ten previous trading days prior to and day of
conversion. The Company determined that the terms of the debenture
created a beneficial conversion feature. Using the Black-Scholes
model, the beneficial conversion feature was valued at $48,533, its
intrinsic value, and recorded as a discount to the principal amount
of the debenture. The discount is amortized using the effective
interest method over the term of the debenture and recorded as
interest expense in the Company's financial statements.
On November 6, 2013, the Company issued a convertible debenture in
the amount of $125,000. The debenture bears interest at 10% per
annum, which is payable in the Company’s common stock at the time
of conversion or maturity. The debenture is convertible at any time
prior to maturity at a conversion price equal to 50% of the lowest
share closing bid price of the Company’s common stock on the twenty
previous trading days prior to and day of conversion. The Company
determined that the terms of the debenture created a beneficial
conversion feature. Using the Black-Scholes model, the beneficial
conversion feature was valued at $125,000, the ceiling of its
intrinsic value, and recorded as a discount to the principal amount
of the debenture. The discount is amortized using the effective
interest method over the term of the debenture and recorded as
interest expense in the Company's financial statements.
On November 6, 2013, the Company issued a convertible debenture in
the amount of $80,000. The debenture bears no interest and is
payable in the Company’s common stock at the time of conversion or
maturity. The debenture is convertible at any time prior to
maturity at a conversion price equal to 50% of the average share
closing bid price of the Company’s common stock on the thirty
previous trading days prior to and day of conversion. The Company
determined that the terms of the debenture created a beneficial
conversion feature. Using the Black-Scholes model, the beneficial
conversion feature was valued at $80,000, the ceiling of its
intrinsic value, and recorded as a discount to the principal amount
of the debenture. The discount is amortized using the effective
interest method over the term of the debenture and recorded as
interest expense in the Company's financial statements.
On November 21, 2013, the Company issued a convertible debenture in
the amount of $100,000. The debenture bears interest at 12% per
annum, which is payable in the Company’s common stock at the time
of conversion or maturity. The debenture is convertible at any time
prior to maturity at a conversion price equal to 50% of the lowest
share intra-day price of the Company’s common stock on the ten
previous trading days prior to and day of conversion. The Company
determined that the terms of the debenture created a beneficial
conversion feature. Using the Black-Scholes model, the beneficial
conversion feature was valued at $100,000, the ceiling of its
intrinsic value, and recorded as a discount to the principal amount
of the debenture. The discount is amortized using the effective
interest method over the term of the debenture and recorded as
interest expense in the Company's financial statements.
June 10, 2014, the Company issued a convertible debenture of
$75,000 to Coventry Enterprises LLC bearing 8% interest per annum.
This debenture is in default.
April 22, 2014, the Company issued a 1 year convertible debenture
of $77,500, maturing April 22, 2015, to Tidepool Ventures Inc.
Bearing 10% interest per annum. This note has a Conversion factor
of 45% of market price. Market price is calculated by the average
of the lowest Bid price for the trailing ten business days to the
market. (Representing a 55% discount to market price). This note
was sold to World Market Ventures LLC and converted into common
stock.
April 22, 2014, the Company issued a 1 year maturity convertible
debenture of $110,000 to Iconic Holding LLC. Bearing 5% interest
per annum, maturing April 22, 2015. This note has a Conversion
factor of 50% of market price. Market price is calculated by the
average of the lowest Bid price for the trailing ten business days.
(Representing a 50% discount to market price). $32,250 Was
converted into Common stock for 2016. This note is in default.
May 2, 2014, the Company issued a 1 year convertible debenture to
LG Capital funding LLC of $37,500 maturing May 2 2015. Bearing 8%
annual interest. This note has a conversion factor of 50% of market
price. Market price is calculated by taking the average of the
lowest Bid price for the trailing ten business days. (Representing
a 50% discount to market price). This note is in default.
June 10, 2014, the Company issued a 1 year maturity convertible
debenture of $75,000 to Coventry Enterprises LLC bearing 8%
interest per annum maturing June 10th 2015. This note has a
conversion factor of 60% of market price. Market price is
calculated by taking the average of the lowest Bid price for the
trailing ten business days. (Representing a 40% discount to market
price). This note is in default. $63K, was converted into Common
stock for the year 2016.
Oct 7, 2014, the Company issued a 1 year Convertible Debenture to
Coventry Enterprises LLC for $30,000. Bearing 8% per annum.
Maturing Oct 7, 2015. This note has a Conversion ratio with a 50%
of market price. Market price is Calculated by taking the average
of the lowest Bid price for the trailing ten business days.
(Representing a 50% discount to market price). This note is in
default.
Jan 14, 2016, the Company issued a convertible debenture to Darren
Marks for $25,000 bearing 8% interest per annum. Maturing Jan 14,
2015. This note has a Conversion factor of 40% of market price.
Market price is calculated by the average of the lowest bid price
of the trailing 5 business days (Representing a 60% discount to
market). This note is in default.
Jan 14, 2016, the Company issued a convertible debenture to Darren
Marks for $50,000 bearing 8% interest per annum. Maturing Jan 14,
2015. This note has a Conversion factor of 40% of market price.
Market price is calculated by taking the average of the lowest bid
price of the trailing 5 business days. (Representing a 60% discount
to market price). This note is in default.
Jan 14, 2016, the Company issued a convertible debenture to Melvin
Leiner for $50,000 bearing 8% interest per annum. Maturing Jan 14,
2017. This note has a Conversion factor of 40% of market price.
Market price is calculated by taking the average of the lowest bid
price of the trailing 5 business days. (Representing a 60% discount
to market price). This note is in default.
Feb 1, 2016, the Company issued a convertible debenture to Andrew
Telsey for $30,000, bearing 8% interest per annum. Maturing Feb 1,
2017. This note has a conversion of 60% of market value. Market
price is calculated by taking the average of the lowest bid price
of the trailing 5 business days. (Representing a 40% discount to
market price). This Note is in default.
Feb 1, 2016, the Company issued a convertible Note to Darren Marks
for $70,500, bearing 8% interest per annum. Maturing Feb 1, 2017.
This note has a conversion factor of 40% of market price. Market
price is calculated by taking the average of the lowest bid price
of the trailing 5 business days. (Representing a 60% discount to
market price). This Note is in default.
Feb 1, 2016, the Company issued a convertible Note to Melvin Leiner
for $106,632.70, bearing 8% interest, with a conversion ratio, of
40% market price. Maturing Feb 1, 2017. Market price is calculated
by taking the average of the lowest bid price of the trailing 5
business days. Discount to market. (Representing a 60% discount to
market price). This Note is in default.
April 16, 2016, the Company issued a convertible debenture to
Tidepool Ventures group for $10,000 bearing 5% interest per annum.
Maturing April 16, 2017. This note has a conversion ratio of 45% of
market price. Market price is calculated by taking the average of
the lowest bid price of the trailing 5 business days. (Representing
a 55% discount to market). This debenture is in default.
April 26, 2016, the Company issued a convertible debenture to
Iconic Holdings LLC for $25,000 bearing 10% interest per annum
Maturing April 26, 2017. This note has a conversion ratio of 50% of
market price. Market price is calculated by taking the average of
the lowest bid price of the trailing 5 business days. (Representing
a 50% discount to market price). This note is in default.
June 10, 2016, the Company issued a convertible debenture to
Tidepool Ventures LLC for $3,000 bearing 5% interest per annum.
Maturing June 10, 2017. This note has a conversion ratio of 50% of
market price. Market price is calculated by taking the average of
the lowest bid price of the trailing 5 business days. (Representing
50% discount to market price). This note is in default.
June 29, 2016, the Company issued a convertible debenture to
Tidepool Ventures LLC of Eight thousand seven hundred fifty dollars
($8,750) bearing 5% interest per annum. Maturing June 29 2017. This
Note has a conversion factor of 50% of market price. Market price
is calculated by taking the average of the lowest bid price of the
trailing 5 business days. (Representing a 50% discount to market
price). This note is in default.
August 12, 2016, the Company issued a convertible debenture to
Tidepool Ventures LLC $3,000 bearing 5% interest per annum.
Maturing August 12, 2017. This note has a conversion factor of 50%
of market price. Market price is calculated by taking the average
of the lowest bid price of the trailing 5 business days.
(Representing a 50% discount to market price). This debenture is in
default.
Sept 7, 2016, the Company issued a convertible debenture to Dr.
Rutherford for $20,000 Bearing 5% interest per annum. Maturing
September 7, 2017. This note has a conversion of 50% discount of
market price. Market price is calculated by taking the average of
the lowest bid price of the trailing 5 business days. (Representing
a 50% discount to market price). This note is in default.
Feb. 1, 2017, the Company issued a Convertible debenture to CEO
Adrian McKenzie or his company PBDC LLC for Eighty Nine Thousand
Dollars ($89,000). Bearing 9.875% interest for Annual Back Salary
and Annual Bonus for 2016. This debenture is in default.
March 31, 2017, the Company issued a convertible note to CEO Adrian
McKenzie or his company PBDC LLC for Eight thousand dollars
($8,000), bearing 9.875% interest for Back Salaries for the months
of February and March 2017. This note is in default.
May 21, 2017, the Company issued a convertible Promissory Note to
Heidi Michitsch for One Hundred Thousand Dollars, bearing 9.875%
interest ($100K). This note is in default.
June 30, 2017, the Company issued a convertible debenture to CEO
Adrian McKenzie or his company PBDC LLC in the amount of Six
Thousand Dollars ($6,000), bearing 9.875% interest, for back salary
for Q2, 2017. This debenture is in default.
November 24, 2017, the Company issued a convertible debenture to
Mr. Fred Rosen for Four Thousand Dollars ($4,000), for funds loaned
to the company. This debenture is in default.
On November 25, 2017, the Company issued a Convertible Note for
Twenty Thousand Dollars USD ($20,000) Dr. Thomas Rutherford, for
funds loaned to the company. This note is in default.
On Nov. 29, 2017, the Company issued a Convertible Promissory Note.
to Mr. Joseph Gibson, for Five Thousand Dollars USD ($5,000) USD.
This note is in default.
On or about November 30, 2017, the Company issued a Convertible
Promissory Note to Dr. Doug Engers Five Thousand USD ($5K) for
funds loaned to the Company. This note is in default.
On or about December 13, 2017, the Company issued a Convertible
Promissory Note to Barry Romich of Ten Thousand dollars USD
($10,000), for funds loaned to the company. This note is in
default.
On or about December 15, 2017, the Company issued a Convertible
Promissory Note to Mr. Kerry Goodman for One hundred Thousand
Dollars USD ($100K, $50K cashed late December, $50K cashed early
February). This note is in default.
On or about December 31, 2017, the Company issued a Convertible
promissory Note payable to Ms. Heidi Michitsch of Six thousand
Dollars USD ($6K) for Back Salaries Due, Q4 2017. This note is in
default.
On Dec. 31, 2017, the Company issued a Convertible promissory Note
to CEO Adrian P. McKenzie or his company PBDC LLC in the Amount of
Thirty One Thousand, two hundred and Eighty USD ($31,280). This
Promissory Note covers monies loaned to the company for the Token
Talk Acquisition and Back Salaries owed to Mr. McKenzie over the
given time period. This note is in default.
On or about March 31, 2018, the Company issued a Convertible
promissory note to CEO Adrian P. McKenzie, for Eleven thousand Five
Hundred USD ($11,500) or his company PBDC LLC for back salaries
owed. This note is in default.
On or about June 30, 2018, the Company issued a Convertible note in
the amount of Twenty Six Thousand Five Hundred dollars USD
($26,500) to CEO Adrian P. McKenzie or his company PBDC LLC, for
back salaries owed. This note is in default.
On or about August 13, 2018, the Company issued a Convertible Note
of Fifty Thousand Dollars USD in exchange for Fifty Thousand Dollar
USD ($50,000) Loan to the Company, to the BA Romich Trust. This
note is in default.
On or about August 13, 2018, the Company issued a Convertible note
in the amount of Fifty Thousand Dollars USD ($50,000) as a
Charitable donation to the Romich Foundation. This note is in
default.
On or about September 30, 2018, the Company issued a Convertible
note in the amount of Thirty Thousand Dollars ($30,000) to Adrian
P. McKenzie or his company PBDC LLC, for back salaries owed. This
note is in default.
On or November 18, 2018, the company issued a convertible
promissory Note to Dr. Thomas Rutherford for One Hundred Thousand
Dollars USD ($100,000), for funds loaned to the company. This note
is in default.
On or about December 31, 2018, the Company issued a Convertible
note in the amount of Twenty One Thousand Dollars ($21,000) to
Adrian P. McKenzie or his company PBDC LLC, for back salaries owed.
This note is in default.
Current Plan of Operations
Our plan of operations is currently focused on the development of
our Fleet business. We expect to incur substantial expenditures in
the foreseeable future for the potential operations of our business
segments and ongoing internal research and development. At this
time, we cannot reliably estimate the nature, timing or aggregate
amount of such costs. We intend to continue to build our corporate
and operational infrastructure and to build interest in our product
and service offerings and as such are unable to project those costs
at this time.
As noted above, the pivot to this plan of operations requires us to
raise significant additional capital immediately. If we are
successful in raising capital through the sale of shares offered
for sale in this Offering Circular we believe that the Company will
have sufficient cash resources to fund its plan of operations for
the next twelve months.
We continually evaluate our plan of operations discussed above to
determine the manner in which we can most effectively utilize our
limited cash resources. The timing of completion of any aspect of
our plan of operations is highly dependent upon the availability of
cash to implement that aspect of the plan and other factors beyond
our control. There is no assurance that we will successfully obtain
the required capital or revenues, or, if obtained, that the amounts
will be sufficient to fund our ongoing operations. The inability to
secure additional capital would have a material adverse effect on
us, including the possibility that we would have to sell or forego
a portion or all of our assets or cease operations. If we
discontinue our operations, we will not have sufficient funds to
pay any amounts to our stockholders.
Even if we raise additional capital in the near future, if our
operating business segments fail to achieve anticipated financial
results, our ability to raise additional capital in the future to
fund our operating business segments would likely be seriously
impaired. If in the future we are not able to demonstrate favorable
financial results or projections from our operating business
segments, we will not be able to raise the capital we need to
continue our then current business operations and business
activities, and we will likely not have sufficient liquidity or
cash resources to continue operating.
Because our working capital requirements depend upon numerous
factors there can be no assurance that our current cash resources
will be sufficient to fund our operations. At present, we have no
committed external sources of capital, and do not expect any
significant product revenues for the foreseeable future. Thus, we
will require immediate additional financing to fund future
operations. There can be no assurance, however, that we will be
able to obtain funds on acceptable terms, if at all.
Credit Facilities
As of December 31, 2018, the Company had notes payable of
$1,943,146 in convertible notes payable, other current liabilities
of $482,848 and accounts payable of $107,752. Other than the
foregoing, and to vendors and service providers in the ordinary
course of our business, we do not have any other credit facilities
or other access to bank credit.
Off-Balance Sheet Arrangements
The Company does not have any derivative financial instrument or
other off-balance sheet arrangements.
Quantitative and Qualitative Disclosures about Market
Risk
In the ordinary course of our business, we are not exposed to
market risk of the sort that may arise from changes in interest
rates or foreign currency exchange rates, or that may otherwise
arise from transactions in derivatives.
Contingencies
Certain conditions may exist as of the date the financial
statements are issued, which may result in a loss to the Company,
but which will only be resolved when one or more future events
occur or fail to occur. The Company's management, in consultation
with its legal counsel as appropriate, assesses such contingent
liabilities, and such assessment inherently involves an exercise of
judgment. In assessing loss contingencies related to legal
proceedings that are pending against the Company or unasserted
claims that may result in such proceedings, the Company, in
consultation with legal counsel, evaluates the perceived merits of
any legal proceedings or unasserted claims, as well as the
perceived merits of the amount of relief sought or expected to be
sought therein. If the assessment of a contingency indicates it is
probable that a material loss has been incurred and the amount of
the liability can be estimated, then the estimated liability would
be accrued in the Company's financial statements. If the assessment
indicates a potentially material loss contingency is not probable,
but is reasonably possible, or is probable, but cannot be
estimated, then the nature of the contingent liability, together
with an estimate of the range of possible loss, if determinable and
material, would be disclosed. Loss contingencies considered remote
are generally not disclosed unless they involve guarantees, in
which case the guarantees would be disclosed.
OUR BUSINESS
Corporate History
DNA Brands, Inc. (hereinafter referred to as “us,” “our,” “we,” the
“Company” or “DNA”) was incorporated in the State of Colorado on
May 23, 2007 under the name Famous Products, Inc. Prior to July 6,
2010 we were a beverage company. We are looking to reproduce,
market and sell a proprietary line of five carbonated blends of DNA
Energy Drink®, Citrus, Sugar Free Citrus, Original (a unique
combination of Red Bull® and Monster® energy drinks), Cryo- Berry
(a refreshing mix of cranberry and raspberry) and Molecular Melon
(a cool and refreshing taste); as well as three milk based energy
coffees with fortified with Omega 3. These flavors are Mocha,
Vanilla Latte and Caramel Macchiato.
Our business commenced in May 2006 in the State of Florida under
the name Grass Roots Beverage Company, Inc. (“Grass Roots”).
Initial operations of Grass Roots included development of our
energy drinks, sampling and other marketing efforts and initial
distribution in the State of Florida. In May 2006 we formed DNA
Beverage Corporation, a Florida corporation (“DNA Beverage”). Our
early years were devoted to brand development, creating awareness
through heavy sampling programs and creating credibility among our
then core demographic by concentrating marketing efforts on action
sports locations and events (surf, motocross, skate, etc.).
Effective July 6, 2010, we executed agreements to acquire all of
the assets, liabilities and contract rights of DNA Beverage and
100% of the common stock of DNA Beverage’s wholly owned subsidiary
Grass Roots Beverage Company, Inc. (“Grass Roots”) in exchange for
the issuance of 31,250,000 shares of our common stock. The share
issuance represented approximately 94.6% of our outstanding shares
at the time of issuance. As a result of this transaction we also
changed our name to “DNA Brands, Inc.”
Grass Roots was dissolved and ceased activity on December 31, 2013.
Whereby DNA Brands Inc. has been the surviving entity.
Our mailing address is DNA Brands, Inc., 6245 N. Federal Highway,
Suite 504, Fort Lauderdale, FL 33308 and our telephone number is
(561) 654-5722. Our website address is,
www.dnabrandsinc.com. The information contained therein or
accessible thereby shall not be deemed to be incorporated into this
Offering Circular.
Business Overview
Although we own All the IP for our 2
time award winning Energy drink. On March 25, 2019, we announced
that we were shifting our primary corporate focus to the
transportation/ridesharing industry with the signing of a fleet
agreement with the rideshare platform, Ridesharerental.com
(http://www.Ridesharerental.com) (the “Rideshare Platform”).
As of the date of this Offering Circular, the Company’s operating
business segments will be primarily focused on the development and
maintenance of a fleet of standard passenger vehicles to be made
commercially available for rent to rent to Uber and Lyft drivers in
the South Florida Region (“Fleet Management”). Initially
concentrating in the South Florida region, DNA Brands is the First
fleet operator in the State of Florida with
www.RideshareRentals.com and anticipates covering the whole state
by years end.
The Company’s Fleet Management
business will focus on the maintenance of a fleet of standard
passenger vehicles, to be subsequently rented directly to drivers
in the ridesharing economy. The Fleet Management business and
vehicles will be made commercially available through the Rideshare
Platform, which is available at www.ridesharerental.com. The
company fully intends to continue adding cars to its fleet monthly.
The most significant portion of the use of proceeds of this
offering will be to add additional vehicles to our Fleet Management
business.
The Company now has four vehicles in service.
Fleet Management Business
The Company’s Fleet Management business will maintain a fleet of
standard passenger vehicles to be subsequently rented directly to
drivers in the ridesharing economy through the Rideshare Platform.
The Company’s fleet of vehicles, as well as other third-party
vehicles will be made commercially available for rental bookings on
the Rideshare Platform as well as on other third-party e-commerce
booking platforms and/or through strategic partnerships and
relationships. The Company will seek to provide drivers in the
ridesharing economy with full-service vehicle rentals and fleet
contract maintenance solutions for commercial standard passenger
vehicles.
The Company’s material operations for the Fleet Management business
will be primarily conducted solely in the State of Florida pursuant
to its agreement with Ridesharerental.com. As a provider of
comprehensive, integrated vehicle rental and fleet management
solutions, the Fleet Management business markets and manages short
and long-term vehicle rentals to ridesharing economy drivers
located in southern Florida with plans to expand to the entire
state within 12 months.
The Company will be focused on operating, developing and investing
in its vehicle rental business with a focus on marketing directly
to the peer-to-peer car sharing and ridesharing industry
professionals. The Company will be capable of meeting customers’
needs, including but not limited to a guaranty that all vehicles
maintained under the Fleet Management business will comply with and
pass the Ridesharing Qualification Requirements. Our Fleet
Management product and service offering will include full-service
vehicle rental(s) and contract maintenance, along with distribution
center management and transportation management service. As of the
date of this Offering Circular, the Company’s customer base is
primarily ridesharing drivers located within Broward County that
are operating and performing driving services on behalf of a host
of the private ridesharing TNCs (primarily Lyft and Uber). Per our
agreement with ridesharerental.com, our Fleet Management business
is limited to the State of Florida. We are presently operating just
in Broward county, Florida, however the Company intends to
aggressively expand our Fleet Management services and product
offerings to the entire state.
The Company believes that customers will rent vehicles offered by
our Fleet Management business in order to reduce the complexity,
cost and total capital associated with vehicle ownership. Further,
we believe that due to our market focus on the ridesharing industry
and the additional imposition of the Ridesharing Qualification
Requirements imposed on ridesharing vehicles by the dominant
private ridesharing TNCs, customers will be further incentivized to
rent our Fleet Management vehicles to guarantee compliance with the
Ridesharing Qualification Requirements.
Under a full-service rental agreement, the Company provides and
fully maintains the vehicle, which is generally specifically
configured to meet the Ridesharing Qualification Requirements. The
services provided under full-service rental and contract
maintenance agreements generally include preventive and regular
maintenance, advanced diagnostics, emergency road service, fleet
services, and safety programs, through our company-operated
facilities.
Fleet Management Software
The Company has entered into an agreement with ridesharerental.com
to use its Rideshare Platform for its Fleet Management business,
which we believe will ensure that the Company’s fleet of vehicles
meet and comply with the Ridesharing Qualification Requirements and
transmit relevant data our customers, the Company has fit its Fleet
Management vehicles with fleet management GPS solution software,
providing open platform fleet management solutions to businesses of
all sizes. These full-featured solutions help the Company manage
their drivers and vehicles by extracting accurate and actionable
intelligence from real-time and historical location trip data. The
telematics solutions for fleet optimization provide our Fleet
Management vehicles with fitted software analytics and data
involving (i) fuel efficiency; (ii) management of vehicle
maintenance and (iii) prevention of vehicle wear and tear.
The Ridesharing Industry
At the most basic level, real-time ridesharing is a service that
arranges one-time shared rides on short notice. Traditionally,
ridesharing arrangements between two or more unrelated individuals
for commuting purposes have been relatively inflexible, long- term
arrangements. These commuting arrangements will establish
reasonably fixed departure time schedules and driving
responsibilities. The complexity of work and social schedules and
the perceived increase in vehicle trip complexity, such as trip
chaining, has made this type of commuting arrangement much less
desirable. “Real-time” ridesharing attempts to provide added
flexibility to ridesharing arrangements by allowing drivers and
passengers to partake in occasional shared rides. The internet-
connected, global positioning system (“GPS”) enabled device
automatically detects your current location, takes the home
location that you have programmed in previously and searches the
database for drivers traveling a similar route and willing to pick
up passengers. According to Wikipedia.org, “real-time”
ridesharing is defined as “a single, or recurring ridesharing
trip with no fixed schedule, organized on a one-time basis, with
matching of participants occurring as little as a few minutes
before departure or as far in advance as the evening before a trip
is scheduled to take place”.
A number of TNCs located in San Francisco premiered apps for
real-time ridesharing in early 2010, several TNCs were introduced
that were advertising as ridesharing, but in fact dispatched
commercial operators similar to a taxi service. Transportation
industry experts have frequently referred to these services as
“ridesourcing” to clarify that drivers do not share a
destination with their passengers. Rather, the
“ridesourcing” app simply outsources rides to available
commercial drivers. In 2013 an agreement was reached with
California Public Utilities Commission creating a new category of
service called “Transportation Network Companies” or
“TNCs” to cover both real-time and scheduled ridesharing
companies. Transportation Network Companies have faced regulatory
opposition in many other cities, including Los Angeles, Chicago,
New York City, and Washington, D.C, among others.
“Ridesharing” has been controversial, variously criticized
as lacking adequate regulation, insurance, licensure, and training.
One of the main so-called ridesharing (but actually ridesourcing)
firms, Uber, was banned in Berlin and a number of other European
cities. Opposition may also come from taxi companies and public
transit operators because they are seen as alternatives. Early
real- time ridesharing projects are believed to have begun in the
1990s, but they faced obstacles such as the need to develop a user
network and a convenient means of communication. Gradually the
means of arranging the ride shifted from telephone to internet,
email, and smartphone; and user networks were developed around
major employers and universities. As of 2006, the goal of taxi-like
responsiveness still generally eluded the industry; “next
day” responsiveness was generally considered the state of the
art.
The term “ridesharing” was starting to become a misnomer,
they’re a lot more like successful private cab or taxi businesses
that cater to a smartphone-toting clientele and actively rival
traditional cab or taxi companies and having reliable and
affordable door- to-door transportation in general can help expand
car-free living. Given the fast rise of smartphone adoption
globally, ridesharing’s success doesn’t come as a surprise. But
there are many reasons why customers prefer to book those services
versus taxis. Among those are a clear overview of pricing prior to
booking, the ease and convenience of “one-tap” rides, the
ability to monitor and follow drivers on map displayed on the
user’s smartphone, the convenience of a cashless transaction, fare
splitting, and feedback options. The premier and probably most well
know ridesharing service, Uber, was born when its founders became
annoyed that they could not get a taxi in Paris. By eliminating the
antiquated taxi dispatch system through technology (call and book
taxi, call to request driver’s location, call when taxi doesn’t
arrive), the founders of Uber created an innovative technology
alternative to the traditional taxi dispatch system that has been
widely adopted by users worldwide. By eliminating a key piece of
the supply chain and streamlining efficiencies for the users, Uber
was able to completely disrupt a century-old taxi industry. In
essence, Uber & Lyft are really the two companies that dominate
the market and Uber so far has won across the board: access, driver
experience, customer experience, brand and funding.
The growth of the ridesharing economy has resulted in increasing
consumer demand for ridesharing services, provided by
Transportation Network Companies (“TNCs”) such as Lyft, Gett
and Uber, that offer a ridesharing economy service through mobile
applications.
Ridesharing apps connect people who need a ride with people who
have a vehicle and time to drive - notably, not necessarily people
who are licensed taxi drivers. Ridesharing TNCs like Lyft, Gett and
Uber provide a smartphone app that lets consumers hail a ride, set
their destination, and pay without leaving the app itself. The
benefits to the consumer is ease of use, availability of rides, and
sometimes lower prices than traditional taxis. Many companies
require at least some sort of certification for the drivers and
take a portion of the drivers’ fares. Ridesharing drivers can
choose when they work (though they can receive bonuses for logging
a certain number of hours) and provide their own vehicles. In the
United States, ridesharing companies argue that the
work-when-you-want arrangement qualifies drivers as contractors,
not employees. Despite legal battles and controversy over surge
pricing, ridesharing companies have exploded in popularity, both in
the U.S. and internationally. Early entrants in the TNC app space,
like Uber and Flywheel, were founded around 2009. Overall, the
industry has raised more than $10 billion in venture funding.
We believe that we have strong economic prospects by virtue of the
following dynamics of the industry:
|
· |
Continued Growth in
Ridesharing Market. The ridesharing services market has
grown faster, gone to more places and has produced robust growth
and consumer traffic figures since commercial introduction in
approximately 2009. The pace of growth is also picking up. It has
been reported that Uber took six (6) years before it reached a
billion rides in December of 2015, but it took only six (6) months
for Uber to get to two billion rides. In the U.S., the number of
users of ridesharing services is estimated to increase from 8.2
million in 2014 to 20.4 million in 2020, producing a compounded
annual growth rate (“CAGR”) of approximately 13.92% over the
seven-year period. |
|
· |
Globalization of
Ridesharing. In the same vein, ridesharing which started as
an experiment in California has grown into a global marketplace
over a short period of time. Asia has emerged as a geographical
territory to drive future growth. For example, Didi Chuang, the
Chinese ridesharing company, completed 1.43 billion rides just in
2015 and it now claims to have 250 million users in 360 Chinese
cities. Ridesharing is also acquiring deep roots in both India and
Malaysia, and is making advances in Europe and Latin America,
despite regulatory pushback. |
|
· |
Expanding Choices.
Consumer options in ridesharing are expanding to attract an even
larger audience, such as carpooling and private bus services. The
expansion of consumer options has also attracted mass transit
customers to more expensive luxury options. In addition, it has
been reported that dominant TNC businesses are experimenting with
pre-scheduled rides and multiple stops on single trip gain to meet
customer needs. Our Fleet Management business and fleet of rental
vehicles are designed to put more certified ridesharing vehicles on
the roadways to meet the increasing consumer demand of the
availability of ridesharing services. |
Regulation of the Ridesharing Industry
In the current ridesharing marketplace, often times the TNCs (such
as Uber or Lyft) generally takes the place of government in
enforcing standards for drivers and vehicles, though two (2) states
and the District of Columbia now have basic driver background and
minimum insurance requirements in place for TNCs. Each TNC has its
own regulations at the corporate level. However, in many instances,
state, local or federal governments are beginning to seriously
assess the ridesharing industry and it is likely that regulations
and mandated standards are imminent. For more information see
section “Vehicle Registration Requirements.”
Our Opportunity
The increasing demand for ridesharing services has produced an
increase in demand by TNC businesses for more ridesharing drivers
and vehicles on the road at any given time. The growing demographic
of ridesharing drivers, as determined on a global basis, has drawn
ridesharing drivers to the ridesharing marketing to perform
services for a host of private TNC businesses focused on
ridesharing, such as Uber and Lyft. The Company believes that
private ridesharing TNC businesses are hiring more than 50,000
drivers a month to keep pace with the current commercial demand for
ridesharing services.
Complicating this matter further, many potential ridesharing
drivers drawn to the ridesharing market are being rejected or
turned away from employment by the private ridesharing TNCs on
account of the fact that many potential ridesharing driver’s
personal vehicles are failing to meet the Ridesharing Qualification
Requirements imposed on all ridesharing vehicles by the private
ridesharing TNCs. Private ridesharing TNCs impose certain vehicle
safety tests and precautions on all ridesharing vehicles to be
utilized by drivers under employment with the private ridesharing
TNCs. Generally, the TNCs impose certain standard requirements on
all ridesharing drivers and their respective vehicles (the
“Driver Qualification Requirements”) as well as additional
vehicle safety tests, inspections and precautions on all
ridesharing vehicles to be utilized by drivers under employment
with the private ridesharing TNCs (the “Vehicle
Qualification Requirements”, together with the Driver
Qualification Requirements, the “Ridesharing
Qualification Requirements”). For more information, see
“Ridesharing Qualification Requirements”. The Company
estimates that approximately 30%-50% of potential ridesharing
drivers do not own or have rights or access to a car or vehicle
that will meet the Ridesharing Qualification Requirements. Further,
the Company believes that this issue surrounding the Ridesharing
Qualifications Requirements are exacerbating the problem and
resulting in a shortfall of ridesharing drivers on the road at any
given time. Private ridesharing TNCs have responded to this issue
by actively pursuing programs to get eligible ridesharing drivers
into qualified cars that meet the Ridesharing Qualification
Requirements. The Company believes that the TNC line of business
and immense capital requirements in developing a fleet management
business to service the growing ridesharing industry on such a
large scale will restrict the ability of the private ridesharing
TNCs to dominate the ridesharing vehicle rental market. Further,
despite the financial resources and scale of the dominant TNCs in
the ridesharing business, the Company believes that third-party
vehicle rental providers are a necessity to the growth and service
of a robust ridesharing market.
Ridesharing Qualification Requirements
The TNCs generally impose a host of requirements on potential
ridesharing driver applicants seeking employment with TNCs such as
Uber and/or Lyft. For example, prior to becoming a ridesharing
driver, Uber and Lyft impose similar uniform requirements on all
ridesharing vehicles and drivers. Generally, the ridesharing driver
must meet the following standard requirements (collectively, the
“Driver Qualification Requirements”):
|
· |
The ridesharing driver must obtain a minimum age of 21 years
old; |
|
· |
The ridesharing driver’s vehicle must be a four-door car made
in year 2007 or newer (in most cities- 2002 or newer for Los
Angeles, Orange County, San Francisco); |
|
· |
The ridesharing driver must have in-state auto insurance with
the driver’s name on the policy; |
|
· |
The ridesharing driver must have an in-state driver’s license,
licensed in the US for at least one year; |
|
· |
The ridesharing driver must have in-state plates with a current
registration (commercial plates are acceptable as well); |
|
· |
The ridesharing driver must have a clean driving record; |
|
· |
The ridesharing driver must pass on the background check; |
|
· |
The ridesharing driver’s vehicle must pass the Cosmetic
Qualification Requirements. |
For example, prior to becoming an Uber driver, the company requires
all potential ridesharing drivers of UberX, UberXL and
UberPlus/UberSelect to meet the following vehicle requirements:
|
· |
Access to a four-door car that is year 2007 or newer (in most
cities- 2002 or newer for Los Angeles, Orange County, San
Francisco); |
|
· |
The vehicle is in good physical condition with no cosmetic
damage; |
|
· |
No marketing or commercial branding is being outwardly
displayed on the vehicle; |
|
· |
Passing score on the vehicle inspection. |
In addition, the TNCs may impose cosmetic guidelines on all
ridesharing vehicles providing ridesharing services on behalf of
the private ridesharing company. Certain cosmetic features may
prevent a potential ridesharing driver’s vehicle from qualifying
under the vehicle inspection on account of the following: (i) the
vehicle includes a full-body wrap containing advertisements, or any
large ads; (ii) the vehicle has holes or damage to the exterior;
(iii) the vehicle has taxi decals or taxi-style paint; (iv) the
vehicle has significant damage to the interior (including any torn
seats, large permanent stains, strong permanent odors); (v) the
vehicle has paint oxidation; or (vi) the vehicle has different
colored hoods/doors; (vii) the vehicle has objectionable
aftermarket modification (collectively, “Cosmetic Qualification
Requirements”).
In addition to the Driver Qualification Requirements, private
ridesharing companies also require all potential ridesharing
drivers to undergo a vehicle inspection test on all personal driver
vehicles to be used by the potential ridesharing driver to perform
ridesharing services on behalf of the private ridesharing company.
In order to become a Uber or Lyft driver, a potential ridesharing
driver’s vehicle generally must pass the 19-point vehicle
inspection to confirm that it meets the private ridesharing
companies requirements (the “Vehicle Qualification
Requirements”, together with the Driver Qualification
Requirements, the “Ridesharing Qualification
Requirements”).
A 19-point inspection is a standard vehicle inspection procedure to
check a car in 19 specific areas to ensure that it conforms to
safety and operational requirements. While the 19 points are the
same for different companies, their procedures differ slightly. The
process also varies based on the geographical location where the
inspection is performed. The 19 points of the vehicle checked for
inspection include headlights, tail-lights, indicator lights, stop
lights, foot brakes, emergency/parking brake, steering mechanism,
windshield, heat and air conditioning, front, rear and side
windows, front seat adjustment mechanism, door controls (open,
close, lock), horn, speedometer, body condition/ damage, muffler
and exhaust system, condition or tires, interior and exterior
rear-view mirrors and safety belts for driver and passengers. Any
vehicle having a problem or issue with any of the inspection points
will generally not pass the vehicle inspection and will be refused
the opportunity to become a ridesharing driver for the private
ridesharing company.
Company Growth Strategy
Our long-term strategy is focused on four priorities: expanding and
diversifying our revenues; improving our operating effectiveness;
enhancing the customer experience; and disciplined capital
management.
Expand and Diversify Revenues—Our strategy to achieve
ongoing growth is driven by initiatives that expand and diversify
our revenues through customer- and market-focused initiatives. We
are actively working to expand our Fleet Management business, and
diversify our equipment rental fleet with a broader mix of vehicles
to increase in the range of customer options and markets we serve.
In addition, we seek to grow our Fleet Management business which
seeks to connect the owners and/or operators of standard passenger
vehicles to existing or prospective ridesharing drivers. We will
continue to offer a comprehensive equipment rental fleet to achieve
market leadership. We plan to expand our footprint in Florida, with
a focus on increasing the following:
(i) the number of major geographical markets in the
state served by our partner’s Rideshare Platform; (ii) the number
of vehicles maintained and managed under the Company’s Fleet
Management business; and (iii) to continue to reconfigure existing
locations with fleet and expertise tailored to local markets. Our
footprint expansion will include locations served under the
Rideshare Platform and Fleet Management business to better support
our growing ridesharing rental business. We will continue to pursue
initiatives that allow us to drive sales through our existing
locations and geographical territories.
Disciplined Asset Management—We manage our vehicle rental
fleet to optimize the timing of fleet rentals, repairs and
maintenance, while at the same time satisfying our customers'
needs. Through continued use and development of our disciplined
approach to efficient fleet management, we seek to maximize our
utilization and return on investment.
Litigation
From time to time we become the subject of litigation that is
incurred in the ordinary course of its business. However, to date,
we have not been made aware of any actual, pending or threatened
litigation against the Company.
Property
We lease and maintain our primary offices at 6245 N. Federal
Highway, Suite 504, Fort Lauderdale, FL 33308. We do not currently
own any real estate.
DIRECTORS, EXECUTIVE OFFICERS &
CORPORATE GOVERNANCE
The following are our executive officers and directors and their
respective ages and positions as of the date of this Offering
Circular:
| Name |
|
Position |
|
Age |
|
Term of Office |
|
Approximate hours per week for part-time
employees |
| Executive
Officers: |
|
|
|
|
|
|
|
|
| Adrian
McKenzie-Patasar |
|
Chief Executive
Officer |
|
44 |
|
Since February 2016 |
|
40 |
| |
|
|
|
|
|
|
|
|
| Howard Ullman |
|
President |
|
62 |
|
Since Jan 2019 |
|
20 |
During the past five (5) years, none of the persons identified
above has been involved in any bankruptcy or insolvency proceeding
or convicted in a criminal proceeding, excluding traffic violations
and other minor offenses. There is no arrangement or understanding
between the persons described above and any other person pursuant
to which the person was selected to his or her office or
position.
Executive Officers and Directors
Adrian McKenzie-Patasar- CEO DNA Brands Inc. Sole
Director.
From 2016 to the present Mr. McKenzie has been CEO of the Company.
From 2009 to the present, he has been President of PBDC LLC, a
consulting company. In 1998 Mr. Patasar graduated from the
University of Western Ontario (UWO), London Ontario Canada with a
BA in Economics.
Howard Ullman- President DNA Brands Inc.
Mr. Ullman is a consumer products specialist in developing and
launching consumer products. Mr. Ullman founded and recently sold
Atmospheric Water Solutions (AWS). Formed in 2011, the company is
involved in producing potable drinking water from air. Over the
past five years he and or his company have filed numerous patents
in atmospheric water generation (AWG) technologies. In 2015/2016
AWS won product of the year at two major exhibitions in the US and
was a finalist for product of the year in four additional contests.
In 2014 Ullman was named leader of the AWG industry by research
giant Frost and Sullivan and has received numerous leadership
awards for his work as a water steward over the past two years. He
has a Bachelor of Arts degree in Economics from Tulane University.
In 2015 he was awarded the CSR Leadership Award For Outstanding
Contribution to Water Efficiency in India and a Leadership
Excellence Award in Dubai from the World Leadership Congress. Since
2016 he has been a member of the Green Energy Council.
Board Leadership Structure and Risk Oversight
The Board oversees our business and considers the risks associated
with our business strategy and decisions. The Board currently
implements its risk oversight function as a whole. Each of the
Board committees, when established, will also provide risk
oversight in respect of its areas of concentration and reports
material risks to the board for further consideration.
Term of Office
Directors serve until the next annual meeting and until their
successors are elected and qualified. Officers are appointed to
serve for one (1) year until the meeting of the Board following the
annual meeting of shareholders and until their successors have been
elected and qualified.
Family Relationships
There are no family relationships among any of our officers or
directors.
Involvement in Certain Legal Proceedings
To our knowledge, none of our current directors or executive
officers has, during the past ten (10) years:
|
· |
been convicted in a criminal
proceeding or been subject to a pending criminal proceeding
(excluding traffic violations and other minor offenses); |
|
· |
had any bankruptcy petition filed
by or against the business or property of the person, or of any
partnership, corporation or business association of which he was a
general partner or executive officer, either at the time of the
bankruptcy filing or within two (2) years prior to that time; |
|
· |
been subject to any order,
judgment, or decree, not subsequently reversed, suspended or
vacated, of any court of competent jurisdiction or federal or state
authority, permanently or temporarily enjoining, barring,
suspending or otherwise limiting, his involvement in any type of
business, securities, futures, commodities, investment, banking,
savings and loan, or insurance activities, or to be associated with
persons engaged in any such activity; |
|
· |
been found by a court of competent
jurisdiction in a civil action or by the SEC or the Commodity
Futures Trading Commission to have violated a federal or state
securities or commodities law, and the judgment has not been
reversed, suspended, or vacated; |
|
· |
been the subject of, or a party to,
any federal or state judicial or administrative order, judgment,
decree, or finding, not subsequently reversed, suspended or vacated
(not including any settlement of a civil proceeding among private
litigants), relating to an alleged violation of any federal or
state securities or commodities law or regulation, any law or
regulation respecting financial institutions or insurance companies
including, but not limited to, a temporary or permanent injunction,
order of disgorgement or restitution, civil money penalty or
temporary or permanent cease-and-desist order, or removal or
prohibition order, or any law or regulation prohibiting mail or
wire fraud or fraud in connection with any business entity; or |
|
· |
been the subject of, or a party to,
any sanction or order, not subsequently reversed, suspended or
vacated, of any self- regulatory organization (as defined in
Section 3(a)(26) of the Exchange Act), any registered entity (as
defined in Section 1(a) (29) of the Commodity Exchange Act), or any
equivalent exchange, association, entity or organization that has
disciplinary authority over its members or persons associated with
a member. |
Except as set forth above and in our discussion below in
“Certain Relationships and Related Transactions,” none of
our directors or executive officers has been involved in any
transactions with us or any of our directors, executive officers,
affiliates or associates which are required to be disclosed
pursuant to the rules and regulations of the SEC.
We are not currently a party to any legal proceedings, the adverse
outcome of which, individually or in the aggregate, we believe will
have a material adverse effect on our business, financial condition
or operating results.
Code of Business Conduct and Ethics
Our Board plans to adopt a written code of business conduct and
ethics (“Code”) that applies to our directors, officers and
employees, including our principal executive officer, principal
financial officer and principal accounting officer or controller,
or persons performing similar functions. We intend to post on our
website a current copy of the Code and all disclosures that are
required by law in regard to any amendments to, or waivers from,
any provision of the Code.
EXECUTIVE COMPENSATION
The following table represents information regarding the total
compensation our executive officers and director of the Company as
of December 31, 2018:
| Name and Principal Position |
|
Cash
Compensation
$ |
|
|
Other
Compensation
$ |
|
|
Total
Compensation
$ |
|
| Adrian
McKenzie-Patasar, CEO, Director |
|
$ |
150,000 |
|
|
|
– |
|
|
$ |
150,000 |
|
| Howard Ullman, President |
|
$ |
60,000 |
|
|
|
– |
|
|
$ |
60,000 |
|
| Total |
|
$ |
210,000 |
|
|
|
– |
|
|
$ |
210,000 |
|
__________________________
(1) Any values reported in the “Other Compensation”, if applicable,
column represents the aggregate grant date fair value, computed in
accordance with Accounting Standards Codification ("ASC")
718 Share Based Payments, of grants of stock options to each
of our named executive officers and directors.
Employment Agreements.
McKenzie has entered into an employment agreement with the Company
for a term of five years. Pursuant to his employment agreement, he
has agreed to devote a substantial portion of his business and
professional time and efforts to our business. The employment
agreement provides that he shall receive a salary determined by the
Board of Directors commensurate with the development of the
Company. He may be entitled to receive, at the sole discretion of
our Board of Directors or a committee thereof, bonuses based on the
achievement (in whole or in part) by the Company of our business
plan and achievement by him of fixed personal performance
objectives.
CERTAIN RELATIONSHIPS AND RELATED
PARTY TRANSACTIONS
Related Transactions
Other than as given herein, there have been no transactions and
there are no currently proposed transaction, in which the Company
was or is to be a participant and in which any related person has
or will have a direct or indirect material interest involving the
lesser of $120,000 or one percent (1%) of the average of the
Company’s total assets as of the end of last two completed fiscal
years. A related person is any executive officer, director, nominee
for director, or holder of 5% or more of the Company’s Common
Stock, or an immediate family member of any of those persons.
SECURITY OWNERSHIP OF MANAGEMENT
& CERTAIN SECURITYHOLDERS
The following table shows the beneficial ownership of our Common
Stock as of the date of this Offering Circular held by (i) each
person known to us to be the beneficial owner of more than five
percent (5%) of any class of our shares; (ii) each director; (iii)
each executive officer; and (iv) all directors and executive
officers as a group. As of July 15, 2019, 122,046,461, shares of
our Common Stock issued and outstanding.
Beneficial ownership is determined in accordance with the rules of
the Commission, and generally includes voting power and/or
investment power with respect to the securities held. Shares of
Common Stock subject to options and warrants currently exercisable
or which may become exercisable within sixty (60) days of the date
of this Offering Circular, are deemed outstanding and beneficially
owned by the person holding such options or warrants for purposes
of computing the number of shares and percentage beneficially owned
by such person, but are not deemed outstanding for purposes of
computing the percentage beneficially owned by any other person.
Except as indicated in the footnotes to this table, the persons or
entities named have sole voting and investment power with respect
to all shares of Common Stock shown as beneficially owned by
them.
The percentages below are based on fully diluted shares of our
Common Stock as of the date of this Offering Circular.
| |
|
Number of shares
of Common Stock
Beneficially
Owned as of
July 15, 2019
|
|
|
Percentage
Before
Offering
|
|
|
Beneficially
Owned (5) After
Maximum
Offering
|
|
| Directors and Officers:
(1)(2) |
|
|
|
|
|
|
|
|
|
|
|
|
| Adrian
McKenzie-Patasar |
|
|
81,000,000 |
|
|
|
77.90% |
|
|
|
2.50% |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Greater than 5% Beneficial
Owners: |
|
|
|
|
|
|
|
|
|
|
|
|
| Adrian
McKenzie-Patasar |
|
|
81,000,000 |
|
|
|
77.90% |
|
|
|
2.50% |
|
_________________________________
|
(1) |
Unless otherwise indicated, the principal address of the named
directors and officers of the Company is c/o DNA Brands Inc., 6245
N. Fed Hwy, Ste 504, Fort Lauderdale Fl 33311.
|
| |
(2) |
Andrian McKenzie-Patasar, by virtue of his ownership of 355,000
shares of Series F preferred stock, has over 26.6 billion votes
and, therefore, control over all matters submitted to
shareholders.
|
DESCRIPTION OF SECURITIES
The following is a summary of the rights of our capital stock as
provided in our certificate of incorporation, bylaws and
certificate of designation. For more detailed information, please
see our certificate of incorporation, bylaws and certificate of
designation which have been filed as exhibits to the Offering
Statement of which this Offering Circular is a part.
Indebtedness.
As of October 6, 2019, the Company had a total outstanding
indebtedness of $1,690,132.70. This was the last time, since the
latest amendment to this Registration Statement that the Company
issued any notes in exchange for cash or bona fide services.
Additional information about the Company’s outstanding notes and
debentures can be found in the Section below entitled “DNA
Brands Inc., Recent Financing Activities.” Other investors also
provided financing, information about which can also be found in
the Section entitled “DNA Brands Inc., Recent Financing
Activities.”
Common Stock
As of January 28, 2020, the Company had 3,613,000,000 shares of
Common Stock authorized and 147,046,461 shares of Common Stock
issued and outstanding.
The holders of the Common Stock are entitled to one vote for each
share held at all meetings of shareholders (and written actions in
lieu of meeting). There shall be no cumulative voting. The holders
of shares of Common Stock are entitled to dividends when and as
declared by the Board from funds legally available therefor, and
upon liquidation are entitled to share pro rata in any distribution
to holders of Common Stock. There are no preemptive, conversion or
redemption privileges, nor sinking fund provisions with respect to
the Common Stock.
The number of authorized shares of Common Stock may be increased or
decreased subject to the Company’s legal commitments at any time
and from time to time to issue them, by the affirmative vote of the
holders of a majority of the stock of the Company entitled to
vote.
Preferred Stock
The following table is a summary of the Company's preferred stock.
Please refer to the information following the table for the full
terms.
|
Designation |
Authorized Shares |
Shares Issued |
Ownership (3) |
Voting |
|
Series A Convertible Preferred Stock (1) Cancelled |
4,000,000 |
None |
|
None |
|
Series C Preferred Stock |
400,000 |
400,000 |
Darren Marks 200,000 shares
Marvin Leiner 200,000 shares
|
300 votes per share |
|
Series D Preferred Stock Cancelled |
1,800,000 |
None |
|
|
|
Series E Preferred Stock |
1,800,000 |
None |
|
68.02721 votes per share |
|
Series F Preferred Stock |
500,000 |
355,000 |
Adrian Mckenzie |
75,000 per share |
|
Series G Preferred Stock |
2,000,000 |
None |
|
|
|
Series H Preferred Stock (2) |
1,000,000,000 |
None |
|
|
|
(1) |
Each share converts into one shares of Common Stock. |
|
(2) |
Each share converts into five shares of Common Stock. |
|
(3) |
The address of all shareholders is c/o DNA Brands, Inc., 6245 N
Federal Hwy, Ste 504, Fort Lauderdale, FL 33308. |
The Company has authorized one billion thirty million
(1,030,000,000) shares of Preferred Stock consisting of one billion
twenty-five million three hundred thousand (1,025,300,000)
undesignated shares of Preferred Stock, $.001 par value per share.
There are designated four hundred thousand (400,000) shares of
Series C Preferred Stock, $.001 par value per share; one million
eight hundred thousand (1,800,000) shares of Series E Preferred
Stock, $.001 par value per share; five hundred thousand (500,000)
shares of Series F Preferred Stock, $.001 par value per share; and
two million (2,000,000) shares of Series G Redeemable Convertible
Preferred Stock, $.001 par value per share, the designations,
preferences, limitations and relative rights of the shares of each
such class are as follows:
Series “A” Convertible Preferred Stock
There are no Series A shares outstanding.
The designation, preferences, limitations and relative rights of
the Series “A” Convertible Preferred Stock are as follows:
This series of Preferred Stock shall be designated as “Series ‘A’
Convertible Preferred Stock” and the number of shares of such
series shall be 4,000,000 shares.
Stated Value
The stated value of the Series “A” Convertible Preferred Stock
shall be $0.25 per share.
Dividends
The holders of outstanding Series “A” Convertible Preferred Shares
shall not be entitled to receive any dividends.
Preference on Liquidation
In the event of any liquidation, dissolution or winding up of the
Corporation, the holders of Series “A” Convertible Preferred Shares
then outstanding shall be entitled to be paid out of the assets of
the Corporation available for distribution to its stockholders,
whether from capital, surplus or earnings, before any payment shall
be made in respect of the Corporation’s Common Shares or junior
stock, an amount equal to twenty-five cents ($0.25) per share. If,
upon liquidation, dissolution or winding up of the Corporation, the
assets of the Corporation available for the distribution to its
shareholders shall be insufficient to pay the holders of the Series
“A” Convertible Preferred Shares an amount equal to twenty-five
cents ($0.25) per share, the holders of the Series “A” Convertible
Preferred Shares shall share ratably in any distribution of assets
according to the respective amounts which would be payable in
respect of the shares held by them upon such distribution if all
amounts payable on or with respect to said shares were paid in
full. After the holders of Series “A” Convertible Preferred Shares
have received an amount equal to twenty-five cents ($0.25) per
share, the assets then remaining shall be distributed equally per
share to the holders of a subsequently issued junior class of
Preferred Shares, or if none, then to the holders of Common
Shares.
A reorganization, consolidation or merger of the Corporation with
or into any other corporation or corporations, or a sale of all or
substantially all of the assets of the Corporation, shall not be
deemed to be a liquidation, dissolution or winding up of the
Corporation as those terms are used in this subdivision (d) and, in
the event of any such reorganization, consolidation, merger or sale
of assets, the Series “A” Convertible Preferred Shares shall be
entitled only to the rights provided in the plan of
reorganization.
Voting Rights
The Series “A” Convertible Preferred Shares shall not have voting
rights and shall not be entitled to notice of shareholders meetings
or to vote upon the election of directors or upon any other matter
at any special meeting of shareholders.
Conversion of Series “A” Convertible Preferred Stock Into
Common Stock
Subject to the provisions of this subdivision (f), the holder of
record of any share or shares of Series “A” Convertible Preferred
Stock shall have the right, at his option, at any time commencing
after July 1, 2011, to convert one (1) share of Series “A”
Convertible Preferred Stock into one fully paid and nonassessable
share of Common Stock of the Company.
Any holder of a share or shares of Series “A” Convertible Preferred
Stock desiring to convert such Series “A” Convertible Preferred
Stock into Common Stock shall surrender the certificate or
certificates representing the share or shares of Series “A”
Convertible Preferred Stock so to be converted, duly endorsed to
the Company, or in blank, at the principal office of the Company,
and shall give written notice to the Company at said office that he
elects to convert the same, and setting forth the name or names
(with the address or addresses) in which the shares of Common Stock
are to be issued.
Conversion of Series “A” Convertible Preferred Stock shall be
subject to the following additional terms and provisions:
As promptly as practicable after the surrender for conversion of
any Series “A” Convertible Preferred Stock, the Company shall
deliver or cause to be delivered to the holder of such Series “A”
Convertible Preferred Stock at the holder’s address as indicated on
the Company’s stock ledger (or such other place as may be
designated by the holder), to or upon the written order of the
holder of such Series “A” Convertible Preferred Stock, certificates
representing the shares of Common Stock issuable upon such
conversion, issued in such name or names as such holder may direct.
Shares of the Series “A” Convertible Preferred Stock shall be
deemed to have been converted as of the close of business on the
date of the surrender of the Series “A” Convertible Preferred Stock
for conversion, as provided above, and the rights of the holders of
such Series “A” Convertible Preferred Stock shall cease at such
time, and the person or persons in whose name or names the
certificates for such shares are to be issued shall be treated for
all purposes as having become the record holder or holders of such
Common Stock at such time; provided, however, that any such
surrender on any date when the stock transfer books of the Company
shall be closed shall constitute the person or persons in whose
name or names the certificates for such shares are to be issued as
the record holder or holders thereof for all purposes at the close
of business on the next succeeding day on which such stock transfer
books are open.
In the event that the Company shall at any time subdivide or
combine in a greater or lesser number of shares the outstanding
shares of Common Stock, the number of shares of Common Stock
issuable upon conversion of the Series “A” Convertible Preferred
Stock shall be proportionately increased in the case of subdivision
or decreased in the case of a combination, effective in either case
at the close of business on the date when such subdivision or
combination shall become effective.
In the event that the Company shall be recapitalized, consolidated
with or merged into any other corporation, or shall sell or convey
to any other corporation all or substantially all of its property
as entirety, provision shall be made as part of the terms of such
recapitalization, consolidation, merger, sale or conveyance so that
any holder of Series “A” Convertible Preferred Stock may thereafter
receive in lieu of the Common Stock otherwise issuable to him upon
conversion of his Series “A” Convertible Preferred Stock, but at
the conversion ratio stated in this subdivision (e), the same kind
and amount of securities or assets as may be distributable upon
such recapitalization, consolidation, merger, sale or conveyance,
with respect to the Common Stock of the Company.
In the event that the Company shall at any time pay to the holders
of Common Stock a dividend in Common Stock, the number of shares of
Common Stock issuable upon conversion of the Series “A” Convertible
Preferred Stock shall be proportionately increased, effective at
the close of business on the record date for determination of the
holders of Common Stock entitled to such dividend.
Such adjustments shall be made successively if more than one event
listed in subdivisions (e)(3)(B), (C) and (D) hereof shall
occur.
No adjustment of the conversion ratio shall be made by reason of
the purchase, acquisition, redemption or retirement by the Company
of any shares of the Common Stock or any other class of the capital
stock of the Company, except as provided in subdivision (e)(3)(B);
or
the issuance, other than as provided in subdivisions (e)(3)(B) and
(D), of any shares of Common Stock of the Company, or of any
securities convertible into shares of Common Stock or other
securities of the Company, or of any rights, warrants or options to
subscribe for or purchase shares of the Common Stock or other
securities of the Company, or of any other securities of the
Company, provided that in the event the Company offers any of its
securities, or any rights, warrants or options to subscribe for or
purchase any of its securities, to the holders of its Common Stock
pursuant to any preemptive or preferential rights granted to
holders of Common Stock by the Articles of Incorporation of the
Company, or pursuant to any similar rights that may be granted to
such holders of Common Stock by the Board of Directors of the
Company, at least 20 days prior to the expiration of any such offer
the Company shall mail written notice of such offer to the holders
of the Series “A” Convertible Preferred Stock then of record; or
any offer by the Company to redeem or acquire shares of its Common
Stock by paying or exchanging therefore stock of another
corporation or the carrying out by the Company of the transactions
contemplated by such offer, provided that at least 20 days prior to
the expiration of any such offer the Company shall mail written
notice of such offer to the holders of the Series “A” Convertible
Preferred Stock then of record.
The Company shall at all times reserve and keep available solely
for the purpose of issue upon conversion of Series “A” Convertible
Preferred Stock, as herein provided, such number of shares of
Common Stock as shall be issuable upon the conversion of all
outstanding Series “A” Convertible Preferred Stock.
The issuance of certificates for shares of Common Stock upon
conversion of the Series “A” Convertible Preferred Stock shall be
made without charge for any tax in respect of such issuance.
However, if any certificate is to be issued in a name other than
that of the holder of record of the Series “A” Convertible
Preferred Stock so converted, the person or persons requesting the
issuance thereof shall pay to the Company the amount of any tax
which may be payable in respect of any transfer involved in such
issuance, or shall establish to the satisfaction of the Company
that such tax has been paid or is not due and payable.
Redemption.
The Series “A” Convertible Preferred Stock shall not be redeemable
at any time by the Company.
Series C Preferred Stock
There are no Series C shares outstanding.
The designation, preferences, limitations and relative rights of
the Series C Preferred Stock are as follows:
Designation and Amount. The shares of such series shall be
designed as "Series C Preferred Shares" (the "Series C Preferred
Shares"), and the number of shares constituting such series shall
be 400,000. The number of shares constituting such series may,
unless prohibited by the Articles of Incorporation, be decreased by
resolution of the Board of Directors; provided that no
decrease shall reduce the number of Series C Preferred Shares to a
number less than the number of shares then outstanding plus the
number of shares issuable upon the exercise of outstanding options,
rights or warrants or upon the conversion of any outstanding
securities issued by the Corporation convertible in Series C
Preferred Shares.
Dividends and Distributions
The holders of Series C Preferred Shares, in preference to the
holders of Common Shares, shall be entitled to receive, when, as
and if declared by the Board of Directors out of funds legally
available for the purpose, annual dividends payable in cash on the
31st day of December in each year (each such date being referred to
herein as a "Dividend Payment Dates"), commencing on December 31,
2013 at the rate of $0.01 per share per year.
Dividends which are not declared will not accrue. Dividends not
declared will not cumulate. Accrued but unpaid dividends shall not
bear interest. Dividends paid on the Series C Preferred Shares in
an amount less than the total amount of such dividends at the time
such dividends are declared and become payable shall be allocated
pro rata on a share-by-share basis among all such shares
outstanding at that time. The Board of Directors may fix a record
date for the determination of holders of Series C Preferred Shares
entitled to receive payment of a dividend or distribution declared
thereon, which record date shall be not more than thirty (30) days
prior to the date fixed for the payment thereof.
Voting Rights. Each Series C Preferred Share will entitle
the holder thereof to 300 votes on all matters submitted to a vote
of the shareholders of the Corporation. Except as otherwise
provided herein or in any other Certificate of Designation creating
a series of Preferred Shares or by law, the holders of Series C
Preferred Shares and the holders of Common Shares and any other
capital shares of the Corporation having general voting rights
shall vote together as one class on all matters submitted to a vote
of the shareholders of the Corporation.
Certain Restrictions Whenever dividends declared or other
distributions payable on the Series C Preferred Shares as provided
in Section 2 hereof are in arrears, thereafter and until all unpaid
dividends and distributions on Series C Preferred Shares
outstanding shall have been paid in full, the Corporation shall
not:
declare or pay dividends, or make any other distributions, on any
shares of stock ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) to the Series C Preferred
Shares;
declare or pay dividends, or make any other distributions, on any
shares of stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Series C Preferred
Shares, except dividends paid ratably on the Series C Preferred
Shares and all such parity stock on which dividends are payable or
in arrears in proportion to the total amounts to which the holders
of all such shares are then entitled;
The Corporation shall not permit any subsidiary of the Corporation
to purchase or otherwise acquire for consideration any shares of
stock of the Corporation unless the Corporation could, under
subparagraph (i) of this Section 4, purchase or otherwise acquire
such shares at such time and in such manner.
Reacquired Shares. Any Series C Preferred Shares purchased
or otherwise acquired by the Corporation in any manner whatsoever
shall constitute authorized but unissued Preferred Shares and may
be reissued as part of a new series of Preferred Shares by
resolution or resolutions of the Board of Directors, subject to the
conditions and restrictions on issuance set forth herein, in the
Articles of Incorporation, or in any other Certificate of
Designation creating a series of Preferred Shares or as otherwise
required by law.
Liquidation, Dissolution or Winding Up. Upon any
liquidation, dissolution or winding up of the Corporation, no
distribution shall be made to the holders of shares of stock
ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Series C Preferred Shares unless,
prior thereto, the holders of Series C Preferred Shares shall have
received $0.67 per share, plus an amount equal to declared and
unpaid dividends and distributions thereon to the date of such
payment.
Consolidation, Merger, Exchange, etc.. In case the
Corporation shall enter into any consolidation, merger,
combination, statutory share exchange or other transaction in which
the Common Shares are exchanged for or changed into other stock or
securities, money and/or any other property, then in any such case
the Series C Preferred Shares shall at the same time be similarly
exchanged or changed into an amount per share equal to the
aggregate amount of stock, securities, money and/or any other
property (payable in kind), as the case may be, into which or for
which each Common Share is changed or exchanged. In the event the
Corporation shall at any time after May 3, 2013 declare or pay any
dividend on Common Shares payable in Common Shares, or effect a
subdivision or combination or consolidation of the outstanding
Common Shares (by reclassification or otherwise) into a greater or
lesser number of Common Shares, then in each such case the amount
set forth in the preceding sentence with respect to the exchange or
change of Series C Preferred Shares shall be adjusted by
multiplying such amount by a fraction, the numerator of which is
the number of Common Shares outstanding immediately after such
event and the denominator of which is the number of Common Shares
that were outstanding immediately prior to such event.
Series D Preferred Stock
The designation, preferences, limitations and relative rights of
the Series D Preferred Stock are as follows:
Designation and Number of Series
This series of Preferred Stock shall be designated as “Series ‘D’
Preferred Stock” and the number of shares of such series shall be
1,800,000 shares.
Stated Value
The stated value of the Series “D” Preferred Stock shall be $0.055
per share.
Dividends
The holders of outstanding Series “D” Preferred Shares shall be
entitled to receive dividends if and when so declared by the
Company’s Board of Directors, in their sole discretion.
Preference on Liquidation
In the event of any liquidation, dissolution or winding up of the
Corporation, the holders of Series “D” Preferred Shares then
outstanding shall be entitled to be paid out of the assets of the
Corporation available for distribution to its stockholders, whether
from capital, surplus or earnings, after any payment shall be made
in respect of the liquidation preference on the Series “A”
Preferred Stock and the Series C Preferred Stock, but before any
payment shall be made in respect of the Corporation’s Common Shares
or junior stock, an amount equal to $0.055 per share. If, upon
liquidation, dissolution or winding up of the Corporation, the
assets of the Corporation available for the distribution to its
shareholders shall be insufficient to pay the holders of the Series
“D” Preferred Shares an amount equal to $0.055 per share, the
holders of the Series “D” Preferred Shares shall share ratably in
any distribution of assets according to the respective amounts
which would be payable in respect of the shares held by them upon
such distribution if all amounts payable on or with respect to said
shares were paid in full. After the holders of the Series “A”
Preferred Stock have received an amount equal to twenty five cents
($.25) per share, the holders of the Series C Preferred Stock have
received an amount equal to sixty-seven cents ($.67) per share and
the Series “D” Preferred Shares have received an amount equal to
$0.055 per share, the assets then remaining shall be distributed
equally per share to the holders of a subsequently issued junior
class of Preferred Shares, or if none, then to the holders of
Common Shares.
A reorganization, consolidation or merger of the Corporation with
or into any other corporation or corporations, or a sale of all or
substantially all of the assets of the Corporation, shall not be
deemed to be a liquidation, dissolution or winding up of the
Corporation as those terms are used in this subdivision (d) and, in
the event of any such reorganization, consolidation, merger or sale
of assets, the Series “D” Preferred Shares shall be entitled only
to the rights provided in the plan of reorganization.
Voting Rights
Each Series “D” Preferred Share will entitle the holder thereof to
68.02721 votes on all matters submitted to a vote of the
shareholders of the Corporation. Except as otherwise provided
herein or in any other Certificate of Designation creating a series
of Preferred Shares or by law, the holders of Series “D” Preferred
Shares and the holders of Common Shares and any other capital
shares of the Corporation having general voting rights shall vote
together as one class on all matters submitted to a vote of the
shareholders of the Corporation.
Redemption.
The Series “D” Preferred Stock shall not be redeemable at any time
by the Company.
Series E Preferred Stock
The designation, preferences, limitations and relative rights of
the Series E Preferred Stock are as follows:
Designation and Number of Series
This series of Preferred Stock shall be designated as “Series E
Preferred Stock” and the number of shares of such series shall be
1,800,000 shares.
Stated Value
The stated value of the Series E Preferred Stock shall be $0.055
per share.
Dividends
The holders of outstanding Series E Preferred Shares shall be
entitled to receive dividends if and when so declared by the
Company’s Board of Directors, in their sole discretion.
Preference on Liquidation
In the event of any liquidation, dissolution or winding up of the
Corporation, the holders of Series E Preferred Shares then
outstanding shall be entitled to be paid out of the assets of the
Corporation available for distribution to its stockholders, whether
from capital, surplus or earnings, after any payment shall be made
in respect of the liquidation preference on the Series C Preferred
Stock, but before any payment shall be made in respect of the
Corporation’s Common Shares or junior stock, an amount equal to
$0.055 per share. If, upon liquidation, dissolution or winding up
of the Corporation, the assets of the Corporation available for the
distribution to its shareholders shall be insufficient to pay the
holders of the Series E Preferred Shares an amount equal to $0.055
per share, the holders of the Series E Preferred Shares shall share
ratably in any distribution of assets according to the respective
amounts which would be payable in respect of the shares held by
them upon such distribution if all amounts payable on or with
respect to said shares were paid in full. After the holders of the
holders of the Series C Preferred Stock have received an amount
equal to sixty-seven cents ($.67) per share and the Series E
Preferred Shares have received an amount equal to $0.055 per share,
the assets then remaining shall be distributed equally per share to
the holders of a subsequently issued junior class of Preferred
Shares, or if none, then to the holders of Common Shares.
A reorganization, consolidation or merger of the Corporation with
or into any other corporation or corporations, or a sale of all or
substantially all of the assets of the Corporation, shall not be
deemed to be a liquidation, dissolution or winding up of the
Corporation as those terms are used in this subdivision (d) and, in
the event of any such reorganization, consolidation, merger or sale
of assets, the Series E Preferred Shares shall be entitled only to
the rights provided in the plan of reorganization.
Voting Rights
Each Series E Preferred Share will entitle the holder thereof to
68.02721 votes on all matters submitted to a vote of the
shareholders of the Corporation. Except as otherwise provided
herein or in any other Certificate of Designation creating a series
of Preferred Shares or by law, the holders of Series E Preferred
Shares and the holders of Common Shares and any other capital
shares of the Corporation having general voting rights shall vote
together as one class on all matters submitted to a vote of the
shareholders of the Corporation.
Redemption.
The Series E Preferred Stock shall not be redeemable at any time by
the Company.
Series F Preferred Stock
The designation, preferences, limitations and relative rights of
the Series “F” Preferred Stock are as follows:
This series of Preferred Stock shall be designated as “Series “F”
Preferred Stock” and the number of shares of such series shall be
500,000 shares.
Stated Value
The stated value of the Series “F” Preferred Stock shall be $1.00
per share.
Dividends
The holders of outstanding Series “F” Preferred Shares shall not be
entitled to receive any dividends.
Preference on Liquidation
In the event of any liquidation, dissolution or winding up of the
Corporation, the holders of Series “F” Preferred Shares then
outstanding shall be entitled to be paid out of the assets of the
Corporation available for distribution to its stockholders, whether
from capital, surplus or earnings, before any payment shall be made
in respect of the Corporation’s Common Shares or junior stock, an
amount equal to One Dollar ($1.00) per share. If, upon liquidation,
dissolution or winding up of the Corporation, the assets of the
Corporation available for the distribution to its shareholders
shall be insufficient to pay the holders of the Series “F”
Preferred Shares an amount equal to One Dollar ($1.00) per share,
the holders of the Series “F” Preferred Shares shall share ratably
in any distribution of assets according to the respective amounts
which would be payable in respect of the shares held by them upon
such distribution if all amounts payable on or with respect to said
shares were paid in full. After the holders of Series “F” Preferred
Shares have received an amount equal to One Dollar ($1.00) per
share, the assets then remaining shall be distributed equally per
share to the holders of a subsequently issued junior class of
Preferred Shares, or if none, then to the holders of Common
Shares.
A reorganization, consolidation or merger of the Corporation with
or into any other corporation or corporations, or a sale of all or
substantially all of the assets of the Corporation, shall not be
deemed to be a liquidation, dissolution or winding up of the
Corporation as those terms are used in this subdivision (d) and, in
the event of any such reorganization, consolidation, merger or sale
of assets, the Series “F” Preferred Shares shall be entitled only
to the rights provided in the plan of reorganization.
Voting Rights
The holders of record of Series “F” Preferred Shares shall be
entitled to Thirty- Five Thousand (35,000) votes at any meeting of
shareholders for each share of Series “F” Preferred Stock.
Redemption.
The Series “F” Preferred Stock shall not be redeemable at any time
by the Company.
Series G Preferred Stock
SECTION 1. DESIGNATION OF SERIES
G CONVERTIBLE PREFERRED STOCK.
The shares of the series of preferred stock created and authorized
by this Resolution shall be designated "Series G Redeemable
Convertible Preferred Stock" (the "Series G Preferred Stock"). The
total number of authorized shares constituting the Series G
Preferred Stock shall be Two Million (2,000,000) shares. The number
of shares constituting this series of preferred stock of the
Corporation may be increased or decreased at any time from time to
time, in accordance with applicable law up to the maximum number of
shares of preferred stock authorized under the Articles, less all
shares at the time authorized of any other series of preferred
stock of the Corporation; provided, however, that no decrease shall
reduce the number of shares of this series to a number less than
that of the then-outstanding shares of Series G Preferred Stock.
The stated face value of the Series G Preferred Stock shall be
$4.00 per share. Shares of the Series G Preferred Stock shall be
dated the date of issue.
SECTION 2. DIVIDEND RIGHTS. The holders of shares of Series G
Preferred Stock shall receive cumulative dividends. "Dividends," as
used in this section, shall mean all dividends provided for in
paragraphs 2.1 and 2.2 of this section 2.
(i) Semi-Annual
Dividends. The holders of the Series G Preferred Stock shall be
entitled to receive, when and as declared by the Board of Directors
out of funds legally available for such purpose, cash dividends
("Semi-Annual Dividends") at the rate of Seven Percent (7.00%) per
share semi-annually (14% Fourteen Percent Annual), (computed on the
basis of a 360-day year, 30-day month), payable semi-annually on
October 1 and April 1. Such dividends shall be cumulative and shall
accrue, whether or not earned or declared, from and after February
16, 2016 or the date of issue of the Preferred Stock, whichever is
later.
(ii) Restrictions
on Dividends, Distributions. So long as any Series G Preferred
Stock shall remain outstanding, (i) no
dividends whatsoever shall be declared or paid upon, nor shall any
distribution be made upon, any shares of any other class of stock
of the Corporation, other than a dividend or distribution payable
in Common Stock, and (ii) no shares of any class of stock of the
Corporation shall be redeemed by the Corporation or purchased or
otherwise acquired by the Corporation or any Affiliate thereof,
unless the Corporation is current with the dividends set forth in
paragraph 2.1. In addition,
if
at any time there shall be any accrued and unpaid Dividends on any
shares of Series B Preferred Stock then outstanding, no dividends
whatsoever of any kind may be declared or paid upon, nor shall any
distribution of any kind be made upon, any share of any class of
stock of the Corporation other than the Series G Preferred Stock.
For the purposes of this Section 1, the term "Affiliate" shall
mean, with respect to any Person, any other Person directly or
indirectly controlling, controlled by, or under common control
with, such Person but shall exclude any Person which is an
institution and which might be deemed to be such an Affiliate
solely by reason of its ownership of the Series G Preferred Stock
or any other securities originally issue d and sold to the initial
purchaser of the Series G Preferred Stock or issued upon conversion
of any of such securities, or by reason of its benefiting from any
agreements or covenants of the Corporation entered into in
connection with the issue and sale of any of such securities, and
"Person" shall mean any individual, partnership, joint venture,
corporation, trust, unincorporated organization or government or
any department or agency thereof.
(iii) Additional
Dividends. After the dividends set forth in paragraph 2.1 shall
have been paid, if the Board shall elect to declare cash dividends
on the Common Stock, additional cash dividends shall also be
declared on the Series G Preferred Stock. Such additional dividends
shall, in the aggregate, be equal to at least the amount obtained
by multiplying the aggregate dividend payable on Common Stock by
two (2). Each holder of shares of Series G Preferred Stock shall be
entitled to participate ratably in such additional dividends based
upon the percentage of outstanding Series G Preferred Stock
held.
SECTION 3. LIQUIDATION RIGHTS AND
RIGHTS ON DISSOLUTION.
3.1 Upon any liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, the holders of the
shares of Series G Preferred Stock shall be entitled before any
distribution or payment is made upon any shares of any other class
of stock of the Corporation, to any and all
mineral rights.
SECTION 4. VOTING RIGHTS. Except as otherwise provided by law and
this Certificate of Incorporation, the holders of the Series G
Preferred Stock shall have no right to vote on any matter to be
voted on by the stockholders of the Corporation (including any
election or removal of the directors of the Corporation) except as
provided in paragraph 4.1, and except in each case to the extent
specifically required by Colorado law.
Special Voting Rights. If and whenever any of the following events
("Preferred Stock Defaults") shall occur for any reason whatsoever:
(i)
the Corporation shall fail to make any conversion of the Series G
Preferred Stock pursuant to this agreement on the date such
conversion is required to be made or (ii) the Corporation shall
take or purport to take any restricted corporate action specified
herein without obtaining the prior consent to the holders of the
Series G Preferred Stock required therein, then, and in any such
event, a meeting of all of the stockholders of the Corporation
shall be called pursuant to paragraph 4.4 and the terms of office
of all directors of the Corporation in office immediately prior to
such meeting shall terminate on the election and qualification of
the directors elected at such meeting. At such meeting, and until
all Preferred Stock Defaults shall have been cured in full, the
holders of the outstanding Series G Preferred Stock, each being
entitled to vote: (i) one vote per Common share that the holder of
Series G Preferred Stock would be permitted to convert into as of
the date of default; and (ii) voting separately as a class, shall
be entitled to elect and remove the number of directors
constituting a majority of the directors of the Corporation.
Notwithstanding any provisions of this Certificate of Incorporation
or the By-Laws of the Corporation classifying the directors of the
Corporation into classes having staggered terms of office, for so
long as the holders of the Series G Preferred Stock are entitled to
elect or remove directors there shall be but one class of
directors, each of whom shall be elected to serve, subject to
paragraph 4.3.l, only until the next annual meeting of stockholders
of the Corporation, and until their successors are elected and
qualified. Any vacancy created by the resignation or death of any
director elected by the holders of the Series G Preferred Stock may
be filled by only an appointment made by a majority of the
remaining directors then elected by the holders of the Series G
Preferred Stock, and each director so appointed shall serve,
subject to paragraph 4.3.I, until the next annual meeting of
stockholders of the Corporation and until his successor is elected
and qualified. Any director or directors elected by the holders of
the Series G Preferred Stock or designated to fill a vacancy or
vacancies, as provided in this paragraph 4.1, may be removed from
office only by vote of the holders of a majority of the outstanding
shares of the Series G Preferred Stock at a special meeting of such
holders caused for the purpose of removing such director or
directors, all as provided in paragraph 4.3. Any vacancy created by
the removal of any such director shall be filed by the holders of
the Series G Preferred Stock at the meeting at which such removal
was voted pursuant to paragraph 4.3 or at any adjournment
thereof.
(1) Divestiture
of Voting Rights. If the holders of the outstanding Series G
Preferred Stock have become entitled to vote to elect or remove
directors pursuant to paragraph 4.1, then, upon the curing in full
of all Preferred Stock Defaults at the time existing, the holders
of the Series G Preferred Stock shall be divested of their rights
with respect to the election or removal of directors provided in
paragraph 4.1, without prejudice to any subsequent re-vesting of
such rights in the holders of the Series G Preferred Stock in
accordance with the terms of paragraph 4.1 if there shall
thereafter occur any Preferred Stock Default. Upon any such
divesting of such voting rights of the holders of Series G
Preferred Stock, the terms of office of all persons who may have
been elected directors of the Corporation by vote of the holders of
the Series G Preferred Stock (or pursuant to the fourth sentence of
paragraph 4.3) shall terminate forthwith and the vacancies thereby
created shall be filled in the manner provided by law or in the
By-Laws of the Corporation.
SECTION 5. Preferred Restrictions. The Corporation will not take
any action forbidden by this paragraph without the prior consent
(in addition to any other vote or consent required by law) of the
holders of the outstanding shares of Series G Preferred Stock (or
such higher percentage as may be required by law or by specific
provisions of this Certificate of Incorporation), voting as a class
in person or by proxy given in writing or at a special meeting
called for the purpose.
SECTION 6. CONVERSION RIGHTS.
6.1 Redemption and
Conversion of Series G Preferred Stock into Common Stock. The
Corporation will redeem the holders of the Series G Preferred Stock
based upon One Dollar of value every Twelve (12) months until the
entire value of Four Dollars ($4.00) plus interest is paid off as
defined in section 6.2.
The Corporation will redeem Twenty Five Cents ($0.25) approximately
every 90 days or a maximum of One Dollar ($1.00) within a twelve
month period of time. The Corporation will issue common shares for
the redemption based upon outstanding principal of their holdings
of the Series G Preferred Stock and any Dividends accrued, but not
yet paid, into fully-paid and non-assessable shares of Common Stock
at Five Percent (5%) discount to the average "Fair Market Value"
(the "Conversion Rate") but not to exceed 95 Cents ($0.95) per
share. However, should the Corporation effect a forward split, the
ceiling price of $.95 Cents ($0.95) per share shall be discounted
down according to the split ratio and notwithstanding, the ceiling
price shall be negotiable at the Holder of the Series G Preferred
Stock request. [n no case shall the conversion price be less than
One Cent ($0.01). "Fair Market Value" on a date shall be the
average of the daily closing bid prices for the Five (5)
consecutive trading days before such date excluding any trades
which are not bona fide arm's length transactions. The closing
price for each day shall be (a) if such security is listed or
admitted for trading on any national securities exchange, the last
sale price of such security, regular way, or the mean of the
closing bid and asked prices thereof if no such sale occurred, in
each case as officially reported on the principal securities
exchange on which such security are listed, or (b) if quoted on
NASDAQ or any similar system of automated dissemination of
quotations of securities prices then in common use the mean between
the closing high bid and low asked quotations of such security in
the over-the-counter market as shown by NASDAQ or such similar
system of automated dissemination of quotations of securities
prices, as reported by any member firm of the New York Stock
Exchange selected by the Holder of the Series G Preferred Stock,
(c) if not quoted as described in clause (b), the mean between the
high bid and low asked quotations for the shares as reported by
NASDAQ or any similar successor organization, as reported by any
member firm of the New York Stock Exchange selected by the Holder
of the Series G Preferred Stock. If such security is quoted on a
national securities or central market system in lieu of a market or
quotation system described above, the closing price shall be
determined in the manner set forth in clause (a) of the preceding
sentence if bid and asked quotations are reported but actual
transactions are not, and in the manner set forth in clause (b) of
the preceding sentence if actual transactions are reported.
Series H Convertible Preferred Stock
The designation, preferences, limitations and relative rights of
the Series H Convertible Preferred Stock are as follows:
Designation and Number of Series
This series of Preferred Stock shall be designated as “Series H
Convertible Preferred Stock” and the number of shares of such
series shall be 1,000,000,000 shares.
Stated Value
The stated value of the Series H Preferred Stock shall be $0.001
per share.
Dividends
The holders of outstanding Series H Preferred Shares shall not be
entitled to receive any dividends.
Preference on Liquidation
In the event of any liquidation, dissolution or winding up of the
Corporation, the holders of Series H Convertible Preferred Shares
then outstanding shall be entitled to be paid out of the assets of
the Corporation available for distribution to its stockholders,
whether from capital, surplus or earnings, after any payment shall
be made in respect of the liquidation preference on the Series F
Preferred Stock, but before any payment shall be made in respect of
the Corporation’s Common Shares or junior stock, an amount equal to
$0.10 per share. If, upon liquidation, dissolution or winding up of
the Corporation, the assets of the Corporation available for the
distribution to its shareholders shall be insufficient to pay the
holders of the Series H Convertible Preferred Shares an amount
equal to $0.10 per share, the holders of the Series H Convertible
Preferred Shares shall share ratably in any distribution of assets
according to the respective amounts which would be payable in
respect of the shares held by them upon such distribution if all
amounts payable on or with respect to said shares were paid in
full. After the holders of any outstanding series of Preferred
Shares having preference, including the holders of the Series H
Convertible Preferred Shares, have received their respective
preference amount, the assets then remaining shall be distributed
equally per share to the holders of a subsequently issued junior
class of Preferred Shares, or if none, then to the holders of
Common Shares.
A reorganization, consolidation or merger of the Corporation with
or into any other corporation or corporations, or a sale of all or
substantially all of the assets of the Corporation, shall not be
deemed to be a liquidation, dissolution or winding up of the
Corporation as those terms are used in this subdivision (d) and, in
the event of any such reorganization, consolidation, merger or sale
of assets, the Series H Convertible Preferred Shares shall be
entitled only to the rights provided in the plan of
reorganization.
Voting Rights
The Series H Convertible Preferred Shares shall not have voting
rights and shall not be entitled to notice of shareholders’
meetings or to vote upon the election of directors or upon any
other matter at any special meeting of shareholders.
Conversion of Series H Convertible Preferred Stock Into
Common Stock
Subject to the provisions of this subdivision (f), the holder of
record of any share or shares of Series H Convertible Preferred
Stock shall have the right, at his/her/its option, at any time
commencing after issuance of such Series H Convertible Preferred
Stock, to convert one (1) share of Series H Convertible Preferred
Stock into five (5) fully paid and nonassessable share of Common
Stock of the Company.
Any holder of a share or shares of Series H Convertible Preferred
Stock desiring to convert such Series H Convertible Preferred Stock
into Common Stock shall surrender the certificate or certificates
representing the share or shares of Series H Convertible Preferred
Stock so to be converted, duly endorsed to the Company, or in
blank, at the principal office of the Company, and shall give
written notice to the Company at said office that he/she/it elects
to convert the same, and setting forth the name or names (with the
address or addresses) in which the shares of Common Stock are to be
issued.
Conversion of Series H Convertible Preferred Stock shall be subject
to the following additional terms and provisions:
As promptly as practicable after the surrender for conversion of
any Series H Convertible Preferred Stock, the Company shall deliver
or cause to be delivered to the holder of such Series H Convertible
Preferred Stock at the holder’s address as indicated on the
Company’s stock ledger (or such other place as may be designated by
the holder), to or upon the written order of the holder of such
Series H Convertible Preferred Stock, certificates representing the
shares of Common Stock issuable upon such conversion, issued in
such name or names as such holder may direct.
Shares of the Series H Convertible Preferred Stock shall be deemed
to have been converted as of the close of business on the date of
the surrender of the Series H Convertible Preferred Stock for
conversion, as provided above, and the rights of the holders of
such Series H Convertible Preferred Stock shall cease at such time,
and the person or persons in whose name or names the certificates
for such shares are to be issued shall be treated for all purposes
as having become the record holder or holders of such Common Stock
at such time; provided, however, that any such surrender on any
date when the stock transfer books of the Company shall be closed
shall constitute the person or persons in whose name or names the
certificates for such shares are to be issued as the record holder
or holders thereof for all purposes at the close of business on the
next succeeding day on which such stock transfer books are
open.
In the event that the Company shall at any time subdivide or
combine in a greater or lesser number of shares the outstanding
shares of Common Stock, the number of shares of Common Stock
issuable upon conversion of the Series H Convertible Preferred
Stock shall be proportionately increased in the case of subdivision
or decreased in the case of a combination, effective in either case
at the close of business on the date when such subdivision or
combination shall become effective.
In the event that the Company shall be recapitalized, consolidated
with or merged into any other corporation, or shall sell or convey
to any other corporation all or substantially all of its property
as entirety, provision shall be made as part of the terms of such
recapitalization, consolidation, merger, sale or conveyance so that
any holder of Series H Convertible Preferred Stock may thereafter
receive in lieu of the Common Stock otherwise issuable to him upon
conversion of his Series H Convertible Preferred Stock, but at the
conversion ratio stated in this subdivision (e), the same kind and
amount of securities or assets as may be distributable upon such
recapitalization, consolidation, merger, sale or conveyance, with
respect to the Common Stock of the Company.
In the event that the Company shall at any time pay to the holders
of Common Stock a dividend in Common Stock, the number of shares of
Common Stock issuable upon conversion of the Series H Convertible
Preferred Stock shall be proportionately increased, effective at
the close of business on the record date for determination of the
holders of Common Stock entitled to such dividend.
Such adjustments shall be made successively if more than one event
listed in subdivisions (e)(3)(B), (C) and (D) hereof shall
occur.
No adjustment of the conversion ratio shall be made by reason of
the purchase, acquisition, redemption or retirement by the Company
of any shares of the Common Stock or any other class of the capital
stock of the Company, except as provided in subdivision (e)(3)(B);
or the issuance, other than as provided in subdivisions (e)(3)(B)
and (D), of any shares of Common Stock of the Company, or of any
securities convertible into shares of Common Stock or other
securities of the Company, or of any rights, warrants or options to
subscribe for or purchase shares of the Common Stock or other
securities of the Company, or of any other securities of the
Company, provided that in the event the Company offers any of its
securities, or any rights, warrants or options to subscribe for or
purchase any of its securities, to the holders of its Common Stock
pursuant to any preemptive or preferential rights granted to
holders of Common Stock by the Articles of Incorporation of the
Company, or pursuant to any similar rights that may be granted to
such holders of Common Stock by the Board of Directors of the
Company, at least 20 days prior to the expiration of any such offer
the Company shall mail written notice of such offer to the holders
of the Series H Convertible Preferred Stock then of record; or any
offer by the Company to redeem or acquire shares of its Common
Stock by paying or exchanging therefore stock of another
corporation or the carrying out by the Company of the transactions
contemplated by such offer, provided that at least 20 days prior to
the expiration of any such offer the Company shall mail written
notice of such offer to the holders of the Series H Convertible
Preferred Stock then of record.
The Company shall at all times reserve and keep available solely
for the purpose of issue upon conversion of Series H Convertible
Preferred Stock, as herein provided, such number of shares of
Common Stock as shall be issuable upon the conversion of all
outstanding Series H Convertible Preferred Stock.
The issuance of certificates for shares of Common Stock upon
conversion of the Series H Convertible Preferred Stock shall be
made without charge for any tax in respect of such issuance.
However, if any certificate is to be issued in a name other than
that of the holder of record of the Series H Convertible Preferred
Stock so converted, the person or persons requesting the issuance
thereof shall pay to the Company the amount of any tax which may be
payable in respect of any transfer involved in such issuance, or
shall establish to the satisfaction of the Company that such tax
has been paid or is not due and payable.
Redemption. The Board of Directors, at its
discretion, shall be authorized to redeem any and all shares of
Series H Convertible Preferred Stock at any time. The Board of
Directors shall be entitled to redeem any and all shares of Series
H Convertible Preferred Stock by delivering to the holders of
Series H Convertible Preferred Stock a notice of redemption, and
from and after the date of giving such notice (the “Redemption
Date”), the shares called for redemption (each, a “Redeemed Share”)
shall cease to be outstanding, shall not be transferred on the
books of the Corporation, and the holder thereof shall cease to be
entitled to all rights with respect to each Redeemed Share,
excepting only the right to receive payment by the Corporation of
the redemption price for such shares as set forth below. The
redemption price for each Redeemed Share shall be ten cents ($0.10)
per share (the “Redemption Price”). The Redemption Price for each
Redeemed Share shall be payable to the holder thereof in cash after
the holder has surrendered the Redeemed Share to the Corporation
for redemption.
Transfer Agent and Registrar
The transfer agent and registrar for our Common Stock is Corporate
Stock Transfer, Inc., 3200 Cherry Creek Drive South, Suite 430,
Denver, CO 80209, telephone 303-282-4800,
www.corporatestock.com. The transfer
agent is registered under the Exchange Act and operates under the
regulatory authority of the SEC and FINRA.
Penny Stock Regulation
The SEC has adopted regulations which generally define “penny
stock” to be any equity security that has a market price of
less than Five Dollars ($5.00) per share or an exercise price of
less than Five Dollars ($5.00) per share. Such securities are
subject to rules that impose additional sales practice requirements
on broker-dealers who sell them. For transactions covered by these
rules, the broker-dealer must make a special suitability
determination for the purchaser of such securities and have
received the purchaser’s written consent to the transaction prior
to the purchase. Additionally, for any transaction involving a
penny stock, unless exempt, the rules require the delivery, prior
to the transaction, of a disclosure schedule prepared by the SEC
relating to the penny stock market. The broker-dealer also must
disclose the commissions payable to both the broker-dealer and the
registered representative, current quotations for the securities
and, if the broker-dealer is the sole market-maker, the
broker-dealer must disclose this fact and the broker- dealer’s
presumed control over the market. Finally, among other
requirements, monthly statements must be sent disclosing recent
price information for the penny stock held in the account and
information on the limited market in penny stocks. As our Common
Stock immediately following this Offering may be subject to such
penny stock rules, purchasers in this Offering will in all
likelihood find it more difficult to sell their Common Stock shares
in the secondary market.
DIVIDEND POLICY
We plan to retain any earnings for the foreseeable future for our
operations. We have never paid any dividends on our Common Stock
and do not anticipate paying any cash dividends in the foreseeable
future. Any future determination to pay cash dividends will be at
the discretion of our Board and will depend on our financial
condition, operating results, capital requirements and such other
factors as our Board deems relevant.
SHARES ELIGIBLE FOR FUTURE SALE
Before this Offering, there has not been a public market for shares
of our Common Stock. Future sales of substantial amounts of shares
of our Common Stock, including shares issued upon the exercise of
outstanding options and warrants, in the public market after this
Offering, or the possibility of these sales occurring, could cause
the prevailing market price for our Common Stock to fall or impair
our ability to raise equity capital in the future.
After this Offering, we will have outstanding 2,647,046,461 shares
of our Common Stock, assuming that all 3,125,000,000 shares are
sold in the Offering and no exercise of outstanding options or
warrants. The shares that we are selling in this Offering may be
resold in the public market immediately following our initial
public offering.
PLAN OF DISTRIBUTION
The shares are being offered by us on a “best-efforts” basis
by our officers, directors and employees, with the assistance of
independent consultants, and possibly through registered
broker-dealers who are members of the Financial Industry Regulatory
Authority (“FINRA”) and finders.
There is no aggregate minimum to be raised in order for the
Offering to become effective and therefore the Offering will be
conducted on a “rolling basis.” This means we will be
entitled to begin applying “dollar one” of the proceeds from
the Offering towards our business strategy, offering expenses,
reimbursements, and other uses as more specifically set forth in
the “Use of Proceeds” contained elsewhere in this Offering
Circular.
We may pay selling commissions to participating broker-dealers who
are members of FINRA for shares sold by them, equal to a percentage
of the purchase price of the Common Stock shares. We may pay
finder’s fees to persons who refer investors to us. We may also pay
consulting fees to consultants who assist us with the Offering,
based on invoices submitted by them for advisory services rendered.
Consulting compensation, finder’s fees and brokerage commissions
may be paid in cash, Common Stock or warrants to purchase our
Common Stock. We may also issue shares and grant stock options or
warrants to purchase our common stock to broker- dealers for sales
of shares attributable to them, and to finders and consultants, and
reimburse them for due diligence and marketing costs on an
accountable or non-accountable basis. We have not entered into
selling agreements with any broker-dealers to date, though we may
engage a FINRA registered broker-dealer firm for offering
administrative services. Participating broker-dealers, if any, and
others may be indemnified by us with respect to this offering and
the disclosures made in this Offering Circular.
We expect to commence the offer and sale of the Shares as of the
date on which the Form 1-A Offering Statement of which this
Offering Circular is a part (the “Offering Circular”)
is qualified by the U.S. Securities and Exchange Commission (which
we refer to as the “SEC” or the “Commission”).
Our Offering will expire on the first to occur of (a) the sale of
all 3,125,000,000 shares of Common Stock offered hereby, (b)
February 15, 2020, subject to extension for up to one
hundred-eighty (180) days in the sole discretion of the Company, or
(c) when our board of directors elects to terminate the
Offering.
Offering Period and Expiration Date
This Offering will start on or immediately prior to the date on
which the SEC initially qualifies this Offering Statement (the
“Qualification Date”) and will terminate on the Termination
Date.
Procedures for Subscribing
If you decide to subscribe for our Common Stock shares in this
Offering, you should:
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1. Electronically receive, review,
execute and deliver to us a subscription agreement; and |
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2. Deliver funds directly by wire
or electronic funds transfer via ACH to the Company’s bank account
designated in the Company’s subscription agreement. |
Any potential investor will have ample time to review the
subscription agreement, along with their counsel, prior to making
any final investment decision. We shall only deliver such
subscription agreement upon request after a potential investor has
had ample opportunity to review this Offering Circular.
Right to Reject Subscriptions. After we receive your
complete, executed subscription agreement and the funds required
under the subscription agreement have been transferred to our
designated account, we have the right to review and accept or
reject your subscription in whole or in part, for any reason or for
no reason. We will return all monies from rejected subscriptions
immediately to you, without interest or deduction.
Acceptance of Subscriptions. Upon our acceptance of a
subscription agreement, we will countersign the subscription
agreement and issue the shares subscribed at closing. Once you
submit the subscription agreement and it is accepted, you may not
revoke or change your subscription or request your subscription
funds. All accepted subscription agreements are irrevocable.
Under Rule 251 of Regulation A, non-accredited, non-natural
investors are subject to the investment limitation and may only
invest funds which do not exceed Ten Percent (10%) of the greater
of the purchaser's revenue or net assets (as of the purchaser's
most recent fiscal year end). A non-accredited, natural person may
only invest funds which do not exceed Ten Percent (10%) of the
greater of the purchaser's annual income or net worth (please see
below on how to calculate your net worth).
NOTE: For the purposes of calculating your net worth,
it is defined as the difference between total assets and total
liabilities. This calculation must exclude the value of your
primary residence and may exclude any indebtedness secured by your
primary residence (up to an amount equal to the value of your
primary residence). In the case of fiduciary accounts, net worth
and/or income suitability requirements may be satisfied by the
beneficiary of the account or by the fiduciary if the fiduciary
directly or indirectly provides funds for the purchase of the
Shares.
In order to purchase our Common Stock shares and prior to the
acceptance of any funds from an investor, an investor will be
required to represent, to the Company’s satisfaction, that he is
either an accredited investor or is in compliance with the Ten
Percent (10%) of net worth or annual income limitation on
investment in this Offering.
LEGAL MATTERS
Certain legal matters with respect to the shares of Common Stock
offered hereby will be passed upon by Milan Saha, Esq., of
Plattsburgh, New York.
EXPERTS
The financial statements of the Company appearing elsewhere in this
Offering Circular have been included herein in reliance upon the
report of Wendell Hacker, an independent certified public
accounting firm, appearing elsewhere herein, and upon the authority
of that firm as experts in accounting and auditing.
WHERE YOU CAN FIND MORE
INFORMATION
We have filed with the SEC a Regulation A Offering Statement on
Form 1-A under the Securities Act of 1993, as amended, with respect
to the shares of Common Stock offered hereby. This Offering
Circular, which constitutes a part of the Offering Statement, does
not contain all of the information set forth in the Offering
Statement or the exhibits and schedules filed therewith. For
further information about us and the Common Stock offered hereby,
we refer you to the Offering Statement and the exhibits and
schedules filed therewith. Statements contained in this Offering
Circular regarding the contents of any contract or other document
that is filed as an exhibit to the Offering Statement are not
necessarily complete, and each such statement is qualified in all
respects by reference to the full text of such contract or other
document filed as an exhibit to the Offering Statement. You may
read and copy this information at the SEC's Public Reference Room,
100 F Street, N.E., Room 1580, Washington, D.C. 20549. You may
obtain information on the operation of the Public Reference Room by
calling the SEC at 1-800-SEC-0330. The SEC also maintains an
Internet website that contains reports, proxy statements and other
information about issuers, including us, that file electronically
with the SEC. The address of this site is www.sec.gov.
In addition, you can find all of our public filings on
otcmarkets.com, and specifically at this link:
https://www.otcmarkets.com/stock/DNAX/disclosure.
DNA BRANDS INC.
INDEX TO FINANCIAL STATEMENTS
|
|
|
Page |
| Balance Sheet as of September 30, 2019
(unaudited) |
|
F-2 |
| |
|
|
| Condensed Consolidated Statement of
Operations for the nine months ended September 30, 2019 and 2018
(unaudited) |
|
F-3 |
| |
|
|
| Statement of Stockholders’ Equity
(Deficit) for the nine months ended September 30, 2019
(unaudited) |
|
F-4 |
| |
|
|
| Statement of Cash Flow for the nine
months ended September 30, 2019 and 2018 (unaudited) |
|
F-5 |
| |
|
|
| Notes to Financial Statements as of
September 30, 2019 and 2018 (unaudited) |
|
F-6 |
| |
|
|
| |
|
|
| |
|
|
| Balance Sheet as of December 31, 2018
(unaudited) |
|
F-20 |
| |
|
|
| Statement of Operations for the years
ended December 31, 2018 and 2017 (unaudited) |
|
F-21 |
| |
|
|
| Statement of Stockholders’ Equity
(Deficit) for the years ended December 31, 2018 and 2017
(unaudited) |
|
F-22 |
| |
|
|
| Statement of Cash Flows for the years
ended December 31, 2018 and 2017 (unaudited) |
|
F-23 |
| |
|
|
| Notes to Financial Statements as of
December 31, 2018 (unaudited) |
|
F-24 |
| |
|
|
| |
|
|
| |
|
|
| Balance Sheet as of December 31, 2017
(unaudited) |
|
F-36 |
| |
|
|
| Statement of Operations for the years
ended December 31, 2017 and 2016 (unaudited) |
|
F-37 |
| |
|
|
| Statement of Cash Flows for the years
ended December 31, 2017 and 2016 (unaudited) |
|
F-38 |
| |
|
|
| Notes to Financial Statements as of
December 31, 2017 (unaudited) |
|
F-39 |
DNA BRANDS INC.
BALANCE SHEET
(UNAUDITED)
| |
|
September 30,
2019 |
|
|
December
31,
2018 |
|
| |
|
|
|
|
|
|
| ASSETS |
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
| Current Assets |
|
|
|
|
|
|
|
|
| Cash
and Cash Equivalents |
|
$ |
499 |
|
|
$ |
62,302 |
|
| Net
Receivables |
|
|
– |
|
|
|
– |
|
| Inventory |
|
|
– |
|
|
|
– |
|
| Deposit -
Acquisitions |
|
|
25,000 |
|
|
|
40,000 |
|
| Other
Current Assets |
|
|
989 |
|
|
|
989 |
|
| |
|
|
|
|
|
|
|
|
| Total Current Assets |
|
|
26,488 |
|
|
|
103,291 |
|
| |
|
|
|
|
|
|
|
|
| Vehicles, Net |
|
|
23,920 |
|
|
|
– |
|
| Other Assets |
|
|
– |
|
|
|
– |
|
| |
|
|
|
|
|
|
|
|
| TOTAL
ASSETS |
|
$ |
50,408 |
|
|
$ |
103,291 |
|
| |
|
|
|
|
|
|
|
|
| LIABILITIES & EQUITY |
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
| Liabilities |
|
|
|
|
|
|
|
|
| Current
Liabilities |
|
|
|
|
|
|
|
|
| Accounts
Payable |
|
$ |
107,752 |
|
|
$ |
107,752 |
|
| Current Long Term
Debt |
|
|
1,997,646 |
|
|
|
1,943,146 |
|
| Other Current
Liabilities |
|
|
166,448 |
|
|
|
166,448 |
|
| Accrued
Interest |
|
|
515,394 |
|
|
|
395,534 |
|
| |
|
|
|
|
|
|
|
|
| Long Term Debt |
|
|
– |
|
|
|
– |
|
| Other
Liabilities |
|
|
– |
|
|
|
– |
|
| Total Liabilities |
|
|
2,787,240 |
|
|
|
2,612,880 |
|
| |
|
|
|
|
|
|
|
|
| Shareholder's Equity |
|
|
|
|
|
|
|
|
| Preferred Stock -
Series A-G |
|
|
2,100 |
|
|
|
2,100 |
|
| Common
Stock par value $.00001, 498,000,000 and 25,000,000,000 shares
authorized: 147,046,461 and 7,812,767 shares issued and outstanding
as of September 30, 2019 and December 30, 2018, respectively |
|
|
5,076,374 |
|
|
|
5,076,345 |
|
| Additional Paid-in
Capital |
|
|
23,693,688 |
|
|
|
23,633,717 |
|
|
Accumulated Deficit |
|
|
(31,508,994 |
) |
|
|
(31,221,751 |
) |
| |
|
|
|
|
|
|
|
|
| Total
Shareholders' Deficit |
|
|
(2,736,832 |
) |
|
|
(2,509,589 |
) |
| |
|
|
|
|
|
|
|
|
| Total
Liabilities and Shareholder's Equity |
|
$ |
50,408 |
|
|
$ |
103,291 |
|
* Decrease Retired Long Term Debt from
Convertible Debentures.
See
notes to financial statements.
DNA BRANDS INC.
CONDENSED CONSOLIDATED STATEMENT OF
OPERATIONS
(UNAUDITED)
| |
|
For the Nine Months Ended |
|
| |
|
September 30, 2019 |
|
|
September
30, 2018 |
|
| |
|
|
|
|
|
|
| Sales |
|
$ |
14,331 |
|
|
$ |
– |
|
| Cost of Goods
Sold |
|
|
– |
|
|
|
– |
|
| Gross Margin |
|
|
14,331 |
|
|
|
– |
|
| |
|
|
|
|
|
|
|
|
| Operating Expenses |
|
|
|
|
|
|
|
|
| Compensation and
Benefits |
|
|
– |
|
|
|
– |
|
| General and
Administrative Expenses |
|
|
178,034 |
|
|
|
191,687 |
|
| Interest Expense on
Convertible Notes |
|
|
119,860 |
|
|
|
277,984 |
|
| Charitable
Donations |
|
|
– |
|
|
|
50,000 |
|
| Depreciation |
|
|
3,680 |
|
|
|
– |
|
| Professional and
Outside Services |
|
|
– |
|
|
|
– |
|
| Selling
and Marketing Expenses |
|
|
– |
|
|
|
– |
|
| Total Operating
Expenses |
|
|
301,574 |
|
|
|
519,671 |
|
| |
|
|
|
|
|
|
|
|
| Loss from Operations |
|
|
(287,243 |
) |
|
|
(519,671 |
) |
| |
|
|
|
|
|
|
|
|
| Other Income
(Expense) |
|
|
– |
|
|
|
– |
|
| Loss before Income Taxes |
|
|
(287,243 |
) |
|
|
(519,671 |
) |
| |
|
|
|
|
|
|
|
|
| Income Taxes |
|
|
– |
|
|
|
– |
|
| |
|
|
|
|
|
|
|
|
| Net Loss |
|
$ |
(287,243 |
) |
|
$ |
(519,671 |
) |
See
notes to financial statements.
DNA BRANDS INC.
STATEMENT OF STOCKHOLDERS EQUITY
(DEFICIT)
For the nine months ended September 30, 2019 and 2018
| |
|
COMMON STOCK SHARES |
|
|
COMMON STOCK AMOUNT |
|
|
PREFERRED STOCK SHARES |
|
|
PREFERRED STOCK AMOUNT |
|
|
ADDITIONAL PAID-IN CAPITAL |
|
|
ACCUMULATED DEFICIT |
|
|
TOTAL |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Beginning balance December 31, 2018 |
|
|
7,812,767 |
|
|
$ |
5,076,345 |
|
|
|
355,000 |
|
|
$ |
2,100 |
|
|
$ |
23,633,717 |
|
|
$ |
(31,221,751 |
) |
|
$ |
(2,509,589 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Common Stock Issued for Services |
|
|
2,600,074 |
|
|
|
29 |
|
|
|
– |
|
|
|
– |
|
|
|
59,971 |
|
|
|
– |
|
|
|
60,000 |
|
| |
|
|
|
|
|
|
|
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
|
|
| Common Stock Issued for Debt
Conversion |
|
|
126,220,779 |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(287,243 |
) |
|
|
(287,243 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Ending Balance September 30,
2019 |
|
|
147,046,461 |
|
|
$ |
5,076,374 |
|
|
|
355,000 |
|
|
$ |
2,100 |
|
|
$ |
23,693,688 |
|
|
$ |
(31,508,994 |
) |
|
$ |
(2,736,832 |
) |
See
notes to financial statements.
DNA BRANDS INC.
STATEMENT OF CASH FLOW
| |
|
For the Nine Months ended |
|
| |
|
September 30, 2019 |
|
|
September
30, 2018 |
|
| |
|
|
|
|
|
|
| Net Income |
|
$ |
(287,243 |
) |
|
$ |
(519,671 |
) |
| |
|
|
|
|
|
|
|
|
|
Operating Activities |
|
|
|
|
|
|
|
|
| Depreciation |
|
|
3,680 |
|
|
|
– |
|
| Adjustments to Net
Income |
|
|
– |
|
|
|
– |
|
| Changes in
Liabilities |
|
|
114,500 |
|
|
|
495,984 |
|
| Changes in Account
Receivables |
|
|
– |
|
|
|
– |
|
| Changes in
Inventories |
|
|
– |
|
|
|
– |
|
| Changes in Accrued
Interest |
|
|
119,860 |
|
|
|
|
|
| Changes
in Other Operating Activities |
|
|
(12,600 |
) |
|
|
– |
|
|
Total Cash Flow From Operating Activities |
|
|
(61,803 |
) |
|
|
(23,687 |
) |
| |
|
|
|
|
|
|
|
|
|
Investing Activities |
|
|
|
|
|
|
|
|
|
Capital expenditures |
|
|
– |
|
|
|
– |
|
|
Investments |
|
|
– |
|
|
|
– |
|
|
Other Cash Flows from Investing Activities |
|
|
– |
|
|
|
– |
|
|
Total Cash Flow From Investing Activities |
|
|
– |
|
|
|
– |
|
| |
|
|
|
|
|
|
|
|
|
Financing Activities |
|
|
|
|
|
|
|
|
| Dividends Paid |
|
|
– |
|
|
|
– |
|
| Sale/Purchase of Stock |
|
|
– |
|
|
|
– |
|
| Net Borrowings |
|
|
– |
|
|
|
– |
|
| Other Cash Flows
From Financing Activities |
|
|
– |
|
|
|
– |
|
|
Total Cash Flow From Financing Activities |
|
$ |
– |
|
|
$ |
– |
|
| |
|
|
|
|
|
|
|
|
| Effect of
Exchange Rate Changes |
|
|
– |
|
|
|
– |
|
| |
|
|
|
|
|
|
|
|
| Change
in Cash and Equivalents |
|
|
(61,803 |
) |
|
|
(23,687 |
) |
|
Cash, beginning balance |
|
|
62,302 |
|
|
|
69,817 |
|
|
Cash, ending balance |
|
$ |
499 |
|
|
$ |
46,130 |
|
See
notes to financial statements.
DNA Brands,
Inc.
Notes to Financial
Statements
September 30,
2019
(Unaudited)
Company Overview and History
DNA Brands, Inc. (hereinafter referred to as ''us," "our," ''we,"
the "Company" or "DNA") was incorporated in the State of Colorado
on May 23, 2007 under the name Famous Products, Inc. Prior to July
6, 2010 we were a beverage company. We are looking to reproduce,
market and sell a proprietary line of five carbonated blends of DNA
Energy Drink®, Citrus, Sugar Free Citrus, Original (a unique
combination of Red Bull® and Monster® energy drinks), Cryo- Berry
(a refreshing mix of cranberry and raspberry) and Molecular Melon
(a cool and refreshing taste); as well as three milk based energy
coffees with fortified with Omega 3. These flavors are Mocha,
Vanilla Latte and Caramel Macchiato.
Our business commenced in May 2006 in the State of Florida under
the name Grass Roots Beverage Company, Inc. ("Grass Roots").
Initial operations of Grass Roots included development of our
energy drinks, sampling and other marketing efforts and initial
distribution in the State of Florida. In May 2006 we formed DNA
Beverage Corporation, a Florida corporation ("DNA Beverage"). Our
early years were devoted to brand development, creating awareness
through heavy sampling programs and creating credibility among our
then core demographic by concentrating marketing efforts on action
sports locations and events (surf, motocross, skate, etc.).
Effective July 6, 2010, we executed agreements to acquire all of
the assets, liabilities and contract rights of DNA Beverage and
100% of the common stock of DNA Beverage's wholly owned subsidiary
Grass Roots Beverage Company, Inc. ("Grass Roots") in exchange for
the issuance of 31,250,000 shares of our common stock. The share
issuance represented approximately 94.6% of our outstanding shares
at the time of issuance. As a result of this transaction we also
changed our name to "DNA Brands, Inc." Grass Roots was dissolved
and ceased activity on December 31, 2013. Whereby DNA Brands Inc.
has been the surviving entity.
Effective on or about March 15, 2019 the company signed a Fleet
agreement with Ridesharerental.com to acquire and rent cars to
Transportation Network Providers (TNP's), such as Uber and Lyft.
This is the core focus of the business at this time.
DNA Brands,
Inc.
Notes to Financial
Statements (Continued)
September 30,
2019
(Unaudited)
Use of Estimates
The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those
estimates.
Revenue Recognition
The Company derives revenues from the sale of carbonated energy
drinks and other related products. Revenue is recognized when all
of the following elements are satisfied: (i) there are no
uncertainties regarding customer acceptance; (ii) there is
persuasive evidence that an agreement exists; (iii) delivery has
occurred; (iv) legal title to the products has transferred to the
customer; (v) the sales price is fixed or determinable; and (vi)
collectability is reasonably assured. At this time the company
is in a reorganization phase and has minimal revenue.
Fair Value of Financial Instruments
The Company's financial instruments consist mainly of cash and cash
equivalents, accounts receivable, prepaid expenses, accounts
payable, accrued expenses, derivative liabilities, and loans
payable. The carrying values of the financial instruments
approximate their fair value due to the short-term nature of these
instruments. The fair values of the loans payable have interest
rates that approximate market rates.
Derivative Instruments
The Company does not enter into derivative contracts for purposes
of risk management or speculation. However, from time to time, the
Company enters into contracts, namely convertible notes payable,
that are not considered derivative financial instruments in their
entirety, but that include embedded derivative features.
In accordance with Financial Accounting Standards Board ("FASB")
ASC Topic 815-15, Embedded Derivatives, and guidance provided by
the SEC Staff, the Company accounts for these embedded features as
a derivative liability or equity at fair value.
The recognition of the fair value of the derivative instrument at
the date of issuance is applied first to the debt proceeds. The
excess fair value, if any, over the proceeds from a debt
instrument, is recognized immediately in the statement of
operations as interest expense. The value of derivatives associated
with a debt instrument is recognized at inception as a discount to
the debt instrument and amortized to interest expense over the life
of the debt instrument. A determination is made upon settlement,
exchange, or modification of the debt instruments to determine if a
gain or loss on the extinguishment has been incurred based on the
terms of the settlement, exchange, or modification and on the value
allocated to the debt instrument at such date.
Cash and Cash Equivalents
The Company considers all highly liquid investments with a maturity
of three months or less at the date of purchase to be cash
equivalents. Cash and cash equivalents are stated at cost and
consist of bank deposits. The carrying amount of cash and cash
equivalents approximates fair value.
DNA Brands,
Inc.
Notes to Financial
Statements (Continued)
September 30,
2019
(Unaudited)
Accounts Receivable and Allowance for Doubtful
Accounts
The Company will bill its customers after its products are shipped.
The Company bases its allowance for doubtful accounts on estimates
of the creditworthiness of customers, analysis of delinquent
accounts, payment histories of its customers and judgment with
respect to the current economic conditions. The Company generally
does not require collateral. The Company believes the allowances
are sufficient to cover uncollectible accounts. The Company reviews
its accounts receivable aging on a regular basis for past due
accounts, and writes off any uncollectible amounts against the
allowance.
Inventory
No Inventory at present or for Fiscal year 2019
Inventory is stated at the lower of cost or market. Cost is
principally determined by using the average cost method that
approximates the First-In, First-Out (FIFO) method of accounting
for inventory. Inventory consists of raw materials as well as
finished goods held for sale. The Company's management monitors the
inventory for excess and obsolete items and makes necessary
valuation adjustments when required. The Company is in the process
of pricing and ordering Inventory.
Property and Equipment
Company owns a fleet of cars. that it rents out
Property and equipment is recorded at cost less accumulated
depreciation. Replacements, maintenance and repairs which do not
improve or extend the lives of the respective assets are charged to
expense as incurred. Depreciation is computed using the
straight-line method over the estimated useful lives of the assets
as follows:
Impairment of Long-Lived Assets
None at present or for fiscal year 2019
Long-lived assets are reviewed for impairment when events or
changes in circumstances indicate the book value of the assets may
not be recoverable. In accordance with Accounting Standards
Codification ("ASC") 360-10-35-15 Impairment or Disposal of
Long-Lived Assets, recoverability is measured by comparing the book
value of the asset to the future net undiscounted cash flows
expected to be generated by the asset.
DNA Brands,
Inc.
Notes to Financial
Statements (Continued)
September 30, 2019
(Unaudited)
Stock-Based Compensation for fiscal year
2017-2019
On or about October 18th 2017, the company issued 1,533,200,000
shares of common stock to Consultant Howard Ullman.
On November 5, 2018, Company issued 500,000 shares to Adrian
McKenzie DBA PBDC LLC.
2/19/19 - Heidi Michitsch- 600K shares issued
2/19/19 - Howard ullman - 500K Shares issued
2/19/19 - PBDC LLC (Adrian McKenzie) 1 Million shares issued
4/16/19 - Adrian McKenzie-80 Million shares
Stock compensation arrangements with non-employee service providers
are accounted for in accordance with ASC 505-50 Equity-Based
Payments to Non-Employees, using a fair value approach. The
compensation costs of these arrangements are subject to
re-measurement over the vesting terms as earned.
Stock Purchase Warrants
All Prior Warrants issued have expired worthless as of Dec
31, 2016
Going Concern
As reflected in the accompanying financial statements, the Company
has recorded continual significant net losses Annually for the
trailing 5 years. These matters raise a substantial doubt about the
Company's ability to continue as a going concern.
The ability of the Company to continue as a going concern is
dependent on management's plans, which includes implementation of
its business plan and continuing to raise funds through debt or
equity raises. The Company will likely continue to rely upon
related-party debt or equity financing in order to ensure the
continuing existence of the business. Additionally the Company is
working on generating new sales from additional retail outlets,
distribution centers or through sponsorship agreements; and
allocating sufficient resources to continue with advertising and
marketing efforts.
6. Prepaid Expenses and Other Assets
None
8. Accrued Liabilities
There is $1,997,646 long term debt as of September 30, 2019.
9. Loans payable
The composition of loans payable up to September 30, 2019 are as
follows:
In June 2013, the Company entered into a loan agreement with
Beverage LLC and received gross proceeds of $265,000. In accordance
with ACS 810- 10-55, the Company considered its relationship with,
and the terms of its interest in, Beverage LLC and determined that
it was a VIE that should be consolidated into its financial
statements. The Company's involvement with Beverage LLC is that it
serves as an entity to obtain inventory financing for DNA.
DNA Brands,
Inc.
Notes to Financial
Statements (Continued)
September 30,
2019
(Unaudited)
As of December 31, 2013 and December 2012 the amounts included in
the consolidated liabilities, which are reported in loans payable
(before discount) total $530,000 and $-0- respectively, relating to
Beverage LLC. The loans payable bear interest at a rate of 6% per
annum and are scheduled to be repaid to the lenders in equal
installments of 66.67% of the original principal on September 30,
2013, December 31, 2013 and March 31, 2014. The aggregate value of
the repayment installments totals $530,000 plus interest and
penalties. September and December installment payments were not
made. The loan is in default and the default interest rate of 10%
per annum.
Convertible Note Debentures
In February 2011, the Company issued a convertible debenture to an
existing shareholder in the amount of $500,000. The debenture bears
interest at 12% per annum and carries an annual transaction fee of
$30,000, of which both are payable in quarterly installments
commencing in May 2011. These costs are recorded as interest
expense in the Company's financial statements. In addition, as
further inducement for loaning the Company funds, the Company
issued 125,000 restricted shares of its common stock to the holder
upon execution. The common shares were valued at $31,250, their
fair market value, and recorded as discount to the debenture. These
costs will be amortized using the effective interest method over
the term of the debenture and recorded as interest expense in the
Company's financial statements.
In June 2011, the Company issued a convertible debenture to an
existing shareholder in the amount of $125,000. The debenture bears
interest at 12% per annum, which is payable in the Company's common
stock at the time of maturity. The debenture is convertible at any
time prior to maturity into 150,000 shares of the Company's common
stock. This beneficial conversion feature was valued at $90,750,
using Black-Scholes methodology, and recorded as a discount to the
debenture. These costs will be amortized using the effective
interest method over the term of the debenture and recorded as
interest expense in the Company's financial statements.
In July and August 2011, the Company issued a series of secured
convertible debentures to accredited investors aggregating $275,000
in gross proceeds. All proceeds from these debentures are to be
utilized solely for the purpose of funding raw materials and
inventory purchases through the use of an escrow agent. The
debentures bear interest at 12% per annum, payable in monthly
installments. The debentures are convertible at any time prior to
maturity at a conversion price equal to 80% of the average share
price of the Company's common stock for the 10 previous trading
days prior to conversion, but not less than $0.70. In addition, as
further inducement for loaning the Company funds, the Company
issued the lenders 68,750 restricted shares of its common stock and
137,500 common stock warrants exercisable at $1.25 per share. As a
result, the Company had to allocate fair market value to each the
beneficial conversion feature, restricted shares and warrants. The
common shares were valued at $30,938, their fair market value. The
Company determined the fair market value of the warrants as $94,255
using the Black-Scholes valuation model. Since the combined fair
market value allocated to the warrants and beneficial conversion
feature cannot exceed the convertible debenture amount, the
beneficial conversion feature was valued at $149,807, the ceiling
of its intrinsic value. These costs will be amortized using the
effective interest method over the term of the debenture and
recorded as interest expense in the Company's financial
statements.
In February 2012, the Company issued a convertible debenture to an
existing shareholder in the amount of $75,000. The debenture bears
interest at 12% per annum, which is payable in the Company's common
stock at the time of maturity. The debenture is convertible at any
time prior to maturity into 280,000 shares of the Company's common
stock. As further inducement, the Company issued the lender 280,000
common stock warrants exercisable at $1.50 per share. If
unexercised the warrants will expire on January 31, 2017. Using the
Black-Scholes model, the warrants were valued at $63,620 and
recorded as a discount to the principal amount of the debenture.
This discount is amortized using the effective interest method over
the term of the debenture and recorded as interest expense in the
Company's financial statements.
DNA Brands,
Inc.
Notes to Financial
Statements (Continued)
September 30,
2019
(Unaudited)
In February and June 2012, the Company converted $524,950 of its
loans payable to officers into convertible debentures. These
debentures were offered by the Company's officers to certain
accredited investors and a majority portion of the proceeds
therefrom were deposited with the Company. The debentures had no
maturity date and bear no interest. Therefore these debentures were
payable on demand and were originally classified as a current
liability. The debentures were convertible at any time into
3,499,667 shares, or $0.15 per share of common stock. The Company
determined that these terms created a beneficial conversion
feature. Using the Black-Scholes model, the beneficial conversion
feature was valued at $524,950, the ceiling of its intrinsic value.
Due to the nature of the debentures, the full value of the
beneficial conversion feature was immediately recorded as interest
expense in the Company's financial statements. In August 2012,
these convertible debentures were converted into 3,499,666 shares
of the Company's common stock.
On April 9, 2012, the Company executed an Investment Banking and
Advisory Agreement with Charles Morgan Securities, Inc., New York,
NY ("CMI"), wherein CMI agreed to provide consulting, strategic
business planning, financing on a "best efforts" basis and investor
and public relations services, as well as to assist the Company in
its efforts to raise capital through the issuance of debt or
equity. The agreement provided for CMI to engage in two separate
private offerings with the initial private placement offering up to
$3.0 million and the second private placement offering up to an
additional $3.0 million; each on a "best efforts" basis. In
connection with this agreement the Company issued 750,000 shares
valued at $0.25 per share or a total value of$187,500. This amount
was fully amortized in the Company's financial statements as of
December 31, 2012.
In July 2012, the Company received proceeds from convertible
debentures totaling $182,668 in connection with the CMI agreement.
The debentures bear interest at 12% per annum, which is payable in
cash or the Company's common stock at the time of conversion or
maturity. The debentures are convertible at any time prior to
maturity at a conversion price equal to the lesser of 75% of the
average share price of the Company's common stock for the five
previous trading days prior to conversion or $0.35, but not less
than $0.15. In the event that the Company offers or issues shares
of its common stock at a share price less than $0.15, the floor
conversion price will adjust to the new lower price. The Company
determined that the terms of the debentures created a beneficial
conversion feature. Using the Black-Scholes model, the beneficial
conversion feature was valued at $160,813 and recorded as a
discount to the principal amount of the debentures. The discount is
amortized using the effective interest method over the term of the
debenture and recorded as interest expense in the Company's
financial statements.
On August 7, 2012, the Company issued a convertible debenture in
the amount of $50,000. The debenture does not bear interest. As an
inducement, the Company agreed to issue the lender 20,000 shares of
its common stock. The common shares were valued at their trading
price on the date of the agreement and recorded as interest expense
in the Company's results of operations. The Company determined that
the terms of the debenture created a beneficial conversion feature.
Using the Black-Scholes model, the beneficial conversion feature
was valued at $50,000, the ceiling of its intrinsic value, and
recorded as a discount to the principal amount of the debenture.
The discount is amortized using the effective interest method over
the term of the debenture and recorded as interest expense in the
Company's financial statements. During the second quarter of 2013,
the conversion terms of this note were modified and the note was
converted into 1,500,000 shares of common stock.
On September 25, 2012, the Company issued a convertible debenture
in the amount of $50,000. The debenture bears interest at 6% per
annum, which is payable in the Company's common stock at the time
of conversion or maturity. The debenture is convertible at any time
prior to maturity at a conversion price equal to 70% of the lowest
closing bid price of the Company's common stock on the four
previous trading days prior to and day of conversion, but not less
than $0.0001. The Company determined that the terms of the
debenture created a beneficial conversion feature. Using the
Black-Scholes model, the beneficial conversion feature was valued
at $50,000, the ceiling of its intrinsic value, and recorded as a
discount to the principal amount of the debenture. The discount is
amortized using the effective interest method over the term of the
debenture and recorded as interest expense in the Company's
financial statements. During the second quarter of 2013, the lender
converted $23,000 of principal into 919,403 shares of common stock
in accordance with the conversion terms of the debenture.
DNA Brands,
Inc.
Notes to Financial
Statements (Continued)
September 30,
2019
(Unaudited)
On November l, 2012, the Company issued a convertible debenture in
the amount of $80,000. The debenture bears interest at 12% per
annum, which is payable in the Company's common stock at the time
of conversion or maturity. The debenture is convertible at any time
prior to maturity at a conversion price equal to 70% of the average
closing bid price of the Company's common stock on the 30 previous
trading days prior to the day of conversion. The Company determined
that the terms of the debenture created a beneficial conversion
feature. Using the Black-Scholes model, the beneficial conversion
feature was valued at $56,286, the ceiling of its intrinsic value,
and recorded as a discount to the principal amount of the
debenture. The discount is amortized using the effective interest
method over the term of the debenture and recorded as interest
expense in the Company's financial statements.
During the second quarter of 2013, the Company recorded $65,000 in
gross proceeds from the issuance of three convertible debentures.
The debentures bear interest at 12% per annum, which is payable in
cash at the time of maturity. The debentures are convertible at any
time prior to maturity into 216,667 shares of the Company's common
stock. As further inducement, the Company issued the lenders
216,667 common stock warrants exercisable at $1.50 per share. If
unexercised, the warrants will expire on February 28, 2017. Using
the Black-Scholes model, the warrants were valued at $69,455 and
recorded as a discount up to the principal amount of the
debentures. This discount is amortized using the effective interest
method over the term of the debenture and recorded as interest
expense in the Company's financial statements. As of December 31,
2013, two of the debentures totaling $35,000 in principal value
were converted into 316,667 shares of common stock. Some of the
original conversion terms were modified prior to the notes'
conversions. The remaining $30,000 debenture is in default, as its
maturity date was April 25, 2013.
On September 17, 2013, the Company issued a convertible debenture
in the amount of $50,000. The debenture bears interest at 6% per
annum, which is payable in the Company's common stock at the time
of conversion or maturity. The debenture is convertible at any time
prior to maturity at a conversion price equal to 70% of the lowest
closing bid price of the Company's common stock on the four
previous trading days prior to and day of conversion, but not less
than $0.0001. The Company determined that the terms of the
debenture created a beneficial conversion feature. Using the
Black-Scholes model, the beneficial conversion feature was valued
at $50,000, the ceiling of its intrinsic value, and recorded as a
discount to the principal amount of the debenture. The discount is
amortized using the effective interest method over the term of the
debenture and recorded as interest expense in the Company's
financial statements.
On October 31, 2013, the Company issued a convertible debenture in
the amount of $204,000. The debenture bears interest at 18% per
annum, which is payable in the Company's common stock at the time
of conversion or maturity. The debenture is convertible at any time
prior to maturity at a conversion price equal to 50% of the lowest
closing bid price of the Company's common stock on the twenty
previous trading days prior to and day of conversion. The Company
determined that the terms of the debenture created a beneficial
conversion feature. Using the Black-Scholes model, the beneficial
conversion feature was valued at $204,000, the ceiling of its
intrinsic value, and recorded as a discount to the principal amount
of the debenture. The discount is amortized using the effective
interest method over the term of the debenture and recorded as
interest expense in the Company's financial statements.
On November 6, 2013, the Company issued a convertible debenture in
the amount of $53,000. The debenture bears interest at 8% per
annum, which is payable in the Company's common stock at the time
of conversion or maturity. The debenture is convertible at any time
prior to maturity at a conversion price equal to 58% of the average
of the 3 lowest share closing bid prices of the Company's common
stock on the ten previous trading days prior to and day of
conversion. The Company determined that the terms of the debenture
created a beneficial conversion feature. Using the Black-Scholes
model, the beneficial conversion feature was valued at $48,533, its
intrinsic value, and recorded as a discount to the principal amount
of the debenture. The discount is amortized using the effective
interest method over the term of the debenture and recorded as
interest expense in the Company's financial statements.
DNA Brands,
Inc.
Notes to Financial
Statements (Continued)
September 30, 2019
(Unaudited)
On November 6, 2013, the Company issued a convertible debenture in
the amount of $125,000. The debenture bears interest at 10% per
annum, which is payable in the Company's common stock at the time
of conversion or maturity. The debenture is convertible at any time
prior to maturity at a conversion price equal to 50% of the lowest
share closing bid price of the Company's common stock on the twenty
previous trading days prior to and day of conversion. The Company
determined that the terms of the debenture created a beneficial
conversion feature. Using the Black-Scholes model, the beneficial
conversion feature was valued at $125,000, the ceiling of its
intrinsic value, and recorded as a discount to the principal amount
of the debenture. The discount is amortized using the effective
interest method over the term of the debenture and recorded as
interest expense in the Company's financial statements.
On November 6, 2013, the Company issued a convertible debenture in
the amount of $80,000. The debenture bears no interest and is
payable in the Company's common stock at the time of conversion or
maturity. The debenture is convertible at any time prior to
maturity at a conversion price equal to 50% of the average share
closing bid price of the Company's common stock on the thirty
previous trading days prior to and day of conversion. The Company
determined that the terms of the debenture created a beneficial
conversion feature. Using the Black-Scholes model, the beneficial
conversion feature was valued at $80,000, the ceiling of its
intrinsic value, and recorded as a discount to the principal amount
of the debenture. The discount is amortized using the effective
interest method over the term of the debenture and recorded as
interest expense in the Company's financial statements.
On November 21, 2013, the Company issued a convertible debenture in
the amount of $100,000. The debenture bears interest at 12% per
annum, which is payable in the Company's common stock at the time
of conversion or maturity. The debenture is convertible at any time
prior to maturity at a conversion price equal to 50% of the lowest
share intra-day price of the Company's common stock on the ten
previous trading days prior to and day of conversion. The Company
determined that the terms of the debenture created a beneficial
conversion feature. Using the Black-Scholes model, the beneficial
conversion feature was valued at $100,000, the ceiling of its
intrinsic value, and recorded as a discount to the principal amount
of the debenture. The discount is amortized using the effective
interest method over the term of the debenture and recorded as
interest expense in the Company's financial statements.
June 10, 2014 Company issued a convertible debenture of $75,000 to
Coventry Enterprises LLC bearing 8% interest per annum. This
debenture is in default.
April 22, 2014 the company issued a 1 year convertible debenture of
$77,500, maturing April 22 2015, to Tidepool Ventures Inc. Bearing
10% interest per annum. This note has a Conversion factor of 45% of
market price. Market price is calculated by the average of the
lowest Bid price for the trailing ten business days to the market.
(Representing a 55% discount to market price). This note was sold
to World Market Ventures LLC and converted into common stock.
April 22, 2014 the company issued a 1 year maturity convertible
debenture of $110,000 to Iconic Holding LLC. Bearing 5% interest
per annum, maturing April 22 2015. This note has a Conversion
factor of 50% of market price. Market price is calculated by the
average of the lowest Bid price for the trailing ten business days.
(Representing a 50% discount to market price). $32,250 was
converted into Common stock for 2016. This note is in default.
May 2, 2014, the company issued a 1 year convertible debenture to
LG Capital funding LLC of $37,500 maturing May 2, 2015, bearing 8%
annual interest. This note has a conversion factor of 50% of market
price. Market price is calculated by taking the average of the
lowest Bid price for the trailing ten business days. (Representing
a 50% discount to market price). This note is in default.
June 10, 2014 the company issued a 1 year maturity convertible
debenture of $75,000 to Coventry Enterprises LLC bearing 8%
interest per annum maturing June 10th 2015. This note has a
conversion factor of 60% of market price. Market price is
calculated by taking the average of the lowest Bid price for the
trailing ten business days. (Representing a 40% discount to market
price). This note is in default. $63K, was converted into Common
stock for the year 2016.
DNA Brands,
Inc.
Notes to Financial
Statements (Continued)
September 30, 2019
(Unaudited)
Oct 7, 2014, the Company issued a 1 year Convertible Debenture to
Coventry Enterprises LLC for $30,000. Bearing 8% per annum.
Maturing Oct 7 2015. This note has a Conversion ratio with a 50% of
market price. Market price is Calculated by taking the average of
the lowest Bid price for the trailing ten business days.
(Representing a 50% discount to market price). This note is in
default.
Jan 14, 2016 the company issued a convertible debenture to Darren
Marks for $25,000 bearing 8% interest per annum. Maturing Jan 14,
2015. This note has a Conversion factor of 40% of market price.
Market price is calculated by the average of the lowest bid price
of the trailing 5 business days (Representing a 60% discount to
market). This note is in default.
Jan 14, 2016 the company issued a convertible debenture to Darren
Marks for $50,000 bearing 8% interest per annum. Maturing Jan 14,
2015. This note has a Conversion factor of 40% of market price.
Market price is calculated by taking the average of the lowest bid
price of the trailing 5 business days. (Representing a 60% discount
to market price). This note is in default.
Jan 14, 2016, the company issued a convertible debenture to Melvin
Leiner for $50,000 bearing 8% interest per annum. Maturing Jan 14
,2017 . This note has a Conversion factor of 40% of market price.
Market price is calculated by taking the average of the lowest bid
price of the trailing 5 business days. (Representing a 60% discount
to market price). This note is in default.
Feb 1, 2016, the company issued a convertible debenture to Andrew
Telsey for $30,000, bearing 8% Interest per annum. Maturing Feb 1
2017. This note has a conversion of 60% of market value. Market
price is calculated by taking the average of the lowest bid price
of the trailing 5 business days. ( Representing a 40% discount to
market price). This Note is in default.
Feb 1, 2016, the Company issued a convertible Note to Darren Marks
for $70,500, bearing 8% interest per annum. Maturing Feb 1 2017.
This note has a conversion factor of 40% of market price. Market
price is calculated by taking the average of the lowest bid price
of the trailing 5 business days. (Representing a 60% discount to
market Price). This Note is in default.
Feb 1 2016, the Company issued a convertible Note to Melvin Leiner
for $106,632.70, bearing 8% interest, with a conversion ratio, of
40% market price. Maturing Feb 1 2017. Market price is calculated
by taking the average of the lowest bid price of the trailing 5
business days. Discount to market. (Representing a 60% discount to
market price). This Note is in default.
April 16, 2016, the company issued a convertible debenture to
Tidepool Ventures group for $10,000 bearing 5% interest per annum.
Maturing April 16 2017. This note has a conversion ratio of 45% of
market price. Market price is calculated by taking the average of
the lowest bid price of the trailing 5 business days. (Representing
a 55% discount to market). This debenture is in default.
April 26, 2016, the company issued a convertible debenture to
Iconic Holdings LLC for $25,000 bearing 10% interest per annum
Maturing April 26 2017. This note has a conversion ratio of 50% of
market price. Market price is calculated by taking the average of
the lowest bid price of the trailing 5 business days. (Representing
a 50% discount to market price). This note is in default.
DNA Brands,
Inc.
Notes to Financial
Statements (Continued)
September 30,
2019
(Unaudited)
June 10, 2016, the company issued a convertible debenture to
Tidepool Ventures LLC for $3,000 bearing 5% interest per annum.
Maturing June 10 2017. This note has a conversion ratio of 50% of
market price. Market price is calculated by taking the average of
the lowest bid price of the trailing 5 business days. (Representing
50% discount to market price). This note is in default.
June 29, 2016, the company issued a convertible debenture to
Tidepool Ventures LLC of Eight thousand seven hundred fifty dollars
($8,750) bearing 5% interest per annum. Maturing June 29 2017. This
Note has a conversion factor of 50% of market price. Market price
is calculated by taking the average of the lowest bid price of the
trailing 5 business days. (Representing a 50% discount to market
price). This note is in default.
August 12, 2016, the company issued a convertible debenture to
Tidepool Ventures LLC $3,000 bearing 5% interest per annum.
Maturing August 12 2017. This note has a conversion factor of 50%
of market price. Market price is calculated by taking the average
of the lowest bid price of the trailing 5 business days.
(Representing a 50% discount to market price). This debenture is in
default.
Sept 7, 2016, the company issued a convertible debenture to Dr.
Rutherford for $20,000 Bearing 5% interest per annum. Maturing
September 7 2017. This note has a conversion of 50% discount of
market price. Market price is calculated by taking the average of
the lowest bid price of the trailing 5 business days. (Representing
a 50% discount to market price). This note is in default.
Feb 1, 2017, Company issued a Convertible debenture to CEO Adrian
McKenzie or his company PBDC LLC for Eighty Nine Thousand Dollars
($89,000). Bearing 9.875% interest for Annual Back Salary and
Annual Bonus for 2016. This debenture is in default.
March 31, 2017, company issued a convertible note to CEO Adrian
McKenzie or his company PBDC LLC for Eight thousand dollars
($8,000), bearing 9.875% interest for Back Salaries for the months
of February and March 2017. This note is in default.
May 21, 2017, Company issued a convertible Promissory Note to Heidi
Michitsch for One Hundred Thousand Dollars, bearing 9.875% interest
($100K). This note is in default.
June 30th company issued a convertible debenture to CEO Adrian
McKenzie or his company PBDC LLC in the amount of Six Thousand
Dollars ($6,000), bearing 9.875% interest, for back salary for Q2,
2017. This debenture is in default.
November 24th the company issued a convertible debenture to Mr.
Fred Rosen for Four Thousand Dollars ($4,000), for funds loaned to
the company. This debenture is in default.
On November 25th the Company issued a Convertible Note for Twenty
Thousand Dollars USD ($20,000) Dr. Thomas Rutherford, for funds
loaned to the company. This note is in default.
On Nov 29th 2017 company issued a Convertible Promissory Note. to
Mr. Joseph Gibson, for Five Thousand Dollars USD ($5,000) USD. This
note is in default.
On or about November 30th 2017 issued a Convertible Promissory Note
to Dr. Doug Eagers Five Thousand USD ($5K) for funds loaned to the
Company. This note is in default.
DNA Brands,
Inc.
Notes to Financial
Statements (Continued)
September 30,
2019
(Unaudited)
On or about December 13th 2017 the company issued a Convertible
Promissory Note to Barry Romich of Ten Thousand dollars USD
($10,000), for funds loaned to the company. This note is in
default.
On or about December 15th 2017 the company issued a Convertible
Promissory Note to Mr. Kerry Goodman for One hundred Thousand
Dollars USD ($100K, $50K cashed late December, $50K cashed early
February). This note is in default.
On or about December 31st 2017 company issued a Convertible
promissory Note payable to Ms. Heidi Michitsch of Six thousand
Dollars USD ($6K) for Back Salaries Due, Q4 2017. This note is in
default.
On Dec 31, 2017, the Company issued a Convertible promissory Note
to CEO Adrian P. McKenzie or his company PBDC LLC in the Amount of
Thirty One Thousand, two hundred and Eighty USD ($31,280). This
Promissory Note covers monies loaned to the company for the Token
Talk Acquisition and Back Salaries owed to Mr. McKenzie over the
given time period. This note is in default.
On or about March 31, 2018, the company issued a Convertible
promissory note to CEO Adrian P. McKenzie, for Eleven thousand Five
Hundred USD ($11,500) or his company PBDC LLC for back salaries
owed. This note is in default.
On or about June 30, 2018, company issued a Convertible note in the
amount of Twenty Six Thousand Five Hundred dollars USD ($26,500) to
CEO Adrian P. McKenzie or his company PBOC LLC, for back salaries
owed. This note is in default.
On or about August 13, 2018, the company issued a Convertible Note
of Fifty Thousand Dollars USD in exchange for Fifty Thousand Dollar
USD ($50,000) Loan to the Company, to the BA Romich Trust. This
note is in default.
On or about August 13, 2018, the Company issued a Convertible note
in the amount of Fifty Thousand Dollars USD ($50,000) as a
Charitable donation to the Romich Foundation. This note is in
default.
On or about September 30, 2018, the company issued a Convertible
note in the amount of Thirty Thousand Dollars ($30,000) to Adrian
P. McKenzie or his company PBDC LLC, for back salaries owed. This
note is in default.
On or November 18, 2018, The company issued a convertible
promissory Note to Dr. Thomas Rutherford for One Hundred Thousand
Dollars USD ($100,000), for funds loaned to the company. This note
is in default.
On or about December 31, 2018, the company issued a Convertible
note in the amount of Twenty One Thousand Dollars ($21,000) to
Adrian P McKenzie or his company PBDC LLC, for back salaries owed.
This note is in default.
As of September 30, 2019, the company has $1,997,646 in long term
debt. Interest has been calculated at 8% annual straight line on
the total amount.
DNA Brands,
Inc.
Notes to Financial
Statements (Continued)
September 30,
2019
(Unaudited)
Equity
Preferred and Common Stock
As of June 30, 2019 the company is Authorized to issue 498,000,000
Common shares. Of which as of June 30, 2019, 105,897,867 shares
were issued and outstanding.
Sole Office and Director Adrian McKenzie Holds 355K Series F
preferred, which have voting rights of 75,000 votes per share.
(Control Block)
At December 31, 2016 the Company was authorized to issue 10,000,000
shares of $0.001 Preferred Stock and 400,000,000 shares of $0.001
par value Common Stock. The holders of common stock are entitled to
receive dividends whenever funds are legally available and when
declared by the Board of Directors. Each share of common stock is
entitled to one vote.
On May 3, 2013 the Company authorized the issuance of 300,000
shares of Series C Preferred Stock ("Series C") and issued 150,000
shares of Series C to Darren Marks, an officer and director of the
Company, in settlement of $100,000 owed by the Company to Mr.
Marks; and issued 150,000 shares of its Series C to Mel Leiner, an
officer and director of the Company, in settlement of $100,000 owed
by the Company to Mr. Leiner. Each Series C share entitles the
holder to 300 votes on all matters submitted to a vote of the
Company's shareholders.
On October 21, 2013 the Company authorized the issuance of
1,800,000 shares of Series D Preferred Stock ("Series D") and
issued 900,000 shares of Series D to Darren Marks in settlement of
$900,000 owed by the Company to Mr. Marks; and issued 900,000
shares of its Series D to Mel Leiner in settlement of $900,000 owed
by the Company to Mr. Leiner. Each share of Series D Convertible
Preferred Stock is convertible into 68.2721 shares of our Common
Stock. If all of these shares are converted it would result in the
issuance of 122,448,780 shares.
On December 27, 2013 Messrs. Marks and Leiner returned their Series
D shares and these shares were cancelled. Additionally on December
27, 2013 the Company authorized the issuance of 1,800,000 shares of
Series E Preferred Stock ("Series E") and issued 900,000 shares of
Series E to Darren Marks in settlement of $50,000 owed by the
Company to Mr. Marks; and issued 900,000 shares of its Series E to
Mel Leiner in settlement of $50,000 owed by the Company to Mr.
Leiner. Each share of Series E stock has voting rights equal to
68.02721 common shares. The Series E is not convertible into any of
our common shares.
At December 31, 2017 and 2016, preferred stock issued and
outstanding 2,100,000 and 0 shares, respectively. At December 31,
2017 and 2016, common stock issued and outstanding totaled 20.7
Billion and 11.7 Billion shares, respectively.
Historically, the Company has issued and sold preferred stock,
common stock and common stock warrants in order to fund a
significant portion its operations. Additionally, the Company has
issued shares of its common stock to compensate its employees, pay
service providers and retire debt.
DNA Brands,
Inc.
Notes to Financial
Statements (Continued)
September 30,
2019
(Unaudited)
Stock Options
ALL stock options that have been issued in the past have expired
worthless.
As of December 31, 2017, 2016 and 2015, there was $-0- in
unrecognized compensation related to stock options outstanding. All
outstanding stock options are vested. Since the inception of the
Company, no stock options have been exercised.
On or about October 18th 2017, the company issued 1,533,200,000
shares of common stock to Consultant Howard Ullman, Pre reversal,
Post reversal after October 31 2018, they equate to Four Hundred
and thirty eight thousand (438K) common shares.
On or about November 5th 2018 the company issued Five hundred
Thousand Shares (500K) to Adrian McKenzie dba PBDC LLC.
On or about Feb 7 2019 company converted $40K worth of common stock
to World Market Ventures LLC from a $20K Convertible Promissory
note dated Sept 7 2016 payable to Dr. Thomas Rutherford.
On Feb 19 2019 the company issued the following common stock:
600K (Six hundred thousand shares) to Heidi Michitsch, For work
done on Rideshares deal 500K (Five hundred thousand shares) to
Howard Ullman For work done on Rideshare deal 1,000,000 (One
Million shares) For work done on Rideshare deal.
On or about March 5th 2019 company issued 885K shares of common
stock to Mr. Kerry Goodman for a Promissory note conversion.
March 31, 2019 the company issued a Convertible Promissory note
payable to CEO Adrian McKenzie/ his company PBDC LLC, in the amount
of $23,500, for backpay for Q1 2019.
On April 16 2019 the company issued CEO Adrian Mckenzie 80 Million
common shares in exchange for settlement agreement of convertible
debt owed from March 31, 2017.
On or about May 6th 2019 the company issued a Convertible
Promissory Note (8.75% interest), to Dr. Thomas Rutherford, in the
amount of Thirty Thousand Dollars ($30,000), for funds loaned to
the company.
On or about May 15th 2019 the company issued 4 million shares of
common stock to Mr. Kerry Goodman for a $25K promissory note
conversion.
April 16 2019, issued 80 million shares to Adrian McKenzie,
redemption of $8K Promissory Note April 23 2019, issued 9,100,000,
shares to GPL Ventures, option purchase of Rutherford Note May 9
2019 Issued 1,000,000 to World Market Ventures LLC, Purchase from
Rutherford.
DNA Brands,
Inc.
Notes to Financial
Statements (Continued)
September 30,
2019
(Unaudited)
Stock Warrants
All Prior Warrants have expired worthless and not
exercised
The net operating loss is comprised as follows:
Loss from operations 2018 ($622,915)
Loss from operations 2017 ($314,875)
Loss from operations 2016 ($318,272)
Loss from operations 2015 ($104, 373)
Loss From operation 2014 ($801,213)
Commitments
As of December 1, 2018 the company is committed to $1300 per month
for an office facility that it leases annually.
DNA BRANDS INC.
BALANCE SHEET
(UNAUDITED)
| |
|
December 31, 2018 |
|
|
December 31, 2017 |
|
| |
|
|
|
|
|
|
| ASSETS |
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
| Current Assets |
|
|
|
|
|
|
|
|
| Cash
and Cash Equivalents |
|
$ |
62,302 |
|
|
$ |
69,817 |
|
| Net
Receivables |
|
|
– |
|
|
|
– |
|
| Inventory |
|
|
– |
|
|
|
– |
|
| Deposit -
Acquisitions |
|
|
40,000 |
|
|
|
– |
|
| Other
Current Assets |
|
|
989 |
|
|
|
989 |
|
| |
|
|
|
|
|
|
|
|
| Total Current Assets |
|
|
103,291 |
|
|
|
70,806 |
|
| |
|
|
|
|
|
|
|
|
| Property, Net |
|
|
– |
|
|
|
– |
|
| Other Assets |
|
|
– |
|
|
|
– |
|
| |
|
|
|
|
|
|
|
|
| TOTAL
ASSETS |
|
$ |
103,291 |
|
|
$ |
70,806 |
|
| |
|
|
|
|
|
|
|
|
| LIABILITIES & EQUITY |
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
| Liabilities |
|
|
|
|
|
|
|
|
| Current
Liabilities |
|
|
|
|
|
|
|
|
| Accounts
Payable |
|
$ |
107,752 |
|
|
$ |
107,752 |
|
| Current Long Term
Debt |
|
|
1,943,146 |
|
|
|
1,604,146 |
|
| Accrued
Interest |
|
|
395,534 |
|
|
|
240,082 |
|
| Other
Current Liabilities |
|
|
166,448 |
|
|
|
166,448 |
|
| Total Current Liabilities |
|
|
2,612,880 |
|
|
|
2,118,428 |
|
| |
|
|
|
|
|
|
|
|
| Long Term Debt |
|
|
– |
|
|
|
– |
|
| Total Noncurrent
Liabilities |
|
|
– |
|
|
|
|
|
| Total Liabilities |
|
|
2,612,880 |
|
|
|
2,118,428 |
|
| |
|
|
|
|
|
|
|
|
| Shareholder's Equity |
|
|
|
|
|
|
|
|
| Preferred Stock -
Series A-G |
|
|
2,100 |
|
|
|
2,100 |
|
| Common
Stock par value $.00001, 9,000,000 shares authorized: 7,812,767
shares issued and outstanding as of December 31, 2018,
25,000,000,000 shares authorized, 20,814,793,955 shares issued and
outstanding as of December 31, 2017 |
|
|
5,076,345 |
|
|
|
5,076,345 |
|
| Additional Paid-in
Capital |
|
|
23,633,717 |
|
|
|
23,633,717 |
|
|
Accumulated Deficit |
|
|
(31,221,751 |
) |
|
|
(30,759,784 |
) |
| |
|
|
|
|
|
|
|
|
| Total
Shareholders' Deficit |
|
|
(2,509,589 |
) |
|
|
(2,047,622 |
) |
| |
|
|
|
|
|
|
|
|
| Total
Liabilities and Shareholder's Equity |
|
$ |
103,291 |
|
|
$ |
70,806 |
|
See
notes to financial statements.
DNA BRANDS INC.
STATEMENT OF OPERATIONS
(UNAUDITED)
YEARS ENDED DECEMBER 31, 2018 AND 2017
| |
|
2018 |
|
|
2017 |
|
| |
|
|
|
|
|
|
| Sales |
|
$ |
– |
|
|
$ |
– |
|
| Cost of Goods
Sold |
|
|
– |
|
|
|
– |
|
| Gross Margin |
|
|
– |
|
|
|
– |
|
| |
|
|
|
|
|
|
|
|
| Operating Expenses |
|
|
|
|
|
|
|
|
| Compensation and
Benefits |
|
|
– |
|
|
|
– |
|
| General and
Administrative Expenses |
|
|
256,515 |
|
|
|
214,875 |
|
| Interest Expense on
Convertible Notes |
|
|
155,452 |
|
|
|
128,332 |
|
| Charitable
Donations |
|
|
50,000 |
|
|
|
– |
|
| Professional and
Outside Services |
|
|
– |
|
|
|
100,000 |
|
| Selling and
Marketing Expenses |
|
|
– |
|
|
|
– |
|
| Total Operating
Expenses |
|
|
461,967 |
|
|
|
443,207 |
|
| |
|
|
|
|
|
|
|
|
| Loss from Operations |
|
|
(461,967 |
) |
|
|
(443,207 |
) |
| |
|
|
|
|
|
|
|
|
| Other Income
(Expense) |
|
|
– |
|
|
|
– |
|
| Loss before Income Taxes |
|
|
(461,967 |
) |
|
|
(443,207 |
) |
| |
|
|
|
|
|
|
|
|
| Income Taxes |
|
|
– |
|
|
|
– |
|
| |
|
|
|
|
|
|
|
|
| Net Loss |
|
$ |
(461,967 |
) |
|
$ |
(443,207 |
) |
See
notes to financial statements.
DNA BRANDS INC.
STATEMENT OF STOCKHOLDERS EQUITY
(DEFICIT)
For the nine months ended December 31, 2018 and 2017
| |
|
COMMON STOCK SHARES |
|
|
COMMON STOCK AMOUNT |
|
|
PREFERRED STOCK SHARES |
|
|
PREFERRED STOCK AMOUNT |
|
|
ADDITIONAL PAID-IN CAPITAL |
|
|
ACCUMULATED DEFICIT |
|
|
TOTAL |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Beginning Balance December 31, 2016 |
|
|
11,700,000,000 |
|
|
$ |
5,055,845 |
|
|
|
355,000 |
|
|
$ |
2,100 |
|
|
$ |
23,539,217 |
|
|
$ |
(30,316,577 |
) |
|
$ |
(1,719,415 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Common Stock Issued for Services |
|
|
9,114,793,955 |
|
|
|
20,500 |
|
|
|
– |
|
|
|
|
|
|
|
94,500 |
|
|
|
|
|
|
|
115,000 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net Loss |
|
|
|
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
(443,207 |
) |
|
|
(443,207 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Ending Balance December 31,
2017 |
|
|
20,814,793,955 |
|
|
$ |
5,076,345 |
|
|
|
355,000 |
|
|
$ |
2,100 |
|
|
$ |
23,633,717 |
|
|
$ |
(30,759,784 |
) |
|
$ |
(2,047,622 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Beginning balance December 31,
2017 |
|
|
20,814,793,955 |
|
|
$ |
5,076,345 |
|
|
|
355,000 |
|
|
$ |
2,100 |
|
|
$ |
23,633,717 |
|
|
$ |
(30,759,784 |
) |
|
$ |
(2,047,622 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Common Stock Issued for Services |
|
|
399,999,900 |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
| |
|
|
|
|
|
|
|
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
|
|
| Reverse stock split |
|
|
(21,206,981,088 |
) |
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(461,967 |
) |
|
|
(461,967 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Ending Balance December 31,
2018 |
|
|
7,812,767 |
|
|
$ |
5,076,345 |
|
|
|
355,000 |
|
|
$ |
2,100 |
|
|
$ |
23,633,717 |
|
|
$ |
(31,221,751 |
) |
|
$ |
(2,509,589 |
) |
See
notes to financial statements.
DNA BRANDS INC.
STATEMENT OF CASH FLOW
FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017
| |
|
2018 |
|
|
2017 |
|
| |
|
|
|
|
|
|
| Net Income |
|
$ |
(461,967 |
) |
|
$ |
(443,207 |
) |
| |
|
|
|
|
|
|
|
|
|
Operating Activities |
|
|
|
|
|
|
|
|
| Depreciation |
|
|
– |
|
|
|
– |
|
| Adjustments to Net
Income |
|
|
– |
|
|
|
– |
|
| Changes in Liabilities |
|
|
655,400 |
|
|
|
207,280 |
|
| Changes in Account Receivables |
|
|
– |
|
|
|
– |
|
| Changes in Inventories |
|
|
– |
|
|
|
– |
|
| Changes in Interest |
|
|
(160,948 |
) |
|
|
128,332 |
|
| Changes in Other Operating
Activities |
|
|
(40,000 |
) |
|
|
– |
|
|
Total Cash Flow
From Operating Activities |
|
|
(7,515 |
) |
|
|
(107,595 |
) |
| |
|
|
|
|
|
|
|
|
|
Investing Activities |
|
|
|
|
|
|
|
|
|
Total Cash Flow
From Investing Activities |
|
|
– |
|
|
|
– |
|
| |
|
|
|
|
|
|
|
|
|
Financing Activities |
|
|
|
|
|
|
|
|
| Dividends Paid |
|
|
– |
|
|
|
– |
|
| Sale/Purchase of Stock |
|
|
– |
|
|
|
115,000 |
|
| Net Borrowings |
|
|
– |
|
|
|
– |
|
| Other Cash Flows From Financing
Activities |
|
|
– |
|
|
|
– |
|
|
Total Cash Flow
From Financing Activities |
|
$ |
– |
|
|
$ |
115,000 |
|
| |
|
|
|
|
|
|
|
|
| Effect of
Exchange Rate Changes |
|
|
– |
|
|
|
– |
|
| |
|
|
|
|
|
|
|
|
| Change
in Cash and Equivalents |
|
|
(7,515 |
) |
|
|
7,405 |
|
|
Cash, beginning balance |
|
|
69,817 |
|
|
|
62,412 |
|
|
Cash, ending balance |
|
$ |
62,302 |
|
|
$ |
69,817 |
|
See
notes to financial statements.
DNA Brands,
Inc.
Notes to Financial
Statements
December 31,
2018
(Unaudited)
Company Overview and
History
DNA Brands, Inc. (hereinafter
referred to as “us,” “our,” “we,” the “Company” or “DNA”) was
incorporated in the State of Colorado on May 23, 2007 under the
name Famous Products, Inc. Prior to July 6, 2010 we were a beverage
company. We are looking to reproduce, market and sell a proprietary
line of five carbonated blends of DNA Energy Drink®, Citrus, Sugar
Free Citrus, Original (a unique combination of Red Bull® and
Monster® energy drinks), Cryo-Berry (a refreshing mix of cranberry
and raspberry) and Molecular Melon (a cool and refreshing taste);
as well as three milk based energy coffees with fortified with
Omega 3. These flavors are Mocha, Vanilla Latte and Caramel
Macchiato.
Our business commenced in May
2006 in the State of Florida under the name Grass Roots Beverage
Company, Inc. (“Grass Roots”). Initial operations of Grass
Roots included development of our energy drinks, sampling and other
marketing efforts and initial distribution in the State of
Florida. In May 2006 we formed DNA Beverage Corporation, a
Florida corporation (“DNA Beverage”). Our early years were devoted
to brand development, creating awareness through heavy sampling
programs and creating credibility among our then core demographic
by concentrating marketing efforts on action sports locations and
events (surf, motocross, skate, etc.).
Effective July 6, 2010, we
executed agreements to acquire all of the assets, liabilities and
contract rights of DNA Beverage and 100% of the common stock of DNA
Beverage’s wholly owned subsidiary Grass Roots Beverage Company,
Inc. (“Grass Roots”) in exchange for the issuance of 31,250,000
shares of our common stock. The share issuance represented
approximately 94.6% of our outstanding shares at the time of
issuance. As a result of this transaction we also changed our
name to “DNA Brands, Inc.”
Grass Roots was dissolved and
ceased activity on December 31, 2013. Whereby DNA Brands Inc. has
been the surviving entity.
Use of
Estimates
The preparation of financial
statements in conformity with accounting principles generally
accepted in the United States of America requires management to
make estimates and assumptions that affect the amounts reported in
the financial statements and accompanying notes. Actual results
could differ from those estimates.
Revenue
Recognition
The Company derives revenues
from the sale of carbonated energy drinks and other related
products. Revenue is recognized when all of the following elements
are satisfied: (i) there are no uncertainties regarding customer
acceptance; (ii) there is persuasive evidence that an agreement
exists; (iii) delivery has occurred; (iv) legal title to the
products has transferred to the customer; (v) the sales price is
fixed or determinable; and (vi) collectability is reasonably
assured. At this time the company is in a reorganization
phase and has minimal to no revenue.
Fair Value of Financial
Instruments
The Company’s financial
instruments consist mainly of cash and cash equivalents, accounts
receivable, prepaid expenses, accounts payable, accrued expenses,
derivative liabilities, and loans payable. The carrying values of
the financial instruments approximate their fair value due to the
short-term nature of these instruments. The fair values of the
loans payable have interest rates that approximate market
rates.
Derivative
Instruments
The Company does not enter
into derivative contracts for purposes of risk management or
speculation. However, from time to time, the Company enters into
contracts, namely convertible notes payable, that are not
considered derivative financial instruments in their entirety, but
that include embedded derivative features.
DNA Brands,
Inc.
Notes to Financial
Statements
December 31,
2018
(Unaudited)
In accordance with Financial
Accounting Standards Board (“FASB”) ASC Topic
815-15, Embedded Derivatives, and guidance
provided by the SEC Staff, the Company accounts for these embedded
features as a derivative liability or equity at fair
value.
The recognition of the fair
value of the derivative instrument at the date of issuance is
applied first to the debt proceeds. The excess fair value, if any,
over the proceeds from a debt instrument, is recognized immediately
in the statement of operations as interest expense. The value of
derivatives associated with a debt instrument is recognized at
inception as a discount to the debt instrument and amortized to
interest expense over the life of the debt instrument. A
determination is made upon settlement, exchange, or modification of
the debt instruments to determine if a gain or loss on the
extinguishment has been incurred based on the terms of the
settlement, exchange, or modification and on the value allocated to
the debt instrument at such date.
Cash and Cash
Equivalents
The Company considers all
highly liquid investments with a maturity of three months or less
at the date of purchase to be cash equivalents. Cash and cash
equivalents are stated at cost and consist of bank deposits. The
carrying amount of cash and cash equivalents approximates fair
value.
Accounts Receivable and
Allowance for Doubtful Accounts
The Company will bill
its customers after its products are shipped. The Company bases its
allowance for doubtful accounts on estimates of the
creditworthiness of customers, analysis of delinquent accounts,
payment histories of its customers and judgment with respect to the
current economic conditions. The Company generally does not require
collateral. The Company believes the allowances are sufficient to
cover uncollectible accounts. The Company reviews its accounts
receivable aging on a regular basis for past due accounts, and
writes off any uncollectible amounts against the
allowance.
Inventory
No Inventory at present
or for Fiscal year 2018
Inventory is stated at the
lower of cost or market. Cost is principally determined by using
the average cost method that approximates the First-In, First-Out
(FIFO) method of accounting for inventory. Inventory consists of
raw materials as well as finished goods held for sale. The
Company’s management monitors the inventory for excess and obsolete
items and makes necessary valuation adjustments when
required.
The Company is in the process
of pricing and ordering inventory.
Property and
Equipment
None at present or for
fiscal year 2018
Property and equipment is
recorded at cost less accumulated depreciation. Replacements,
maintenance and repairs which do not improve or extend the lives of
the respective assets are charged to expense as incurred.
Depreciation is computed using the straight-line method over the
estimated useful lives of the assets as follows:
Impairment of
Long-Lived Assets
None at present or for
fiscal year 2018
Long-lived assets are
reviewed for impairment when events or changes in circumstances
indicate the book value of the assets may not be recoverable. In
accordance with Accounting Standards Codification (“ASC”)
360-10-35-15 Impairment or Disposal of Long-Lived
Assets, recoverability is measured by comparing the book
value of the asset to the future net undiscounted cash flows
expected to be generated by the asset.
DNA Brands,
Inc.
Notes to Financial
Statements
December 31,
2018
(Unaudited)
No events or changes in
circumstances have been identified which would impact the
recoverability of the Company’s long-lived assets reported at
December 31, 2016 and 2015.
Stock-Based
Compensation for fiscal year 2017 and 2018
On or about October 18, 2017,
the Company issued 1,533,200,000 shares of common stock to
Consultant Howard Ullman.
On November 5, 2018, Company
issued 500K, shares to Adrian McKenzie DBA PBDC
LLC
Stock compensation
arrangements with non-employee service providers are accounted for
in accordance with ASC 505-50 Equity-Based Payments to
Non-Employees, using a fair value approach. The compensation
costs of these arrangements are subject to re-measurement over the
vesting terms as earned.
Stock Purchase
Warrants
All Prior Warrants
issued have expired worthless as of Dec 31 2016
Going
Concern
As reflected in the
accompanying financial statements, the Company has recorded
continual significant net losses Annually for the trailing 5
years. These matters raise a substantial doubt about the Company’s
ability to continue as a going concern.
The ability of the Company to
continue as a going concern is dependent on management's plans,
which includes implementation of its business plan and continuing
to raise funds through debt or equity raises. The Company will
likely continue to rely upon related-party debt or equity financing
in order to ensure the continuing existence of the business.
Additionally the Company is working on generating new sales from
additional retail outlets, distribution centers or through
sponsorship agreements; and allocating sufficient resources to
continue with advertising and marketing efforts.
6. Prepaid Expenses and
Other Assets
None
7. Accrued
Liabilities
$316,400- Interest on
Convertible notes for fiscal year 2018.
9. Loans
payable
The composition of loans
payable up to December 31, 2018 are as follows:
In June 2013, the Company
entered into a loan agreement with Beverage LLC and received gross
proceeds of $265,000. In accordance with ACS 810- 10-55, the
Company considered its relationship with, and the terms of its
interest in, Beverage LLC and determined that it was a VIE that
should be consolidated into its financial statements. The Company’s
involvement with Beverage LLC is that it serves as an entity to
obtain inventory financing for DNA.
As of December 31, 2013 and
December 2012 the amounts included in the consolidated liabilities,
which are reported in loans payable (before discount) total
$530,000 and $-0- respectively, relating to Beverage LLC. The loans
payable bear interest at a rate of 6% per annum and are scheduled
to be repaid to the lenders in equal installments of 66.67% of the
original principal on September 30, 2013, December 31, 2013 and
March 31, 2014. The aggregate value of the repayment installments
totals $530,000 plus interest and penalties. September and
December installment payments were not made. The loan is in default
and the default interest rate of 10% per annum.
DNA Brands,
Inc.
Notes to Financial
Statements
December 31,
2018
(Unaudited)
Convertible Note
Debentures
In February 2011, the Company
issued a convertible debenture to an existing shareholder in the
amount of $500,000. The debenture bears interest at 12% per annum
and carries an annual transaction fee of $30,000, of which both are
payable in quarterly installments commencing in May 2011. These
costs are recorded as interest expense in the Company's financial
statements. In addition, as further inducement for loaning the
Company funds, the Company issued 125,000 restricted shares of its
common stock to the holder upon execution. The common shares were
valued at $31,250, their fair market value, and recorded as
discount to the debenture. These costs will be amortized using the
effective interest method over the term of the debenture and
recorded as interest expense in the Company's financial
statements.
In June 2011, the Company
issued a convertible debenture to an existing shareholder in the
amount of $125,000. The debenture bears interest at 12% per annum,
which is payable in the Company’s common stock at the time of
maturity. The debenture is convertible at any time prior to
maturity into 150,000 shares of the Company’s common stock. This
beneficial conversion feature was valued at $90,750, using
Black-Scholes methodology, and recorded as a discount to the
debenture. These costs will be amortized using the effective
interest method over the term of the debenture and recorded as
interest expense in the Company's financial statements.
In July and August 2011, the
Company issued a series of secured convertible debentures to
accredited investors aggregating $275,000 in gross proceeds. All
proceeds from these debentures are to be utilized solely for the
purpose of funding raw materials and inventory purchases through
the use of an escrow agent. The debentures bear interest at 12% per
annum, payable in monthly installments. The debentures are
convertible at any time prior to maturity at a conversion price
equal to 80% of the average share price of the Company’s common
stock for the 10 previous trading days prior to conversion, but not
less than $0.70. In addition, as further inducement for loaning the
Company funds, the Company issued the lenders 68,750 restricted
shares of its common stock and 137,500 common stock warrants
exercisable at $1.25 per share. As a result, the Company had to
allocate fair market value to each the beneficial conversion
feature, restricted shares and warrants. The common shares were
valued at $30,938, their fair market value. The Company determined
the fair market value of the warrants as $94,255 using the
Black-Scholes valuation model. Since the combined fair market value
allocated to the warrants and beneficial conversion feature cannot
exceed the convertible debenture amount, the beneficial conversion
feature was valued at $149,807, the ceiling of its intrinsic value.
These costs will be amortized using the effective interest method
over the term of the debenture and recorded as interest expense in
the Company's financial statements.
In February 2012, the Company
issued a convertible debenture to an existing shareholder in the
amount of $75,000. The debenture bears interest at 12% per annum,
which is payable in the Company’s common stock at the time of
maturity. The debenture is convertible at any time prior to
maturity into 280,000 shares of the Company’s common stock. As
further inducement, the Company issued the lender 280,000 common
stock warrants exercisable at $1.50 per share. If unexercised, the
warrants will expire on January 31, 2017. Using the Black-Scholes
model, the warrants were valued at $63,620 and recorded as a
discount to the principal amount of the debenture. This discount is
amortized using the effective interest method over the term of the
debenture and recorded as interest expense in the Company's
financial statements.
In February and June 2012,
the Company converted $524,950 of its loans payable to officers
into convertible debentures. These debentures were offered by the
Company’s officers to certain accredited investors and a majority
portion of the proceeds therefrom were deposited with the Company.
The debentures had no maturity date and bear no interest. Therefore
these debentures were payable on demand and were originally
classified as a current liability. The debentures were convertible
at any time into 3,499,667 shares, or $0.15 per share of common
stock. The Company determined that these terms created a beneficial
conversion feature. Using the Black-Scholes model, the beneficial
conversion feature was valued at $524,950, the ceiling of its
intrinsic value. Due to the nature of the debentures, the full
value of the beneficial conversion feature was immediately recorded
as interest expense in the Company’s financial statements. In
August 2012, these convertible debentures were converted into
3,499,666 shares of the Company’s common stock.
On April 9, 2012, the Company
executed an Investment Banking and Advisory Agreement with Charles
Morgan Securities, Inc., New York, NY (“CMI”), wherein CMI agreed
to provide consulting, strategic business planning, financing on a
“best efforts” basis and investor and public relations services, as
well as to assist the Company in its efforts to raise capital
through the issuance of debt or equity. The agreement provided for
CMI to engage in two separate private offerings with the initial
private placement offering up to $3.0 million and the second
private placement offering up to an additional $3.0 million; each
on a “best efforts” basis. In connection with this agreement the
Company issued 750,000 shares valued at $0.25 per share or a total
value of $187,500. This amount was fully amortized in the Company's
financial statements as of December 31, 2012.
DNA Brands,
Inc.
Notes to Financial
Statements
December 31,
2018
(Unaudited)
In July 2012, the Company
received proceeds from convertible debentures totaling $182,668 in
connection with the CMI agreement. The debentures bear interest at
12% per annum, which is payable in cash or the Company’s common
stock at the time of conversion or maturity. The debentures are
convertible at any time prior to maturity at a conversion price
equal to the lesser of 75% of the average share price of the
Company’s common stock for the five previous trading days prior to
conversion or $0.35, but not less than $0.15. In the event that the
Company offers or issues shares of its common stock at a share
price less than $0.15, the floor conversion price will adjust to
the new lower price. The Company determined that the terms of the
debentures created a beneficial conversion feature. Using the
Black-Scholes model, the beneficial conversion feature was valued
at $160,813 and recorded as a discount to the principal amount of
the debentures. The discount is amortized using the effective
interest method over the term of the debenture and recorded as
interest expense in the Company's financial statements.
On August 7, 2012, the
Company issued a convertible debenture in the amount of $50,000.
The debenture does not bear interest. As an inducement, the Company
agreed to issue the lender 20,000 shares of its common stock. The
common shares were valued at their trading price on the date of the
agreement and recorded as interest expense in the Company’s results
of operations. The Company determined that the terms of the
debenture created a beneficial conversion feature. Using the
Black-Scholes model, the beneficial conversion feature was valued
at $50,000, the ceiling of its intrinsic value, and recorded as a
discount to the principal amount of the debenture. The discount is
amortized using the effective interest method over the term of the
debenture and recorded as interest expense in the Company's
financial statements. During the second quarter of 2013, the
conversion terms of this note were modified and the note was
converted into 1,500,000 shares of common stock.
On September 25, 2012, the
Company issued a convertible debenture in the amount of $50,000.
The debenture bears interest at 6% per annum, which is payable in
the Company’s common stock at the time of conversion or maturity.
The debenture is convertible at any time prior to maturity at a
conversion price equal to 70% of the lowest closing bid price of
the Company’s common stock on the four previous trading days prior
to and day of conversion, but not less than $0.0001. The Company
determined that the terms of the debenture created a beneficial
conversion feature. Using the Black-Scholes model, the beneficial
conversion feature was valued at $50,000, the ceiling of its
intrinsic value, and recorded as a discount to the principal amount
of the debenture. The discount is amortized using the effective
interest method over the term of the debenture and recorded as
interest expense in the Company's financial statements. During the
second quarter of 2013, the lender converted $23,000 of principal
into 919,403 shares of common stock in accordance with the
conversion terms of the debenture.
On November 1, 2012, the
Company issued a convertible debenture in the amount of $80,000.
The debenture bears interest at 12% per annum, which is payable in
the Company’s common stock at the time of conversion or maturity.
The debenture is convertible at any time prior to maturity at a
conversion price equal to 70% of the average closing bid price of
the Company’s common stock on the 30 previous trading days prior to
the day of conversion. The Company determined that the terms of the
debenture created a beneficial conversion feature. Using the
Black-Scholes model, the beneficial conversion feature was valued
at $56,286, the ceiling of its intrinsic value, and recorded as a
discount to the principal amount of the debenture. The discount is
amortized using the effective interest method over the term of the
debenture and recorded as interest expense in the Company's
financial
statements.
During the second quarter of
2013, the Company recorded $65,000 in gross proceeds from the
issuance of three convertible debentures. The debentures bear
interest at 12% per annum, which is payable in cash at the time of
maturity. The debentures are convertible at any time prior to
maturity into 216,667 shares of the Company’s common stock. As
further inducement, the Company issued the lenders 216,667 common
stock warrants exercisable at $1.50 per share. If unexercised, the
warrants will expire on February 28, 2017. Using the Black-Scholes
model, the warrants were valued at $69,455 and recorded as a
discount up to the principal amount of the debentures. This
discount is amortized using the effective interest method over the
term of the debenture and recorded as interest expense in the
Company's financial statements. As of December 31, 2013, two of the
debentures totaling $35,000 in principal value were converted into
316,667 shares of common stock. Some of the original conversion
terms were modified prior to the notes’ conversions. The remaining
$30,000 debenture is in default, as its maturity date was April 25,
2013.
DNA Brands,
Inc.
Notes to Financial
Statements
December 31,
2018
(Unaudited)
On September 17, 2013, the
Company issued a convertible debenture in the amount of $50,000.
The debenture bears interest at 6% per annum, which is payable in
the Company’s common stock at the time of conversion or maturity.
The debenture is convertible at any time prior to maturity at a
conversion price equal to 70% of the lowest closing bid price of
the Company’s common stock on the four previous trading days prior
to and day of conversion, but not less than $0.0001. The Company
determined that the terms of the debenture created a beneficial
conversion feature. Using the Black-Scholes model, the beneficial
conversion feature was valued at $50,000, the ceiling of its
intrinsic value, and recorded as a discount to the principal amount
of the debenture. The discount is amortized using the effective
interest method over the term of the debenture and recorded as
interest expense in the Company's financial statements.
On October 31, 2013, the
Company issued a convertible debenture in the amount of $204,000.
The debenture bears interest at 18% per annum, which is payable in
the Company’s common stock at the time of conversion or maturity.
The debenture is convertible at any time prior to maturity at a
conversion price equal to 50% of the lowest closing bid price of
the Company’s common stock on the twenty previous trading days
prior to and day of conversion. The Company determined that the
terms of the debenture created a beneficial conversion feature.
Using the Black-Scholes model, the beneficial conversion feature
was valued at $204,000, the ceiling of its intrinsic value, and
recorded as a discount to the principal amount of the debenture.
The discount is amortized using the effective interest method over
the term of the debenture and recorded as interest expense in the
Company's financial statements.
On November 6, 2013, the
Company issued a convertible debenture in the amount of $53,000.
The debenture bears interest at 8% per annum, which is payable in
the Company’s common stock at the time of conversion or maturity.
The debenture is convertible at any time prior to maturity at a
conversion price equal to 58% of the average of the 3 lowest share
closing bid prices of the Company’s common stock on the ten
previous trading days prior to and day of conversion. The Company
determined that the terms of the debenture created a beneficial
conversion feature. Using the Black-Scholes model, the beneficial
conversion feature was valued at $48,533, its intrinsic value, and
recorded as a discount to the principal amount of the debenture.
The discount is amortized using the effective interest method over
the term of the debenture and recorded as interest expense in the
Company's financial statements.
On November 6, 2013, the
Company issued a convertible debenture in the amount of $125,000.
The debenture bears interest at 10% per annum, which is payable in
the Company’s common stock at the time of conversion or maturity.
The debenture is convertible at any time prior to maturity at a
conversion price equal to 50% of the lowest share closing bid price
of the Company’s common stock on the twenty previous trading
days prior to and day of conversion. The Company determined that
the terms of the debenture created a beneficial conversion feature.
Using the Black-Scholes model, the beneficial conversion feature
was valued at $125,000, the ceiling of its intrinsic value, and
recorded as a discount to the principal amount of the debenture.
The discount is amortized using the effective interest method over
the term of the debenture and recorded as interest expense in the
Company's financial statements.
On November 6, 2013, the
Company issued a convertible debenture in the amount of $80,000.
The debenture bears no interest and is payable in the Company’s
common stock at the time of conversion or maturity. The debenture
is convertible at any time prior to maturity at a conversion price
equal to 50% of the average share closing bid price of the
Company’s common stock on the thirty previous trading days prior to
and day of conversion. The Company determined that the terms of the
debenture created a beneficial conversion feature. Using the
Black-Scholes model, the beneficial conversion feature was valued
at $80,000, the ceiling of its intrinsic value, and recorded as a
discount to the principal amount of the debenture. The discount is
amortized using the effective interest method over the term of the
debenture and recorded as interest expense in the Company's
financial statements.
On November 21, 2013, the
Company issued a convertible debenture in the amount of $100,000.
The debenture bears interest at 12% per annum, which is payable in
the Company’s common stock at the time of conversion or maturity.
The debenture is convertible at any time prior to maturity at a
conversion price equal to 50% of the lowest share intra-day price
of the Company’s common stock on the ten previous trading
days prior to and day of conversion. The Company determined that
the terms of the debenture created a beneficial conversion feature.
Using the Black-Scholes model, the beneficial conversion feature
was valued at $100,000, the ceiling of its intrinsic value, and
recorded as a discount to the principal amount of the debenture.
The discount is amortized using the effective interest method over
the term of the debenture and recorded as interest expense in the
Company's financial statements.
June 10, 2014, the Company
issued a convertible debenture of $75,000 to Coventry Enterprises
LLC bearing 8% interest per annum. This debenture is in
default.
DNA Brands,
Inc.
Notes to Financial
Statements
December 31,
2018
(Unaudited)
April 22, 2014, the Company
issued a 1 year convertible debenture of $77,500, maturing April
22, 2015, to Tidepool Ventures Inc. Bearing 10% interest per annum.
This note has a Conversion factor of 45% of market price. Market
price is calculated by the average of the lowest Bid price for the
trailing ten business days to the market. (Representing a 55%
discount to market price). This note was sold to World Market
Ventures LLC and converted into common stock.
April 22, 2014, the company
issued a 1 year maturity convertible debenture of $110,000 to
Iconic Holding LLC. Bearing 5% interest per annum, maturing April
22, 2015. This note has a Conversion factor of 50% of market price.
Market price is calculated by the average of the lowest Bid price
for the trailing ten business days. (Representing a 50% discount to
market price). $32,250 Was converted into Common stock for
2016. This note is in default.
May 2, 2014, the Company
issued a 1 year convertible debenture to LG Capital funding LLC of
$37,500 maturing May 2, 2015. Bearing 8% annual interest. This note
has a conversion factor of 50% of market price. Market price is
calculated by taking the average of the lowest Bid price for the
trailing ten business days. (Representing a 50% discount to market
price). This note is in default.
June 10, 2014, the Company
issued a 1 year maturity convertible debenture of $75,000 to
Coventry Enterprises LLC bearing 8% interest per annum maturing
June 10, 2015. This note has a conversion factor of 60% of market
price. Market price is calculated by taking the average of the
lowest Bid price for the trailing ten business days. (Representing
a 40% discount to market price). This note is in default.
$63K, was converted into Common stock for the year 2016.
Oct 7, 2014, the Company
issued a 1 year Convertible Debenture to Coventry Enterprises LLC
for $30,000. Bearing 8% per annum. Maturing Oct 7, 2015. This note
has a Conversion ratio with a 50% of market price. Market price is
Calculated by taking the average of the lowest Bid price for the
trailing ten business days. (Representing a 50% discount to market
price). This note is in default.
Jan 14, 2016, the Company
issued a convertible debenture to Darren Marks for $25,000 bearing
8% interest per annum. Maturing Jan 14, 2015. This note has a
Conversion factor of 40% of market price. Market price is
calculated by the average of the lowest bid price of the trailing 5
business days (Representing a 60% discount to market). This note is
in default.
Jan 14, 2016, the Company
issued a convertible debenture to Darren Marks for $50,000 bearing
8% interest per annum. Maturing Jan 14, 2015. This note has a
Conversion factor of 40% of market price. Market price is
calculated by taking the average of the lowest bid price of
the trailing 5 business days. (Representing a 60% discount to
market price). This note is in default.
Jan 14, 2016, the Company
issued a convertible debenture to Melvin Leiner for $50,000 bearing
8% interest per annum. Maturing Jan 14, 2017. This note has a
Conversion factor of 40% of market price. Market price is
calculated by taking the average of the lowest bid price of the
trailing 5 business days. (Representing a 60% discount to market
price). This note is in default.
Feb 1, 2016, the Company
issued a convertible debenture to Andrew Telsey for $30,000,
bearing 8% interest per annum. Maturing Feb 1, 2017. This note has
a conversion of 60% of market value. Market price is calculated by
taking the average of the lowest bid price of the trailing 5
business days. (Representing a 40% discount to market price). This
Note is in default.
Feb 1, 2016, the Company
issued a convertible Note to Darren Marks for $70,500, bearing 8%
interest per annum. Maturing Feb 1, 2017. This note has a
conversion factor of 40% of market price. Market price is
calculated by taking the average of the lowest bid price of
the trailing 5 business days. (Representing a 60% discount to
market price). This Note is in default.
Feb 1, 2016, the Company
issued a convertible Note to Melvin Leiner for $106,632.70, bearing
8% interest, with a conversion ratio, of 40% market price.
Maturing Feb 1, 2017. Market price is calculated by taking the
average of the lowest bid price of the trailing 5 business days.
Discount to market. (Representing a 60% discount to market price).
This Note is in default.
DNA Brands,
Inc.
Notes to Financial
Statements
December 31,
2018
(Unaudited)
April 16, 2016, the Company
issued a convertible debenture to Tidepool Ventures group for
$10,000 bearing 5% interest per annum. Maturing April 16, 2017.
This note has a conversion ratio of 45% of market price.
Market price is calculated by taking the average of the lowest bid
price of the trailing 5 business days. (Representing a 55% discount
to market). This debenture is in default.
April 26, 2016, the Company
issued a convertible debenture to Iconic Holdings LLC for $25,000
bearing 10% interest per annum Maturing April 26, 2017. This note
has a conversion ratio of 50% of market price. Market price is
calculated by taking the average of the lowest bid price of the
trailing 5 business days. (Representing a 50% discount to market
price). This note is in default.
June 10, 2016, the Company
issued a convertible debenture to Tidepool Ventures LLC for
$3,000 bearing 5% interest per annum. Maturing June 10, 2017. This
note has a conversion ratio of 50% of market price. Market price is
calculated by taking the average of the lowest bid price of the
trailing 5 business days. (Representing 50% discount to market
price). This note is in default.
June 29, 2016, the Company
issued a convertible debenture to Tidepool Ventures LLC of Eight
thousand seven hundred fifty dollars ($8,750) bearing 5% interest
per annum. Maturing June 29, 2017. This Note has a conversion
factor of 50% of market price. Market price is calculated by taking
the average of the lowest bid price of the trailing 5 business
days. (Representing a 50% discount to market price). This note is
in default.
August 12, 2016, the Company
issued a convertible debenture to Tidepool Ventures LLC $3,000
bearing 5% interest per annum, maturing August 12, 2017. This note
has a conversion factor of 50% of market price. Market price is
calculated by taking the average of the lowest bid price of
the trailing 5 business days. (Representing a 50% discount to
market price). This debenture is in default.
Sept 7, 2016 the company
issued a convertible debenture to Dr. Rutherford for $20,000
Bearing 5% interest per annum. Maturing September 7, 2017. This
note has a conversion of 50% discount of market price. Market
price is calculated by taking the average of the lowest bid price
of the trailing 5 business days. (Representing a 50% discount to
market price). This note is in default.
Feb 1, 2017, the Company
issued a Convertible debenture to CEO Adrian McKenzie or his
company PBDC LLC for Eighty Nine Thousand Dollars ($89,000).
Bearing 9.875% interest for Annual Back Salary and Annual Bonus for
2016. This note is in default.
March 31, 2017, the Company
issued a convertible note to CEO Adrian McKenzie or his company
PBDC LLC for Eight thousand dollars ($8,000), bearing 9.875%
interest for Back Salaries for the months of February and March
2017. This note is in default.
May 21, 2017, the Company
issued a convertible Promissory Note to Heidi Michitsch for
One Hundred Thousand Dollars, bearing 9.875% interest ($100K). This
note is in default.
June 30, 2017, the Company
issued a convertible debenture to CEO Adrian McKenzie or his
company PBDC LLC in the amount of Six Thousand Dollars ($6,000),
bearing 9.875% interest, for back salary for Q2, 2017. This
note is in default.
November 24, 2017, the
Company issued a convertible debenture to Mr. Fred Rosen for Four
Thousand Dollars ($4,000), for funds loaned to the company. This
note is in default.
On November 25, 2017, the
Company issued a Convertible Note for Twenty Thousand Dollars
USD ($20,000) Dr. Thomas Rutherford, for funds loaned to the
company. This note is in default.
On Nov 29, 2017, the Company
issued a Convertible Promissory Note. to Mr. Joseph Gibson, for
Five Thousand Dollars USD ($5,000) USD. This note is in
default.
DNA Brands,
Inc.
Notes to Financial
Statements
December 31,
2018
(Unaudited)
On or about November 30,
2017, the Company issued a Convertible Promissory Note to Dr. Doug
Engers Five Thousand USD ($5K) for funds loaned to the Company.
This note is in default.
On or about December 13,
2017, the Company issued a Convertible Promissory Note to Barry
Romich of Ten Thousand dollars USD ($10,000), for funds loaned to
the company. This note is in default.
On or about December 15,
2017, the Company issued a Convertible Promissory Note to Mr. Kerry
Goodman for One hundred Thousand Dollars USD ($100K, $50K cashed
late December, $50K cashed early February). This note is in
default.
On or about December 31,
2017, the Company issued a Convertible promissory Note payable to
Ms. Heidi Michitsch of Six thousand Dollars USD ($6K) for Back
Salaries Due, Q4 2017. This note is in default.
On Dec 31, 2017, the Company
issued a Convertible promissory Note to CEO Adrian P. McKenzie or
his company PBDC LLC in the Amount of Thirty One Thousand, two
hundred and Eighty USD ($31,280). This Promissory Note covers
monies loaned to the company for the Token Talk Acquisition and
Back Salaries owed to Mr. McKenzie over the given time period. This
note is in default.
On or about March 31, 2018,
the Company issued a Convertible promissory note to CEO Adrian P.
McKenzie, for Eleven thousand Five Hundred USD ($11,500) or his
company PBDC LLC for back salaries owed. This note is in
default.
On or about June 30, 2018,
the Company issued a Convertible note in the amount of Twenty Six
Thousand Five Hundred dollars USD ($26,500) to CEO Adrian P.
McKenzie or his company PBDC LLC, for back salaries owed. This note
is in default.
On or about August 13, 2018,
the Company issued a Convertible Note of Fifty Thousand Dollars USD
in exchange for Fifty Thousand Dollar USD ($50,000) Loan to the
Company, to the BA Romich Trust. This note is in
default.
On or about August 13, 2018,
the Company issued a Convertible note in the amount of Fifty
Thousand Dollars USD ($50,000) as a Charitable donation to the
Romich Foundation. This note is in default.
On or about September 30,
2018, the Company issued a Convertible note in the amount of Thirty
Thousand Dollars ($30,000) to Adrian P. McKenzie or his company
PBDC LLC, for back salaries owed. This note is in
default.
On or November 18, 2018, the
Company issued a convertible promissory Note to Dr. Thomas
Rutherford for One Hundred Thousand Dollars USD ($100,000), for
funds loaned to the company. This note is in default.
On or about December 31,
2018, the Company issued a Convertible note in the amount of Twenty
One Thousand Dollars ($21,000) to Adrian P. McKenzie or his company
PBDC LLC, for back salaries owed. This note is in
default.
As of December 31, 2018, the
company has $1,943,146 in long term debt. Interest has been
calculated at 8% annual straight line on the total
amount.
Equity
Preferred and Common
Stock
As of Dec 31 2018 the company
is Authorized to issue 9 million Common shares, of which as of
December 31 2018, 7.9 Million shares were issued and
outstanding.
Sole Office and Director
Adrian McKenzie Holds 355K Series F preferred, which have voting
rights of 75,000 votes per share. (Control Block).
DNA Brands,
Inc.
Notes to Financial
Statements
December 31,
2018
(Unaudited)
At December 31, 2016, the
Company was authorized to issue 10,000,000 shares of $0.001
Preferred Stock and 400,000,000 shares of $0.001 par value Common
Stock. The holders of common stock are entitled to receive
dividends whenever funds are legally available and when declared by
the Board of Directors. Each share of common stock is entitled to
one vote.
On May 3, 2013, the Company
authorized the issuance of 300,000 shares of Series C Preferred
Stock (“Series C”) and issued 150,000 shares of Series C to Darren
Marks, an officer and director of the Company, in settlement of
$100,000 owed by the Company to Mr. Marks; and issued 150,000
shares of its Series C to Mel Leiner, an officer and director of
the Company, in settlement of $100,000 owed by the Company to Mr.
Leiner. Each Series C share entitles the holder to 300 votes on all
matters submitted to a vote of the Company's
shareholders.
On October 21, 2013, the
Company authorized the issuance of 1,800,000 shares of Series D
Preferred Stock (“Series D”) and issued 900,000 shares of Series D
to Darren Marks in settlement of $900,000 owed by the Company to
Mr. Marks; and issued 900,000 shares of its Series D to Mel Leiner
in settlement of $900,000 owed by the Company to Mr. Leiner. Each
share of Series D Convertible Preferred Stock is convertible into
68.2721 shares of our Common Stock. If all of these shares are
converted it would result in the issuance of 122,448,780
shares.
On December 27, 2013, Messrs.
Marks and Leiner returned their Series D shares and these shares
were cancelled. Additionally on December 27, 2013, the Company
authorized the issuance of 1,800,000 shares of Series E Preferred
Stock (“Series E”) and issued 900,000 shares of Series E to Darren
Marks in settlement of $50,000 owed by the Company to Mr. Marks;
and issued 900,000 shares of its Series E to Mel Leiner in
settlement of $50,000 owed by the Company to Mr. Leiner. Each share
of Series E stock has voting rights equal to 68.02721 common
shares. The Series E is not convertible into any of our common
shares.
At December 31, 2017 and
2016, preferred stock issued and outstanding 2,100,000 and 0
shares, respectively. At December 31, 2017 and 2016, common stock
issued and outstanding totaled 20.7 Billion and 11.7 Billion
shares, respectively. Historically, the Company has issued and sold
preferred stock, common stock and common stock warrants in order to
fund a significant portion its operations. Additionally, the
Company has issued shares of its common stock to compensate its
employees, pay service providers and retire debt.
Stock
Options
ALL stock options that have
been issued in the past have expired worthless.
As of December 31, 2017, 2016
and 2015, there was $-0- in unrecognized compensation related to
stock options outstanding. All outstanding stock options are
vested. Since the inception of the Company, no stock options have
been exercised.
On or about October 18, 2017,
the Company issued 1,533,200,000 shares of common stock to
Consultant Howard Ullman, Pre reversal, Post reversal after October
31, 2018, they equate to Four Hundred and thirty eight thousand
(438K) common shares.
On or about November 5, 2018,
the Company issued Five hundred Thousand Shares (500K) to Adrian
McKenzie dba PBDC LLC.
On or about Feb 7, 2019, the
Company converted $40K worth of common stock to World Market
Ventures LLC from a $20K Convertible Promissory note dated Sept 7
2016 payable to Dr. Thomas Rutherford.
On Feb 19, 2019, the Company
issued the following common stock:
600K (Six hundred thousand
shares) to Heidi Michitsch, for work done on Rideshares
deal
500K (Five hundred thousand
shares) to Howard Ullman for work done on Rideshare deal
1,000,000 (One Million
shares) For work done on Rideshare deal.
DNA Brands,
Inc.
Notes to Financial
Statements
December 31,
2018
(Unaudited)
On or about March 5, 2019,
the Company issued 885K shares of common stock to Mr. Kerry Goodman
for a Promissory note conversion.
On March 31, 2019, the
Company issued a Convertible Promissory note payable to CEO Adrian
McKenzie/ his company PBDC LLC, in the amount of $23,500, for
backpay for Q1 2019.
On April 16, 2019, the
Company issued CEO Adrian Mckenzie 80 Million common shares in
exchange for settlement agreement of convertible debt owed from
March 31, 2017.
On or about May 6, 2019, the
Company issued a Convertible Promissory Note (8.75% interest), to
Dr. Thomas Rutherford, in the amount of Thirty Thousand Dollars
($30,000), for funds loaned to the company.
On or about May 15, 2019, the
Company issued 4 million shares of common stock to Mr. Kerry
Goodman for a $25K promissory note conversion.
April 16, 2019, issued 80
million shares to Adrian McKenzie, redemption of $8K Promissory
Note.
April 23, 2019, issued
9,100,000, shares to GPL Ventures, Purchase of from
Rutherford.
May 9, 2019, issued 1,000,000
to World Market Ventures LLC, Purchase from Rutherford.
Stock
Warrants
All Prior Warrants have
expired worthless and not exercised.
The net operating loss is
comprised as follows:
| Loss from operations 2018 |
$(622,915) |
| Loss from operations 2017 |
$(314,875) |
| Loss from operations 2016 |
$(318,272) |
| Loss from operations 2015 |
$(104,373) |
| Loss From operation 2014 |
$(801,213) |
Commitments
As of December 1, 2018, the
Company is committed to $1300 per month for an office facility,
that it leases annually.
During the second quarter of 2013, the Company recorded $65,000 in
gross proceeds from the issuance of three convertible debentures.
The debentures bear interest at 12% per annum, which is payable in
cash at the time of maturity. The debentures are convertible at any
time prior to maturity into 216,667 shares of the Company's common
stock. As further inducement, the Company issued the lenders
216,667 common stock warrants exercisable at $1.50 per share.
If unexercised, the warrants
will expire on February 28, 2017. Using the Black-Scholes model,
the warrants were valued at $69,455 and recorded as a discount up
to the principal amount of the debentures. This discount is
amortized using the effective interest method over the term of the
debenture and recorded as interest expense in the Company's
financial statements. As of December 31, 2013, two of the
debentures totaling $35,000 in principal value were converted into
316,667 shares of common stock. Some of the original conversion
terms were modified prior to the notes' conversions. The remaining
$30,000 debenture is in default, as its maturity date was April 25,
2013.
On September 17, 2013, the Company issued a convertible debenture
in the amount of $50,000. The debenture bears interest at 6% per
annum, which is payable in the Company's common stock at the time
of conversion or maturity. The debenture is convertible at any time
prior to maturity at a conversion price equal to 70% of the lowest
closing bid price of the Company's common stock on the four
previous trading days prior to and day of conversion, but not less
than $0.0001. The Company determined that the terms of the
debenture created a beneficial conversion feature. Using the
Black-Scholes model, the beneficial conversion feature was valued
at $50,000, the ceiling of its intrinsic value, and recorded as a
discount to the principal amount of the debenture. The discount is
amortized using the effective interest method over the term of the
debenture and recorded as interest expense in the Company's
financial statements.
DNA BRANDS INC.
BALANCE SHEET
(UNAUDITED)
| |
|
December 31, 2017 |
|
|
December 31, 2016 |
|
| |
|
|
|
|
|
|
| ASSETS |
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
| Current Assets |
|
|
|
|
|
|
|
|
| Cash
and Cash Equivalents |
|
$ |
69,817 |
|
|
$ |
62,412 |
|
| Net
Receivables |
|
|
– |
|
|
|
– |
|
| Inventory |
|
|
– |
|
|
|
– |
|
| Other
Current Assets |
|
|
989 |
|
|
|
989 |
|
| |
|
|
|
|
|
|
|
|
| Total Current Assets |
|
|
70,806 |
|
|
|
63,401 |
|
| |
|
|
|
|
|
|
|
|
| Property, Net |
|
|
– |
|
|
|
– |
|
| Other Assets |
|
|
– |
|
|
|
– |
|
| |
|
|
|
|
|
|
|
|
| TOTAL
ASSETS |
|
$ |
70,806 |
|
|
$ |
63,401 |
|
| |
|
|
|
|
|
|
|
|
| LIABILITIES & EQUITY |
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
| Liabilities |
|
|
|
|
|
|
|
|
| Current
Liabilities |
|
|
|
|
|
|
|
|
| Accounts
Payable |
|
$ |
107,752 |
|
|
$ |
107,752 |
|
| Current Long Term
Debt |
|
|
1,604,146 |
|
|
|
1,396,866 |
|
| Accrued
interest |
|
|
240,082 |
|
|
|
111,750 |
|
| Other Current
Liabilities |
|
|
166,448 |
|
|
|
166,448 |
|
| |
|
|
|
|
|
|
|
|
| Long Term Debt |
|
|
– |
|
|
|
– |
|
| Other
Liabilities |
|
|
– |
|
|
|
– |
|
| Total Liabilities |
|
|
2,118,428 |
|
|
|
1,782,816 |
|
| |
|
|
|
|
|
|
|
|
| Shareholder's Equity |
|
|
|
|
|
|
|
|
| Preferred Stock -
Series A-G |
|
|
2,100 |
|
|
|
2,100 |
|
| Common
Stock par value $.00001, 25,000,000,000 shares authorized:
20,814,793,955 shares issued and outstanding as of December 31,
2017 |
|
|
5,076,345 |
|
|
|
5,055,845 |
|
| Additional Paid-in
Capital |
|
|
23,633,717 |
|
|
|
23,539,217 |
|
|
Accumulated Deficit |
|
|
(30,759,784 |
) |
|
|
(30,316,577 |
) |
| |
|
|
|
|
|
|
|
|
| Total
Shareholders' Deficit |
|
|
(2,047,622 |
) |
|
|
(1,719,415 |
) |
| |
|
|
|
|
|
|
|
|
| Total
Liabilities and Shareholder's Equity |
|
$ |
70,806 |
|
|
$ |
63,401 |
|
* Decrease Retired Long Term Debt from
Convertible Debentures
DNA BRANDS INC.
STATEMENT OF OPERATIONS
(UNAUDITED)
YEARS ENDED DECEMBER 31, 2017 AND 2016
| |
|
2017 |
|
|
2016 |
|
| |
|
|
|
|
|
|
| Sales |
|
$ |
– |
|
|
$ |
– |
|
| Cost of Goods
Sold |
|
|
– |
|
|
|
– |
|
| Gross Margin |
|
|
– |
|
|
|
– |
|
| |
|
|
|
|
|
|
|
|
| Operating Expenses |
|
|
|
|
|
|
|
|
| Compensation and
Benefits |
|
|
– |
|
|
|
– |
|
| General and
Administrative Expenses |
|
|
214,875 |
|
|
|
102,139 |
|
| Professional and
Outside Services |
|
|
100,000 |
|
|
|
216,133 |
|
| Selling and
Marketing Expenses |
|
|
– |
|
|
|
– |
|
| Interest
expense |
|
|
128,332 |
|
|
|
111,750 |
|
| Total Operating
Expenses |
|
|
443,207 |
|
|
|
430,022 |
|
| |
|
|
|
|
|
|
|
|
| Loss from Operations |
|
|
(443,207 |
) |
|
|
(430,022 |
) |
| |
|
|
|
|
|
|
|
|
| Other Income
(Expense) |
|
|
– |
|
|
|
– |
|
| Loss before Income Taxes |
|
|
(443,207 |
) |
|
|
(430,022 |
) |
| |
|
|
|
|
|
|
|
|
| Income Taxes |
|
|
– |
|
|
|
– |
|
| |
|
|
|
|
|
|
|
|
| Net Loss |
|
$ |
(443,207 |
) |
|
$ |
(430,022 |
) |
DNA BRANDS INC.
STATEMENT OF CASH FLOW
FOR THE YEARS ENDED DECEMBER 31, 2017 AND 2016
| |
|
2017 |
|
|
2016 |
|
| |
|
|
|
|
|
|
| Net Income |
|
$ |
(443,207 |
) |
|
$ |
(430,022 |
) |
| |
|
|
|
|
|
|
|
|
|
Operating Activities |
|
|
|
|
|
|
|
|
| Depreciation |
|
|
– |
|
|
|
– |
|
| Adjustments to Net
Income |
|
|
– |
|
|
|
– |
|
| Changes in Liabilities |
|
|
207,280 |
|
|
|
274,383 |
|
| Changes in Account Receivables |
|
|
– |
|
|
|
– |
|
| Changes in Inventories |
|
|
– |
|
|
|
– |
|
| Changes in Interest |
|
|
128,332 |
|
|
|
111,750 |
|
| Changes in Other Operating
Activities |
|
|
– |
|
|
|
– |
|
|
Total Cash Flow From Operating
Activities |
|
|
(107,595 |
) |
|
|
(43,889 |
) |
| |
|
|
|
|
|
|
|
|
|
Investing Activities |
|
|
|
|
|
|
|
|
| Capital Expenditures |
|
|
– |
|
|
|
– |
|
| Investments |
|
|
– |
|
|
|
– |
|
| Other Cash Flows From Investing
Activities |
|
|
– |
|
|
|
– |
|
|
Total Cash Flow From Investing
Activities |
|
|
– |
|
|
|
–– |
|
| |
|
|
|
|
|
|
|
|
|
Financing Activities |
|
|
|
|
|
|
|
|
| Dividends Paid |
|
|
– |
|
|
|
– |
|
| Sale/Purchase of Stock |
|
|
115,000 |
|
|
|
105,100 |
|
| Net Borrowings |
|
|
– |
|
|
|
– |
|
| Other Cash Flows From Financing
Activities |
|
|
– |
|
|
|
– |
|
|
Total Cash Flow From Financing
Activities |
|
$ |
115,000 |
|
|
$ |
105,100 |
|
| |
|
|
|
|
|
|
|
|
| Effect of
Exchange Rate Changes |
|
|
– |
|
|
|
– |
|
| |
|
|
|
|
|
|
|
|
|
Change in Cash and Equivalents |
|
|
7,405 |
|
|
$ |
61,211 |
|
|
Cash, beginning balance |
|
|
62,412 |
|
|
|
1,201 |
|
|
Cash, ending balance |
|
$ |
69,817 |
|
|
$ |
62,412 |
|
DNA Brands, Inc.
Notes to Financial
Statements
December 31, 2017
(Unaudited)
Company Overview and History
DNA Brands, Inc. (hereinafter referred to as “us,” “our,” “we,” the
“Company” or “DNA”) was incorporated in the State of Colorado on
May 23, 2007 under the name Famous Products, Inc. Prior to July 6,
2010 we were a beverage company. We are looking to reproduce,
market and sell a proprietary line of five carbonated blends of DNA
Energy Drink®, Citrus, Sugar Free Citrus, Original (a unique
combination of Red Bull® and Monster® energy drinks), Cryo- Berry
(a refreshing mix of cranberry and raspberry) and Molecular Melon
(a cool and refreshing taste); as well as three milk based energy
coffees with fortified with Omega 3. These flavors are Mocha,
Vanilla Latte and Carmel Macchiato.
Our current business commenced in May 2006 in the State of Florida
under the name Grass Roots Beverage Company, Inc. ("Grass Roots").
Initial operations of Grass Roots included development of our
energy drinks, sampling and other marketing efforts and initial
distribution in the State of Florida. In May 2006 we formed DNA
Beverage Corporation, a Florida corporation ("DNA Beverage"). Our
early years were devoted to brand development, creating awareness
through heavy sampling programs and creating credibility among our
then core demographic by concentrating marketing efforts on action
sports locations and events (surf, motocross, skate, etc.).
Effective July 6, 2010, we executed agreements to acquire all of
the assets, liabilities and contract rights of DNA Beverage and
100% of the common stock of DNA Beverage's wholly owned subsidiary
Grass Roots Beverage Company, Inc. ("Grass Roots") in exchange for
the issuance of 31,250,000 shares of our common stock. The share
issuance represented approximately 94.6% of our outstanding shares
at the time of issuance. As a result of this transaction we also
changed our name to "DNA Brands, Inc."
Grass Roots was dissolved and ceased activity on December 31, 2013.
Whereby DNA Brands, Inc. has been the surviving entity.
Use of Estimates
The preparation of financial statements in conformity with
a