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EX-32.1 - CERTIFICATION - Blue Line Protection Group, Inc.egrv_ex321.htm
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EX-31.2 - CERTIFICATION - Blue Line Protection Group, Inc.egrv_ex312.htm
EX-31.1 - CERTIFICATION - Blue Line Protection Group, Inc.egrv_ex311.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


FORM 10-K


(Mark One)

 

[X]

Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

 

 

For the Fiscal Year Ended December 31, 2013

 

 

[   ]

Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

 

 

For the Transition Period from __________ to

 

 

Commission File Number: 000-52942

 

 

THE ENGRAVING MASTERS, INC.

(Name of small business issuer in its charter)

 

Nevada

20-5543728

(State or other jurisdiction of incorporation or organization)

(I.R.S. employer identification number)

 

 

1350 Independence St.

Lakewood, CO

80215

(Address of principal executive offices)

(Zip code)

 

 

Issuer’s telephone number: (800) 844-5576

 

Securities Registered Pursuant to Section 12(b) of the Act:

 

Title of each class

Name of each exchange on which registered

 

 

None

None

 

 

 

 

 

 

Securities Registered Pursuant to Section 12(g) of the Act:

 

Common Stock

(Title of class)

 

 

(Title of class)







Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes [   ]   No [X]


Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes [   ]   No [X]


Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X]   No [   ]

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of its chapter) during the preceding twelve months (or for such shorter period that the registrant was required to submit and post such files).  Yes [X]   No [  


Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405) is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  [X]


Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.:


Large accelerated filer  [  ]

Accelerated filer                   [  ]

Non-accelerated filer    [  ]  (Do not check if a smaller reporting company)

Smaller reporting company  [X]


Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act)

Yes [  ]   No [X]


The aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the most recent price at which the common equity was sold: $0 as of June 30, 2013.


The number of shares outstanding of each of the issuer's classes of common equity, as of March 31, 2014 was 8,644,235.


DOCUMENTS INCORPORATED BY REFERENCE

 

None.


Transitional Small Business Disclosure Format (Check one): Yes [   ] No [X]



2



THE ENGRAVING MASTERS, INC.

FORM 10-K

For the year ended December 31, 2013


TABLE OF CONTENTS


PART I

4

  ITEM 1. DESCRIPTION OF BUSINESS

4

  ITEM 1A. RISK FACTORS

6

  ITEM 1B. UNRESOLVED STAFF COMMENTS

10

  ITEM 2. PROPERTIES

10

  ITEM 3. LEGAL PROCEEDINGS

10

  ITEM 4. MINE SAFETY DISCLOSURES

10

PART II

11

  ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS AND MARKET INFORMATION FOR COMMON STOCK

11

  ITEM 6. SELECTED FINANCIAL DATA

11

  ITEM 7. MANAGEMENT’S DISCUSSION AND PLAN OF OPERATIONS

11

  ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

13

  ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

13

  ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS

14

  ITEM 9A(T). CONTROLS AND PROCEDURES

14

  ITEM 9B. OTHER INFORMATION

16

PART III

17

  ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

17

  ITEM 11. EXECUTIVE COMPENSATION

19

  ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

20

  ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

21

  ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

21

  ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES

22

SIGNATURES

23






















3



FORWARD LOOKING STATEMENTS


This Annual Report contains forward-looking statements about our business, financial condition and prospects that reflect our management’s assumptions and beliefs based on information currently available.  We can give no assurance that the expectations indicated by such forward-looking statements will be realized.  If any of our assumptions should prove incorrect, or if any of the risks and uncertainties underlying such expectations should materialize, our actual results may differ materially from those indicated by the forward-looking statements.


The key factors that are not within our control and that may have a direct bearing on operating results include, but are not limited to, acceptance of our services, our ability to expand our customer base, managements’ ability to raise capital in the future, the retention of key employees and changes in the regulation of our industry.


There may be other risks and circumstances that management may be unable to predict.  When used in this report, words such as,  "believes,"  "expects," "intends,"  "plans,"  "anticipates,"  "estimates" and similar expressions are intended to identify and qualify forward-looking statements, although there may be certain forward-looking statements not accompanied by such expressions.


PART I

 

ITEM 1. DESCRIPTION OF BUSINESS


Business Development and Summary


The Engraving Masters, Inc. was incorporated in the State of Nevada on September 11, 2006.  Our prior stated business objective was to sell engraved products and awards.  To that end, in January 2007, we entered into a Procurement Agreement with The Engravers, Inc., an engraving company founded in 1982 in Spokane, Washington, which is owned and operated by the family of our officers and directors.  As of the date of this annual report, we did not generate any revenues from that line of business.  Due to our lack of sufficient financial resources and inability to establish our business, we sought business opportunities with established companies and financing from third-party sources.


Subsequent to the date of this annual report, we entered into the following transactions, the net effect of which was a change of control of the company:


1.

On February 19, 2014, David Uddman and Jolene Uddman, the Company’s two directors, appointed Ted Daniels and Dan Sullivan to be directors of the Company.  Following the appointments of Mr. Daniels and Mr. Sullivan, Mr. Uddman and Ms. Uddman resigned as officers and directors of the Company.


2.

On March 4, 2014, David Uddman sold 2,495,000 shares of the Company’s common stock to Ted Daniels and sold 2,495,000 shares of the Company’s common stock to Dan Sullivan.


3.

On March 13, 2014, Mr. Daniels and Mr. Sullivan appointed Sean Campbell to be a director of the Company.  Following his appointment, Mr. Daniels and Mr. Sullivan resigned as officers and directors of the Company.


4.

On March 14, 2014, the Company acquired Blue Line Protection Group, Inc., a Colorado corporation formed in February 2014 (“Blue Line Inc”).  Blue Line Inc intends to provide private security services to licensed marijuana growers and dispensaries.  


5.

On March 14, 2014, Sean Campbell, Ted Daniels and Dan Sullivan were appointed as officers of the Company.

 

6.

On March 15, 2014, the Company agreed to acquire all of the issued and outstanding membership interests in Blue Line Protection Group, LLC, a Colorado corporation (“Blue Line LLC”), from Ted Daniels and Dan Sullivan for cash. Since August 2013, Blue Line, LLC has provided private security services to licensed marijuana growers and dispensaries.  The closing of the acquisition will take place when the Company is provided with financial statements, audited as necessary and in proper form, which will be satisfactory for filing by the Company in an 8-K report with the Securities and Exchange Commission.  If the acquisition of Blue Line does not occur by July 31, 2014, the agreement pertaining to the acquisition of Blue Line will terminate.  As of the date of this annual report, the acquisition had not been completed.

 

7.

On March 24, 2014, Ricky Bennett was appointed as an officer of the Company.


 

4



 

In March 2014, we sold 991,158 shares of our common stock to a group of private investors at a price of $1.30 per share, and issued 23,077 shares of our common stock in exchange for a vehicle which we use for our business.

 

As a result of the foregoing, as of March 26, 2014, we had 8,644,235 outstanding shares of common stock.

 

We plan to forward split our outstanding shares of common stock on a 21 for 1 basis.

 

Business of Issuer


Principal Products and Principal Markets


The Company is making a concerted effort to become a total solutions provider of security and storage solutions for the medicinal marijuana market.  The Company intends to design, engineer, supply, install and maintain professional security, access control, video and storage solutions for licensed marijuana growers and dispensaries.  The Company will not manufacture the hardware that it sells.  Hardware is purchased from third parties and resold.  Each project presents us with a unique combination of a one-of-a-kind array of security related devices in a unique geographic configuration and utilization, and security deployment environment.


Industry Background and Competition


In Colorado (with 5.1 million residents), the 2013 medical marijuana market, with approximately 500 licensed dispensaries and 110,000 legal medical users, is believed to be $350,000,000.  While projections vary widely, many believe that when legalization occurs in 2014, the Colorado medical and recreational market combined will reach $600,000,000 (according to Colorado State University).


In Colorado, the market was expanded in January 2014 to include adult use, including visitors from other states. Voters in Washington recently approved a ballot measure to legalize cannabis for adult use.  Many experts predict that other states will follow Colorado and Washington in enacting legislation or approving ballot measures that expand the permitted use of cannabis.


The security services industry is a large and competitive market.  More specifically, however, the market for security and storage solutions as it pertains to medical marijuana companies is a nascent market, resulting a highly fragmented and fractured marketplace.  Some of the companies we compete with are much larger than us, and such companies have significantly greater resources than us.  None of the large security companies, such as Brinks, Argyle, Tyco or Torment, are currently competing in this market segment, although there can be no guarantee this trend will continue.  


Competition depends, to a large extent, on clients' perception of the quality of our services in comparison to those of our competitors.  To the extent we lose clients to our competitors because of dissatisfaction with our products and services, or if our reputation is adversely impacted for any other reason, our ability to attract customers, and therefore our ability to generate revenues, will be reduced.

 

Number of total employees and number of full time employees


As of March 31, 2014, we had 31 full-time employees and five part-time employees, including our officers.  




5



Reports to Security Holders


1.

We will furnish shareholders with annual financial reports certified by our independent registered public accountants.


2.

We are a reporting issuer with the Securities and Exchange Commission.  We file periodic reports, which are required in accordance with Section 13 of the Securities Exchange Act of 1934, with the Securities and Exchange Commission to maintain the fully reporting status.


3.

The public may read and copy any materials we file with the SEC at the SEC's Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549.  The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.  Our SEC filings will be available on the SEC Internet site, located at http://www.sec.gov.


ITEM 1A. RISK FACTORS


Federal regulation and enforcement may adversely affect the implementation of medical marijuana laws and regulations may negatively impact our revenues and profits.


As of January 31, 2014, 21 states and the District of Columbia allow its citizens to use medical marijuana.  Additionally, voters in the states of Colorado and Washington approved ballot measures last November to legalize cannabis for adult use.  The state laws are in conflict with the federal Controlled Substances Act, which makes marijuana use and possession illegal on a national level. The Obama administration has effectively stated that it is not an efficient use of resources to direct law federal law enforcement agencies to prosecute those lawfully abiding by state-designated laws allowing the use and distribution of medical marijuana.  However, there is no guarantee that the administration will not change its stated policy regarding the low-priority enforcement of federal laws.  Additionally, any new administration that follows could change this policy and decide to enforce the federal laws strongly.  Any such change in the federal government’s enforcement of current federal laws could cause significant financial damage to us and its shareholders.  While we do not intend to harvest, distribute or sell cannabis, we may be irreparably harmed by a change in enforcement by the Federal or state governments.


Marijuana remains illegal under federal law and we may be considered an accessory to the sale and distribution of it.


Marijuana remains illegal under federal law.  It is a schedule-I controlled substance.  Even in those jurisdictions in which the use of medical marijuana has been legalized at the state level, its prescription is a violation of federal law.  The United States Supreme Court has ruled in United States v. Oakland Cannabis Buyers’ Coop. and Gonzales v. Raich that it is the federal government that has the right to regulate and criminalize cannabis, even for medical purposes.  Therefore, federal law criminalizing the use of marijuana trumps state laws that legalize its use for medicinal purposes.  At present, the states are standing tall against the federal government, maintaining existing laws and passing new ones in this area.  This may be because the Obama administration has made a policy decision to allow states to implement these laws and not prosecute anyone operating in accordance with applicable state law.  However, we face another presidential election cycle in 2016, and a new administration could introduce a less favorable policy.  A change in the federal attitude towards enforcement could cripple the industry. While we are not insulated from economic risk if such a change were to occur, we believe that by virtue of the fact that we do not market, sell, or produce marijuana or marijuana related products, we and our investors should be insulated from federal prosecution or harassment.  However, the growers and sellers of medical marijuana are our primary customers, and if this industry were unable to operate, we would lose substantially all of our potential clients, which would have a negative impact on our business, operations and financial condition.


Laws and regulations affecting the medical marijuana industry are constantly changing, which could detrimentally affect our proposed operations.


Local, state and federal medical marijuana laws and regulations are broad in scope and subject to evolving interpretations, which could require us to incur substantial costs associated with compliance or alter our business plan.  In addition, violations of these laws, or allegations of such violations, could disrupt our business and result in a material adverse effect on our operations.  In addition, it is possible that regulations may be enacted in the future that will be directly applicable to our proposed business.  We cannot predict the nature of any future laws, regulations, interpretations or applications, nor can we determine what effect additional governmental regulations or administrative policies and procedures, when and if promulgated, could have on our business.  




6



Any change in the unwillingness of FDIC-insured banks to accept deposits from customers could harm our proposed operations.


As discussed above, the sale and use of marijuana is illegal under federal law.  There is a compelling argument that banks cannot accept for deposit funds from the drug trade and therefore cannot do business with our clients that traffic in marijuana, and clinic operators often have trouble finding a bank willing to accept their business.  The inability of potential clients in our target market to open accounts and otherwise use the service of banks provides the distinct opportunity for our services to exist.  However, U.S. Rep. Jared Polis (D-CO) has stated he will seek an amendment to banking regulations and laws in order to allow banks to transact business with state-authorized medical marijuana businesses.  In the event his legislation is successful, that banks decide to do business with medical marijuana retailers, or that state and federal banking regulators remove current prohibitions on banks handling funds generated from an activity that is illegal under federal law, our operations could be adversely affected.


We have a limited operating history and may not succeed.

 

We have a limited operating history and may not succeed.  We are subject to all risks inherent in a developing business enterprise.  Our likelihood of continued success must be considered in light of the problems, expenses, difficulties, complications, and delays frequently encountered in connection with manufacturing specialty products and the competitive and regulatory environment in which we operate.  You should consider, among other factors, our prospects for success in light of the risks and uncertainties encountered by companies that, like us, are in their early stages.  For example, unanticipated expenses, problems, and technical difficulties may occur and they may result in material delays in the operation of our business, in particular with respect to our new products.  We may not successfully address these risks and uncertainties or successfully implement our operating strategies.  If we fail to do so, it could materially harm our business to the point of having to cease operations and could impair the value of our common stock to the point investors may lose their entire investment.   


The success of our new and existing services is uncertain and may not be adopted by the medical marijuana industry.

 

We expect to commit significant resources and capital to develop and market a relatively new service in the nascent and developing medical marijuana industry.  These services are untested, and we cannot assure you that we will achieve market acceptance for these services, or other new services that we may offer in the future.  Moreover, these and other new services may be subject to significant competition with offerings by new and existing competitors.  In addition, new services and enhancements may pose a variety of technical challenges and require us to attract additional qualified employees.  The failure to successfully develop and market these new services or enhancements could seriously harm our business, financial condition and results of operations.


Investors may lose their entire investment if we fail to implement our business plan.


We only recently began operating as a medical marijuana security and storage company and have no demonstrable operations record on which you can evaluate our business and prospects.  Our prospects must be considered in light of the risks, uncertainties, expenses and difficulties frequently encountered by companies in their early stages of development.  These risks include, without limitation, competition, the absence of ongoing revenue streams, inexperienced management and lack of brand recognition.  We cannot guarantee that we will be successful in executing our business. If we fail to implement and create a base of operations for our proposed business, we may be forced to cease operations, in which case investors may lose their entire investment.


We may not be able to attain profitability without additional funding, which may be unavailable.


We have limited capital resources.  To date, we have not generated cash from our operations.  Unless we begin to generate sufficient revenues from our proposed business to finance operations as a going concern, we may experience liquidity and solvency problems.  Such liquidity and solvency problems may force us to go out of business if additional financing is not available.  We have no intention of liquidating.  In the event our cash resources are insufficient to continue operations, we intend to raise additional capital through offerings and sales of equity or debt securities.  In the event we are unable to raise sufficient funds, we will be forced to go out of business and will be forced to liquidate.  A possibility of such outcome presents a risk of complete loss of investment in our common stock.




7



Our internal controls may be inadequate, which could cause our financial reporting to be unreliable and lead to misinformation being disseminated to the public.


Our management is responsible for establishing and maintaining adequate internal control over financial reporting.  As defined in Exchange Act Rule 13a-15(f), internal control over financial reporting is a process designed by, or under the supervision of, the principal executive and principal financial officer and effected by the board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that: (i) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.  Our internal controls may be inadequate or ineffective, which could cause our financial reporting to be unreliable and lead to misinformation being disseminated to the public.  Investors relying upon this misinformation may make an uninformed investment decision.


We are subject to federal legislation to protect investors against corporate fraud.


Federal legislation, such as the Sarbanes-Oxley Act of 2002 and the Dodd- Frank Act, has resulted in the adoption of various corporate governance measures designed to promote the integrity of the corporate management and the securities markets. Some of these measures have been adopted in response to legal requirements. Others have been adopted by companies in response to the requirements of national securities exchanges, such as the NYSE, or the Nasdaq Stock Market, on which their securities are listed. Among the corporate governance measures that are required under the rules of national securities exchanges and NASDAQ are those that address board of directors’ independence, audit committee oversight, and the adoption of a code of ethics.


We have not yet adopted any of these corporate governance measures such as an audit or other independent committees of our board of directors as we presently have one director. Additionally, since our securities are not yet listed on a national securities exchange or NASDAQ, we are not required to do so. If we expand our board membership in future periods to include independent directors, we may seek to establish an audit and other committees of our board of directors. It is possible that if we were to adopt some or all of these corporate governance measures, stockholders would benefit from somewhat greater assurances that internal corporate decisions were being made by disinterested directors and that policies had been implemented to define responsible conduct. For example, in the absence of audit, nominating and compensation committees comprised of at least a majority of independent directors, decisions concerning matters such as compensation packages to our senior officers and recommendations for director nominees are made by a majority of directors who have an interest in the outcome of the matters being decided. Prospective investors should consider our current lack of corporate governance measures in making their investment decisions, in addition to the fact that we currently have only one director.


We are an “emerging growth company” under the JOBS Act of 2012, and we cannot be certain if the reduced disclosure requirements applicable to emerging growth companies will make our common stock less attractive to investors.


We are an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act of 2012 (“JOBS Act”), and we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies” including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved. We cannot predict if investors will find our common stock less attractive because we may rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile.


In addition, Section 107 of the JOBS Act also provides that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an “emerging growth company” can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We are choosing to take advantage of the extended transition period for complying with new or revised accounting standards.  As a result, our financial statements may not be comparable to those of companies that comply with public company effective dates.



8




We will remain an “emerging growth company” for up to five years, although we will lose that status sooner if our revenues exceed $1 billion, if we issue more than $1 billion in non-convertible debt in a three year period, or if the market value of our common stock that is held by non-affiliates exceeds $700 million.”


Even if we no longer qualify as an “emerging growth company”, we may still be subject to reduced reporting requirements so long as we are considered a “Smaller Reporting Company.”


Many of the exemptions available for emerging growth companies are also available to smaller reporting companies like us that have less than $75 million of worldwide common equity held by non-affiliates.  So, although we may no longer qualify as an emerging growth company, we may still be subject to reduced reporting requirements.


Our auditors have substantial doubt about our ability to continue as a going concern.


Our financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. Our auditor’s report reflects that our ability to continue as a going concern is dependent upon our ability to raise additional capital from the sale of common stock and, ultimately, the achievement of significant operating revenues. If we are unable to continue as a going concern, our stockholders will lose their investment.  We will be required to seek additional capital to fund future growth and expansion. No assurance can be given that such financing will be available or, if available, that it will be on commercially favorable terms. Moreover, favorable financing may be dilutive to our stockholders.


Because our common stock is deemed a low-priced “Penny” stock, an investment in our common stock should be considered high risk and subject to marketability restrictions.


Since our common stock is a penny stock, as defined in Rule 3a51-1 under the Securities Exchange Act, it will be more difficult for investors to liquidate their investment even if and when a market develops for the common stock. Until the trading price of the common stock rises above $5.00 per share, if ever, trading in the common stock is subject to the penny stock rules of the Securities Exchange Act specified in rules 15g-1 through 15g-10. Those rules require broker-dealers, before effecting transactions in any penny stock, to:


1.

Deliver to the customer, and obtain a written receipt for, a disclosure document;


2.

Disclose certain price information about the stock;


3.

Disclose the amount of compensation received by the broker-dealer or any associated person of the broker-dealer;


4.

Send monthly statements to customers with market and price information about the penny stock; and


5.

In some circumstances, approve the purchaser’s account under certain standards and deliver written statements to the customer with information specified in the rules.


Consequently, the penny stock rules may restrict the ability or willingness of broker-dealers to sell the common stock and may affect the ability of holders to sell their common stock in the secondary market and the price at which such holders can sell any such securities. These additional procedures could also limit our ability to raise additional capital in the future.

 

FINRA sales practice requirements may also limit a stockholder's ability to buy and sell our stock.

 

In addition to the “penny stock” rules described above, the Financial Industry Regulatory Authority (FINRA) has adopted rules that require that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative low priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer's financial status, tax status, investment objectives and other information. Under interpretations of these rules, the FINRA believes that there is a high probability that speculative low priced securities will not be suitable for at least some customers. The FINRA requirements make it more difficult for broker-dealers to recommend that their customers buy our common stock, which may limit your ability to buy and sell our stock and have an adverse effect on the market for our shares.

 



9




ITEM 1B. UNRESOLVED STAFF COMMENTS


None.


ITEM 2. PROPERTIES


We use office space at 1350 Independence St., Lakewood, CO 80215. We rent this space at a rate of $2,000 per month pursuant to a month-to-month lease.


ITEM 3. LEGAL PROCEEDINGS


None.


No director, officer, significant employee or consultant has had any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time.


ITEM 4. MINE SAFETY DISCLOSURES


Not applicable.























10



PART II


ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS AND MARKET INFORMATION FOR COMMON STOCK


Market information


We have been approved for listing on the OTCBB under the symbol "EGRV".  As of March 31, 2014, no public market in our common stock has developed and there can be no assurance that a meaningful trading market will subsequently develop.


Holders


As of the date of this filing, we had 8,644,235 shares of $0.001 par value common stock issued and outstanding held by 60 shareholders of record.  Our Transfer Agent is Holladay Stock Transfer, Inc., 2939 N. 67th Place, Suite C, Scottsdale, Arizona 85251, phone (480) 481-3940.


Dividends


The Company has never declared or paid any dividends on its common stock.  For the foreseeable future, we intend to retain any earnings to finance the development and expansion of our business, and we do not anticipate paying any dividends on our common stock.  


ITEM 6. SELECTED FINANCIAL DATA


Not applicable.


ITEM 7. MANAGEMENT’S DISCUSSION AND PLAN OF OPERATIONS


Forward-Looking Statements


The statements contained in all parts of this document that are not historical facts are, or may be deemed to be, "forward-looking statements" within the meaning of  Section 27A of  the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.  Such forward-looking statements include, but are not limited to, those relating to the following: the Company's ability to secure necessary financing; expected growth; future operating expenses; future margins; fluctuations in interest rates; ability to continue to grow and  implement growth, and regarding future growth, cash needs, operations, business plans and financial results and any other statements that are not historical facts.


When used in this document, the words "anticipate," "estimate," "expect," "may," "plans," "project," and similar expressions are intended to be among the statements that identify forward-looking statements.  The Engraving Masters, Inc.’s results may differ significantly from the results discussed in the forward-looking statements.  Such statements involve risks and uncertainties, including, but not limited to, those relating to costs, delays and difficulties related to the Company’s dependence on its ability to attract and retain skilled managers and other personnel; intense competition; the uncertainty of the Company's ability to manage and continue its growth and implement its business strategy; its vulnerability to general economic conditions; accuracy of accounting and other estimates; the Company's future financial and operating results, cash needs and demand for services; and the Company's ability to maintain and comply with permits and licenses; as well as other risk factors described in this Annual Report. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual outcomes may vary materially from those projected.


Background and Recent Developments


We were incorporated in the State of Nevada on September 11, 2006.  Our prior stated business objective was to sell engraved products and awards.  To that end, in January 2007, we entered into a Procurement Agreement with The Engravers, Inc., an engraving company founded in 1982 in Spokane, Washington, which is owned and operated by the family of our officers and directors.  As of the date of this annual report, we did not generate any revenues from that line of business.  Due to our lack of sufficient financial resources and inability to establish our business, we sought business opportunities with established companies and financing from third-party sources.




11



Subsequent to the date of this annual report, we entered into the following transactions:


1.

On February 19, 2014, David Uddman and Jolene Uddman resigned as officers and directors of the Company.

 

2.

On March 14, 2014, the Company acquired Blue Line Protection Group, Inc., a Colorado corporation formed in February 2014 (“Blue Line Inc”).  Blue Line Inc intends to provide private security services to licensed marijuana growers and dispensaries.  


3.

On March 15, 2014, the Company agreed to acquire all of the issued and outstanding membership interests in Blue Line Protection Group, LLC, a Colorado corporation (“Blue Line LLC”).  Since August 2013, Blue Line, LLC has provided private security services to licensed marijuana growers and dispensaries.  The closing of the acquisition will take place when the Company is provided with financial statements, audited as necessary and in proper form, which will be satisfactory for filing by the Company in an 8-K report with the Securities and Exchange Commission.  If the acquisition of Blue Line does not occur by July 31, 2014, the agreement pertaining to the acquisition of Blue Line will terminate.  As of the date of this annual report, the acquisition had not been completed.


Management’s Discussion and Analysis


Since March 14, 2014, we have been engaged in the business of providing private security, transportation and storage to licensed marijuana growers and dispensaries.


Since our formation in 2006, we have generated no revenues.  


In the execution of our business, we incur depreciation expense related to our computer equipment, as well as various general and administrative costs.  General and administrative expenses mainly consist of office expenditures and accounting and legal fees.  


During the year ended December 31, 2013, our expenses of $15,288, consisted solely of general and administrative expenses.  In the comparable period from the year ended December 31, 2012, our expenses of $14,932, comprised solely of general and administrative expenses.  Aggregate operating expenses from our inception on September 11, 2006 through December 31, 2013 were $102,481, of which $1,521 is related to depreciation expense and $100,960 in general and administrative expenses.  No development related expenses have been or will be paid to our affiliates.  We expect to continue to incur general and administrative expenses for the foreseeable future, although we cannot estimate the extent of these costs.


As a result of not having revenues and incurring ongoing expenses related to the implementation of our business, we have experienced net losses in all periods since our inception on September 11, 2006.  In the year ended December 31, 2013, our net loss totaled $15,288, compared to a net loss of $14,932 in the prior year ended December 31, 2012.  Since our inception, we have accumulated net losses in the amount of $102,481.  We anticipate incurring ongoing operating losses and cannot predict when, if at all, we may expect these losses to plateau or narrow.  We have not been profitable from our inception through the year ended December 31, 2013.  There is significant uncertainty projecting future profitability due to our history of losses, lack of revenues, and due to our reliance on the performance of third parties on which we have no direct control.  







12



As of December 31, 2013, we had $2,844 of cash on hand, which our management believes these funds are not sufficient to implement our planned strategies and establish a base of operations over the next 12 months.  We cannot predict the stability of current or projected overhead or that we will generate sufficient revenues to maintain our operations without the need for additional capital.  Our management believes we may need to raise additional capital by issuing capital stock in exchange for cash in order to continue as a going concern.  There are no formal or informal agreements to attain such financing.  We cannot assure you that any financing can be obtained or, if obtained, that it will be on reasonable terms.  As such, our principal accountants have expressed substantial doubt about our ability to continue as a going concern because we have limited operations and have not fully commenced planned principal operations.  If our business fails, our investors may face a complete loss of their investment.  


In March 2014, we sold 991,158 shares of our common stock to a group of private investors at a price of $1.30 per share and issued 23,077 shares of its common stock in exchange for a vehicle which we use for our business.

 

We do not have any firm commitments from any person to provide us with any additional capital.

 

Other than the changes which will result from the acquisition of Blue Line Protection Group, LLC, we do not know of any trends, events or uncertainties that will have, or are reasonably expected to have, a material impact om sales, revenues, expenses or results of operations, or liquidity.

 

See Note 2 to the financial statements included as part of this report for a description of our accounting policies and recent accounting pronouncements.


Off-Balance Sheet Arrangements


We do not have any off-balance sheet arrangements.


ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK


Not applicable.


ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA


The following documents (pages F-1 to F-12) form part of the report on the Financial Statements


 

PAGE

 

 

Report of Independent Registered Public Accounting Firm Weaver, Martin & Samyn, LLC (2012)

F-1

Report of Independent Registered Public Accounting Firm Seale and Beers, CPAs (2013)

F-2

Balance Sheets

F-3

Statements of Operations

F-4

Statement of Stockholders’ (Deficit)

F-5 & F-6

Statements of Cash Flows

F-7

Notes to Financial Statements

F-8



 









13



To the Board of Directors and Stockholders

The Engraving Masters, Inc.

Spokane, Washington



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM



We have audited the balance sheet of The Engraving Masters, Inc.(A Development Stage Company) as of December 31, 2012 and the related statements of operations, stockholders’ deficit, and cash flows for the year then ended, and from September 11, 2006 (inception) through December 31, 2012.  Amounts for periods prior to December 31, 2011 are based on the reports of other auditors.  The Engraving Masters, Inc.’s management is responsible for these financial statements.  Our responsibility is to express an opinion on these financial statements based on our audit.


We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.  The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.  Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.  Accordingly, we express no such opinion.  Our audit of the financial statements includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation.  We believe that our audit provides a reasonable basis for our opinion.


In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of The Engraving Masters, Inc. as of December 31, 2012 and the results of its operations, stockholders’ deficit, and cash flows for the year then ended and from September 11, 2006 (inception) through December 31, 2012, in conformity with accounting principles generally accepted in the United States of America.


The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 3 to the financial statements, the Company has suffered recurring losses from operations and is dependent upon the continued sale of its securities or obtaining debt financing for funds to meet its cash requirements. These factors raise substantial doubt about the Company’s ability to continue as a going concern.  The financial statements do not include any adjustments that might result from the outcome of this uncertainty.



/s/  Weaver Martin & Samyn, LLC

Weaver Martin & Samyn, LLC

Kansas City, Missouri

April 15, 2013



















F-1



SEALE AND BEERS, CPAs

PCAOB & CPAB REGISTERED AUDITORS

www.sealebeers.com



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM



To the Board of Directors and Stockholders of

The Engraving Masters, Inc.  

(A Development Stage Company)


We have audited the accompanying balance sheets of The Engraving Masters, Inc. (A Development Stage Company) as of December 31, 2013, and the related statements of income, stockholders’ equity (deficit), and cash flows for the year then ended, and since inception on September 11, 2006 through December 31, 2013. Amounts for periods prior to December 31, 2013 are based on the reports of other auditors.

The Engraving Masters, Inc.’s management is responsible for these financial statements. Our responsibility is to express an opinion on these financial statements based on our audits.


We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.


In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of The Engraving Masters, Inc. (A Development Stage Company) as of December 31, 2013, and the related statements of income, stockholders’ equity (deficit), and cash flows for the year then ended, and since inception on September 11, 2006 through December 31, 2013 in conformity with accounting principles generally accepted in the United States of America.


The accompanying financial statements have been prepared assuming that the Company will continue as a going concern.  As discussed in Note 3 to the financial statements, the Company has no revenues, has negative working capital at December 31, 2013, has incurred recurring losses and recurring negative cash flow from operating activities, and has an accumulated deficit which raises substantial doubt about its ability to continue as a going concern.  Management’s plans concerning these matters are also described in Note 3.  The financial statements do not include any adjustments that might result from the outcome of this uncertainty.




Seale and Beers, CPAs

Las Vegas, Nevada

March 25, 2014


50 S. Jones Blvd,  Suite 201 - Las Vegas, NV 89107 Phone: (888)727-8251 Fax: (888)782-2351










F-2



The Engraving Masters, Inc.

(A Development Stage Company)

Balance Sheets

(Audited)




 

December 31,

 

2013

 

2012

Assets

 

 

 

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

   Cash

$

2,844

 

$

582

      Total current assets

 

2,844

 

 

582

 

 

 

 

 

 

Total assets

$

2,844

 

$

582

 

 

 

 

 

 

Liabilities and Stockholders’ (Deficit)

 

 

 

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

   Accounts payable

$

2,300

 

$

-

   Note payable

 

2,000

 

 

2,000

      Total current liabilities

 

4,300

 

 

2,000

 

 

 

 

 

 

Stockholders’ (deficit)

 

 

 

 

 

   Preferred stock, $0.001 par value, 100,000,000 shares

 

 

 

 

 

      authorized, no shares issued and outstanding

 

-

 

 

-

   Common stock, $0.001 par value, 100,000,000 shares

 

 

 

 

 

      authorized, 7,630,000 shares issued and outstanding

 

 

 

 

 

      as of 12/31/13 and 12/31/12

 

7,630

 

 

7,630

   Additional paid-in capital

 

93,395

 

 

78,145

   Deficit accumulated during development stage

 

(102,481)

 

 

(87,193)

      Total stockholders’ (deficit)

 

(1,456)

 

 

(1,418)

 

 

 

 

 

 

Total liabilities and stockholders’ (deficit)

$

2,844

 

$

582




















The accompanying notes are an integral part of these financial statements.




F-3



The Engraving Masters, Inc.

(A Development Stage Company)

Statements of Operations

(Audited)




 

For the years ended

 

Inception

 

December 31,

 

(September 11, 2006) to

 

2013

 

2012

 

December 31, 2013

 

 

 

 

 

 

 

 

 

Revenue

$

-

 

$

-

 

$

-

 

 

 

 

 

 

 

 

 

Expenses:

 

 

 

 

 

 

 

 

   Depreciation expense

 

-

 

 

-

 

 

1,521

   General and administrative expenses

 

15,288

 

 

14,932

 

 

100,960

      Total expenses

 

15,288

 

 

14,932

 

 

102,481

 

 

 

 

 

 

 

 

 

Net loss

$

(15,288)

 

$

(14,932)

 

$

(102,481)

 

 

 

 

 

 

 

 

 

Weighted average number of

 

 

 

 

 

 

 

 

   common shares outstanding - basic

 

7,630,000

 

 

7,630,000

 

 

 

 

 

 

 

 

 

 

 

 

Net loss per share - basic

$

(0.00)

 

$

(0.00)

 

 

 
































The accompanying notes are an integral part of these financial statements.




F-4



The Engraving Masters, Inc.

(A Development Stage Company)

Statements of Stockholders’ (Deficit)

From Inception (September 11, 2006) to December 31, 2013

(Audited)


 

Preferred Stock

Common Stock

 

 

 

 

Shares

Amount

Shares

Amount

Additional

Paid-in

Capital

(Deficit)

Accumulated

During

Development

Stage

Total

Stockholders’

(Deficit)

 

 

 

 

 

 

 

 

September 14, 2006

 

 

 

 

 

 

 

  Additional paid-in capital

-

$-

-

$-

$175

$-

$175

 

 

 

 

 

 

 

 

September 25, 2006

 

 

 

 

 

 

 

  Additional paid-in capital

-

-

-

-

100

-

100

 

 

 

 

 

 

 

 

October 5, 2006

 

 

 

 

 

 

 

  Founders shares

 

 

 

 

 

 

 

  issued for cash

 

 

 

 

 

 

 

  $0.001 per share

-

-

6,000,000

6,000

4,000

-

10,000

 

 

 

 

 

 

 

 

Net loss

 

 

 

 

 

 

 

  Inception (September 11, 2006)

 

 

 

 

 

 

 

  to December 31, 2006

-

-

-

-

-

(3,462)

(3,462)

 

 

 

 

 

 

 

 

Balance, December 31, 2006

-

-

6,000,000

6,000

4,275

(3,462)

6,813

 

 

 

 

 

 

 

 

October 10, 2007

 

 

 

 

 

 

 

  Issued for cash

 

 

 

 

 

 

 

  $0.02 per share

-

-

1,630,000

1,630

30,470

-

32,100

 

 

 

 

 

 

 

 

Net loss

 

 

 

 

 

 

 

  For the year ended

 

 

 

 

 

 

 

  December 31, 2007

-

-

-

-

-

(8,297)

(8,297)

 

 

 

 

 

 

 

 

Balance, December 31, 2007

-

-

7,630,000

7,630

34,745

(11,759)

30,616

 

 

 

 

 

 

 

 

Net loss

 

 

 

 

 

 

 

  For the year ended

 

 

 

 

 

 

 

  December 31, 2008

-

-

-

-

-

(21,940)

(21,940)

 

 

 

 

 

 

 

 

Balance, December 31, 2008

-

-

7,630,000

7,630

34,745

(33,699)

8,676

 

 

 

 

 

 

 

 

Donated capital

-

-

-

-

3,600

-

3,600

 

 

 

 

 

 

 

 

Net loss

 

 

 

 

 

 

 

  For the year ended

 

 

 

 

 

 

 

  December 31, 2009

-

-

-

-

-

(10,974)

(10,974)

 

 

 

 

 

 

 

 

Balance, December 31, 2009

-

-

7,630,000

7,630

38,345

(44,673)

1,302

 

 

 

 

 

 

 

 

Donated capital

-

-

-

-

11,300

-

11,300

 

 

 

 

 

 

 

 

Net loss

 

 

 

 

 

 

 

  For the year ended

 

 

 

 

 

 

 

  December 31, 2010

-

-

-

-

-

(12,169)

(12,169)




F-5



The Engraving Masters, Inc.

(A Development Stage Company)

Statements of Stockholders’ (Deficit)

From Inception (September 11, 2006) to December 31, 2013

(Audited) (CONTINUED)



Balance, December 31, 2010

-

-

7,630,000

7,630

49,645

(56,842)

433

 

 

 

 

 

 

 

 

Donated capital

-

-

-

-

13,300

-

13,300

 

 

 

 

 

 

 

 

Net loss

 

 

 

 

 

 

 

  For the year ended

 

 

 

 

 

 

 

  December 31, 2011

-

-

-

-

-

(15,419)

(15,419)

 

 

 

 

 

 

 

 

Balance, December 31, 2011

-

-

7,630,000

7,630

62,945

(72,261)

(1,686)

 

 

 

 

 

 

 

 

Donated capital

-

-

-

-

15,200

-

15,200

 

 

 

 

 

 

 

 

Net loss

 

 

 

 

 

 

 

  For the year ended

 

 

 

 

 

 

 

  December 31, 2012

-

-

-

-

-

(14,932)

(14,932)

 

 

 

 

 

 

 

 

Balance, December 31, 2012

-

-

7,630,000

7,630

78,145

(87,193)

(1,418)

 

 

 

 

 

 

 

 

Donated capital

-

-

-

-

15,250

-

15,250

 

 

 

 

 

 

 

 

Net loss

 

 

 

 

 

 

 

  For the year ended

 

 

 

 

 

 

 

  December 31, 2013

-

-

-

-

-

(15,288)

(15,288)

 

 

 

 

 

 

 

 

Balance, December 31, 2013

-

$-

7,630,000

$7,630

$93,395

$(102,481)

$(1,456)


















The accompanying notes are an integral part of these financial statements.




F-6



The Engraving Masters, Inc.

(A Development Stage Company)

Statements of Cash Flows

(Audited)




 

For the year ended

 

Inception

 

December 31,

 

(September 11, 2006) to

 

2013

 

2012

 

December 31, 2013

 

 

 

 

 

 

 

 

 

Operating activities

 

 

 

 

 

 

 

 

Net loss

$

(15,288)

 

$

(14,932)

 

$

(102,481)

Adjustments to reconcile net loss to

 

 

 

 

 

 

 

 

   net cash used by operating activities:

 

 

 

 

 

 

 

 

      Depreciation

 

-

 

 

-

 

 

1,521

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

   Increase in accounts payable

 

2,300

 

 

-

 

 

2,300

Net cash used by operating activities

 

(15,288)

 

 

(14,932)

 

 

(98,660)

 

 

 

 

 

 

 

 

 

Investing activities

 

 

 

 

 

 

 

 

   Purchase of fixed assets

 

-

 

 

-

 

 

(1,521)

Net cash used by investing activities

 

-

 

 

-

 

 

(1,521)

 

 

 

 

 

 

 

 

 

Financing activities

 

 

 

 

 

 

 

 

   Proceeds from notes payable

 

-

 

 

-

 

 

2,000

   Donated capital

 

15,250

 

 

15,200

 

 

58,925

   Issuances of common stock

 

-

 

 

-

 

 

42,100

Net cash provided by financing activities

 

15,250

 

 

15,200

 

 

103,025

 

 

 

 

 

 

 

 

 

Net increase (decrease) in cash

 

2,262

 

 

268

 

 

2,844

Cash - beginning of the year

 

582

 

 

314

 

 

-

Cash - end of the year

$

2,844

 

$

582

 

$

2,844

 

 

 

 

 

 

 

 

 

Supplemental disclosures:

 

 

 

 

 

 

 

 

   Interest paid

 

-

 

 

-

 

 

-

   Income taxes paid

 

-

 

 

-

 

 

-
















The accompanying notes are an integral part of these financial statements.




F-7



The Engraving Masters, Inc.

(A Development Stage Company)

Notes to Financial Statements

(Audited)


Note 1 - History and organization of the company


The Company was organized September 11, 2006 (Date of Inception) under the laws of the State of Nevada, as The Engraving Masters, Inc. The Company is authorized to issue up to 100,000,000 shares of its common stock and 100,000,000 shares of preferred stock, each with a par value of $0.001 per share.


The business plan of the Company is to sell engraved awards and collectibles via the Internet.  The Company has limited or no operations and in accordance with FASB ASC 915-10, “Development Stage Entities,” the Company is considered a development stage company.  


Note 2 - Accounting policies and procedures


Basis of Presentation:

The financial statements present the balance sheets, statements of operations, stockholder’s equity and cash flows of the Company. The financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States of America.


Year end

The Company has adopted December 31 as its fiscal year end.


Use of estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period.  Actual results could differ from those estimates.


Cash and cash equivalents

The Company maintains a cash balance in a non-interest-bearing account that currently does not exceed federally insured limits.  For the purpose of the statements of cash flows, all highly liquid investments with an original maturity of three months or less are considered to be cash equivalents.  There were no cash equivalents as of December 31, 2013 and 2012.


Fair value of financial instruments

The carrying amounts reflected in the balance sheets for cash, accounts payable and related party payables approximate the respective fair values due to the short maturities of these items. The Company does not hold any investments that are available-for-sale.


As required by the Fair Value Measurements and Disclosures Topic of the FASB ASC, fair value is measured based on a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows: (Level 1) observable inputs such as quoted prices in active markets; (Level 2) inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and (Level 3) unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.


The three levels of the fair value hierarchy are described below:

Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;


Level 2: Quoted prices in markets that are not active, or inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability;


Level 3: Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (supported by little or no market activity).





F-8



The Engraving Masters, Inc.

(A Development Stage Company)

Notes to Financial Statements

(Audited)


Note 2 - Accounting policies and procedures (continued)


Property and equipment

Property and equipment are stated at cost less accumulated depreciation. Depreciation is calculated using the straight-line method over the estimated useful lives of the related assets. When property and equipment are retired or otherwise disposed of, the related cost and accumulated depreciation are removed from the respective accounts, and any gain or loss is included in operations. Expenditures for maintenance and repairs are charged to operations as incurred; additions, renewals and betterments are capitalized.


Stock-based compensation

The Company records stock based compensation in accordance with the guidance in ASC Topic 718 which requires the Company to recognize expense related to the fair value of its employee stock option awards.  This eliminates accounting for share-based compensation transactions using the intrinsic value and requires instead that such transactions be accounted for using a fair-value-based method. The Company recognizes the cost of all share-based awards on a graded vesting basis over the vesting period of the award. The Company accounts for equity instruments issued in exchange for the receipt of goods or services from other than employees in accordance with FASB ASC 718-10 and the conclusions reached by the FASB ASC 505-50. Costs are measured at the estimated fair market value of the consideration received or the estimated fair value of the equity instruments issued, whichever is more reliably measurable. The value of equity instruments issued for consideration other than employee services is determined on the earliest of a performance commitment or completion of performance by the provider of goods or services as defined by FASB ASC 505-50


Revenue recognition

The Company’s revenue recognition policies are in compliance with FASB ASC 605-35 “Revenue Recognition”.  Revenue is recognized when a formal arrangement exists, the price is fixed or determinable, all obligations have been performed pursuant to the terms of the formal arrangement and collectability is reasonably assured.  The Company recognizes revenues on sales of its services, based on the terms of the customer agreement.  The customer agreement takes the form of either a contract or a customer purchase order and each provides information with respect to the service being sold and the sales price.  If the customer agreement does not have specific delivery or customer acceptance terms, revenue is recognized at the time the service is provided to the customer.


Advertising costs

The Company expenses all costs of advertising as incurred.  There were no advertising costs included in selling, general and administrative expenses at December 31, 2013 and 2012.


General and administrative expenses

The significant components of general and administrative expenses consist solely of legal and professional fees.


Loss per share

Net loss per share is provided in accordance with FASB ASC 260-10, “Earnings per Share”.  Basic loss per share is computed by dividing losses available to common stockholders by the weighted average number of common shares outstanding during the period.  Diluted income (loss) per share gives effect to all dilutive potential common shares outstanding during the period. Dilutive loss per share excludes all potential common shares if their effect is anti-dilutive. The Company had no dilutive common stock equivalents, such as stock options or warrants as of December 31, 2013 and 2012.


Dividends

The Company has not yet adopted any policy regarding payment of dividends.  No dividends have been paid or declared since inception.









F-9



The Engraving Masters, Inc.

(A Development Stage Company)

Notes to Financial Statements

(Audited)


Note 2 - Accounting policies and procedures (continued)


Income Taxes

The Company follows FASB ASC 740-10, “Income Taxes” for recording the provision for income taxes.  Deferred tax assets and liabilities are computed based upon the difference between the financial statement and income tax basis of assets and liabilities using the enacted marginal tax rate applicable when the related asset or liability is expected to be realized or settled.  Deferred income tax expenses or benefits are based on the changes in the asset or liability each period.  If available evidence suggests that it is more likely than not that some portion or all of the deferred tax assets will not be realized, a valuation allowance is required to reduce the deferred tax assets to the amount that is more likely than not to be realized.  Future changes in such valuation allowance are included in the provision for deferred income taxes in the period of change.


Deferred income taxes may arise from temporary differences resulting from income and expense items reported for financial accounting and tax purposes in different periods.  Deferred taxes are classified as current or non-current, depending on the classification of assets and liabilities to which they relate.  Deferred taxes arising from temporary differences that are not related to an asset or liability are classified as current or non-current depending on the periods in which the temporary differences are expected to reverse.


The Company applies a more-likely-than-not recognition threshold for all tax uncertainties. ASC Topic 740 only allows the recognition of those tax benefits that have a greater than fifty percent likelihood of being sustained upon examination by the taxing authorities. As of December 31, 2013 and 2012, the Company reviewed its tax positions and determined there were no outstanding, or retroactive tax positions with less than a 50% likelihood of being sustained upon examination by the taxing authorities, therefore this standard has not had a material affect on the Company.

 

The Company does not anticipate any significant changes to its total unrecognized tax benefits within the next 12 months.


The Company classifies tax-related penalties and net interest as income tax expense. As of December 31, 2013 and 2012, no income tax expense has been incurred.


Contingencies

The Company is not currently a party to any pending or threatened legal proceedings.  Based on information currently available, management is not aware of any matters that would have a material adverse effect on the Company’s financial condition, results of operations or cash flows.


Recent pronouncements

The Company evaluated all recent accounting pronouncements issued and determined that the adoption of these pronouncements would not have a material effect on the financial position, results of operations or cash flows of the Company.

















F-10



The Engraving Masters, Inc.

(A Development Stage Company)

Notes to Financial Statements

(Audited)


Note 3 - Going concern


The Company’s financial statements are prepared using generally accepted accounting principles in the United States of America applicable to a going concern which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has not yet established an ongoing source of revenues sufficient to cover its operating costs and allow it to continue as a going concern. The Company had an accumulated deficit of $102,481 as of December 31, 2013. The ability of the Company to continue as a going concern is dependent on the Company obtaining adequate capital to fund operating losses until it becomes profitable. If the Company is unable to obtain adequate capital, it could be forced to cease operations.


In order to continue as a going concern, the Company will need, among other things, additional capital resources.  The Company is contemplating conducting an offering of its debt or equity securities to obtain additional operating capital.  The Company is dependent upon its ability, and will continue to attempt, to secure equity and/or debt financing.  There are no assurances that the Company will be successful and without sufficient financing it would be unlikely for the Company to continue as a going concern.


The ability of the Company to continue as a going concern is dependent upon its ability to successfully accomplish the plans described in the preceding paragraph and eventually secure other sources of financing and attain profitable operations. These financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts, or amounts and classification of liabilities that might result from this uncertainty.


Note 4 - Debt and interest expense


Through December 31, 2013, a non-affiliated third-party loaned the Company an aggregate of $2,000 in cash.  The note bears no interest and is due upon demand.  


Note 5 - Income taxes


For the years ended December 31, 2013 and 2012, the Company incurred net operating losses and, accordingly, no provision for income taxes has been recorded. In addition, no benefit for income taxes has been recorded due to the uncertainty of the realization of any tax assets. At December 31, December 31, 2013 and 2012, the Company had approximately $102,481 and $87,193 of federal and state net operating losses. The net operating loss carry forwards, if not utilized, will begin to expire in 2026. The provision for income taxes consisted of the following components for the years ended December 31:


Components of net deferred tax assets, including a valuation allowance, are as follows at December 31:


 

December 31

 

2013

 

2012

Deferred tax assets:

 

 

 

  Net operating loss carry forwards

$

35,868

 

$

30,516

  Valuation allowance

 

(35,868)

 

 

(30,516)

    Total deferred tax assets

$

-

 

$

-


The valuation allowance for deferred tax assets as of December 31, December 31, 2013 and 2012 was $35,868 and $30,516, respectively.  In assessing the recovery of the deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income in the periods in which those temporary differences become deductible.  Management considers the scheduled reversals of future deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment.  As a result, management determined it was more likely than not the deferred tax assets would not be realized as of December 31, 2013 and 2012 and recorded a full valuation allowance.




F-11



The Engraving Masters, Inc.

(A Development Stage Company)

Notes to Financial Statements

(Audited)


Note 5 - Income taxes (continued)


Reconciliation between the statutory rate and the effective tax rate is as follows at December 31:


 

2013 & 2012

 

 

Federal statutory tax rate

(35.0)%

Permanent difference and other

35.0 %


Note 6 - Stockholders’ equity


The Company is authorized to issue 100,000,000 shares of $0.001 par value common stock and 100,000,000 shares of $0.001 par value preferred stock, of which 7,630,000 shares of common stock are issued and outstanding.


On October 5, 2006, the Company issued 6,000,000 shares of its no par value common stock as founders’ shares to an officer and director in exchange for cash in the amount of $10,000.  


On October 10, 2007, the Company issued 1,630,000 shares of its par value common stock in a public offering for total gross cash proceeds in the amount of $32,600.  Total offering costs related to this issuance was $500.


From the inception of the Company through December 31, 2013, an officer and director of the Company donated cash in the aggregate amount of $58,925.  The entire amount is considered to be additional paid-in capital.


As of December 31, 2013, there have been no other issuances of common stock.


Note 7 - Warrants and options


As of December 31, 2013 and 2012, there were no warrants or options outstanding to acquire any additional shares of common stock.


Note 8 - Related party transactions


Office space and services are provided without charge by an officer and director of the Company.  Such costs are immaterial to the financial statements and, accordingly, have not been reflected therein.


From the inception of the Company through December 31, 2013, an officer and director of the Company donated cash in the aggregate amount of $58,925.  The entire amount is considered to be additional paid-in capital.


The Company does not lease or rent any property.  Office services are provided without charge by an officer and director of the Company.  Such costs are immaterial to the financial statements and, accordingly, have not been reflected therein.  The officers and directors of the Company are involved in other business activities and may, in the future, become involved in other business opportunities.  If a specific business opportunity becomes available, such persons may face a conflict in selecting between the Company and their other business interests.  The Company has not formulated a policy for the resolution of such conflicts.










F-12



The Engraving Masters, Inc.

(A Development Stage Company)

Notes to Financial Statements

(Audited)


Note 9 - Subsequent Events


The Company’s Management has reviewed all material events through the date of this report in accordance with ASC 855-10, and believes there are no further material subsequent events to report, except for the following:


Subsequent to the date of this annual report, we entered into several transactions, the net effect of which was a change of control of the company.  The transactions are set forth, below:


1.

On February 19, 2014, David Uddman and Jolene Uddman, the Company’s two directors, appointed Ted Daniels and Dan Sullivan to be directors of the Company.  Following the appointments of Mr. Daniels and Mr. Sullivan, Mr. Uddman and Ms. Uddman resigned as officers and directors of the Company.


2.

On March 4, 2014, David Uddman sold 2,495,000 shares of the Company’s common stock to Ted Daniels and sold 2,495,000 shares of the Company’s common stock to Dan Sullivan in private transactions not involving the Company.


3.

On March 13, 2014, Mr. Daniels and Mr. Sullivan appointed Sean Campbell to be a director of the Company.  Following his appointment, Mr. Daniels and Mr. Sullivan resigned as officers and directors of the Company.


4.

On March 14, 2014, the Company acquired Blue Line Protection Group, Inc., a Colorado corporation formed in February 2014 (“Blue Line Inc”).  Blue Line Inc intends to provide private security services to licensed marijuana growers and dispensaries.  


5.

On March 14, 2014, Sean Campbell, Ted Daniels and Dan Sullivan were appointed as officers of the Company.


6.

On March 15, 2014, the Company agreed to acquire all of the issued and outstanding membership interests in Blue Line Protection Group, LLC, a Colorado corporation (“Blue Line LLC”), from Ted Daniels and Dan Sullivan for cash.  The closing of the acquisition will take place when the Company is provided with financial statements, audited as necessary and in proper form, which will be satisfactory for filing by the Company in an 8-K report with the Securities and Exchange Commission.  If the acquisition of Blue Line does not occur by July 31, 2014, the agreement pertaining to the acquisition of Blue Line will terminate.  As of the date of this audit report, the transaction was not consummated.


7.

On March 24, 2014, Ricky Bennett was appointed as an officer of the Company.




 

















F-13



ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS


On December 17, 2013, Weaver Martin & Samyn, LLC notified the Company of its decision to resign as the Registrant’s certifying independent registered public accountants, effective as of that date.  None of the reports of Weaver Martin & Samyn, LLC on the financial statements of the Company contained any adverse opinion or disclaimer of opinion, or was qualified or modified as to uncertainty, audit scope or accounting principles, except for a going concern paragraph in Weaver Martin & Samyn, LLC's report on the Company’s financial statements as of and for the years ended December 31, 2012 and 2011.


During the Company’s two most recent fiscal years and during any subsequent interim periods preceding the date of termination, there were no disagreements with Weaver Martin & Samyn, LLC on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreement(s), if not resolved to Weaver Martin & Samyn, LLC’s satisfaction, would have caused them to refer to the subject matter of the disagreement(s) in connection with their report; and there were no "reportable events" as defined in Item 304 (a)(1) of the Securities and Exchange Commission's Regulation S-K.


On February 18, 2014, the Board of Directors of the Company approved the engagement of, and the Company did on such same date engage, Seale and Beers, CPAs, 50 S. Jones Blvd., Suite 201, Las Vegas, NV 89107, as its independent registered public accounting firm commencing February 18, 2014, for the fiscal year ended December 31, 2013.  During the two most recent years and the subsequent interim period through the date of engagement, neither the Company nor anyone engaged on its behalf has consulted with Seale and Beers, CPAs regarding: (i) either the application of accounting principles to a specified transaction, either completed or proposed; or the type of audit opinion that might be rendered on the Registrant's financial statements; or (ii) any matter that was either the subject of a disagreement (as defined in Item 304(a)(1)(iv) or (v) of Regulation S-K).


ITEM 9A. CONTROLS AND PROCEDURES


Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures


We maintain a set of disclosure controls and procedures designed to ensure that information required to be disclosed by us in the reports filed under the Securities Exchange Act, is recorded, processed, summarized and reported within the time periods specified by the Commission’s rules and forms.  Disclosure controls are also designed with the objective of ensuring that this information is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure.  We evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended) as of the end of the period covered by this report. As a result of this evaluation, management concluded that our disclosure controls and procedures were effective for the period ended December 31, 2013, with the exception of the following:


Lack of Functioning Audit Committee:  We do not have an Audit Committee; our board of directors currently acts as our Audit Committee.  We do not have an independent director as our current director is not considered a “Financial Expert,” within the meaning of Section 407 of the Sarbanes-Oxley Act.


Management’s Annual Report on Internal Control over Financial Reporting


Our management is responsible for establishing and maintaining adequate internal control over financial reporting.  Internal control over financial reporting is defined in Rule 13a-15(f) or 15d-15(f) promulgated under the Securities Exchange Act of 1934 as a process designed by, or under the supervision of, the company’s principal executive and principal financial officers and effected by the company’s board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America and includes those policies and procedures that:


1.

Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the company;




14



2.

Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of America and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and


3.

Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company’s assets that could have a material effect on the financial statements.


Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.  Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.  All internal control systems, no matter how well designed, have inherent limitations.  Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.  Because of the inherent limitations of internal control, there is a risk that material misstatements may not be prevented or detected on a timely basis by internal control over financial reporting. However, these inherent limitations are known features of the financial reporting process.  Therefore, it is possible to design into the process safeguards to reduce, though not eliminate, this risk.


As of December 31, 2013, management assessed the effectiveness of our internal control over financial reporting based on the criteria for effective internal control over financial reporting established in Internal Control--Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO") and SEC guidance on conducting such assessments.  Based on that evaluation, management concluded that, during the period covered by this report, such internal controls and procedures were not effective to detect the inappropriate application of US GAAP rules as more fully described below:


Lack of Functioning Audit Committee:  We do not have an Audit Committee; our board of directors currently acts as our Audit Committee.  We do not have an independent director as our current director is not considered a “Financial Expert,” within the meaning of Section 407 of the Sarbanes-Oxley Act.


This annual report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting.  Management's report was not subject to attestation by the Company’s registered public accounting firm pursuant to temporary rules of the SEC that permit the Company to provide only the management's report in this annual report.  


Implemented or Planned Remedial Actions in response to the Material Weaknesses


Our management believes the lack of a functioning Audit Committee has not had a material effect on our financial results.  Our present management will continue to address our need for additional financial personnel and other independent members for our Board of Directors and identify an “expert” for the Audit Committee to advise other members with regard to accounting and reporting procedures.


We will continue to strive to correct the above noted weakness in internal control once we have adequate funds to do so. When funds become are available, we will be able to appoint a qualified independent director.  Appointing a financial expert to serve on our Audit Committee will improve the overall performance of Company’s controls over our financial reporting.  


Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.


Changes in Internal Control over Financial Reporting


There were no changes in our internal control over financial reporting that occurred during our most recent fiscal year ended December 31, 2013, that have materially affected, or reasonably likely to materially affect, our internal control over financial reporting.




15



The Company’s management, including the chief executive officer and principal financial officer, do not expect that its disclosure controls or internal controls will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. In addition, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake.


ITEM 9B. OTHER INFORMATION


None.













































16




PART III


ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE


Our directors are elected by the stockholders to a term of one year and serve until  their successors  are elected and qualified.  The officers are appointed by our Board of Directors to a term of one year and serve until his/her successor is duly elected and qualified, or until he/she is removed from office.

 

On February 19, 2014, Dvid Uddman and Jolene Uddman, our two directors, appointed Ted Daniels and Dan Sulivan to be directors.

 

Following the appointments of Mr. Daniels and Mr. Sullivan, Mr. Uddman and Ms. Uddman resigned as officers and directors.

 

On March 13, 2014, Mr. Daniels and Mr. Sullivan appointed Sean Campbell to be a director.  Following Mr. Campbell’s appointment, Mr. Daniels and Mr. Sullivan resigned as officers and directors.

 

On March 14, 2014, Sean Campbell, Ted Daniels and Dan Sullivan were appointed as officers.  On March 24, 2014, Ricky Bennett was appointed as an officer.

 

Information concerning our new officers and director follows:


Name

 

Age

 

Position

Sean Campbell

 

48

 

Chief Executive Officer, Chief Financial and Accounting Officer, and a Director

 

 

 

 

 

Ricky G. Bennett

 

57

 

Vice President of Operations and Compliance

 

 

 

 

 

Ted Daniels

 

39

 

Vice President of Sales

 

 

 

 

 

Dan Sullivan

 

44

 

Vice President of Marketing

 

Our directors are elected by the stockholders to a term of one year and serve until their successors are elected and qualified.  The officers are appointed by our Board of Directors to a term of one year and serve until his/her successor is duly elected and qualified, or until he/she is removed from office.


Background of Directors, Executive Officers, Promoters and Control Persons


Sean Campbell has, since 2008, been Co-Portfolio Manager and Managing Director of MKM Capital Advisors LLC where he is responsible for evaluation of companies for potential investment and assisting companies preparing for public listings in assembling their management teams. Mr. Campbell has also been a consultant to numerous development stage companies considering and engaging in public listings.


Ricky G. Bennett was, between October 2013 and March 2014, an independent consultant to Convercent, Inc., a Denver, Colorado-based corporation which develops and markets computer software which firms use to comply with human resource regulations and conduct employee training.  Between 2011 and October 2013 Mr. Bennett was Vice President of Professional Services and Director of Training for Convercent.  Between 2008 and 2010 Mr. Bennett was an Interstate Compact and Youth Offender Officer for the Colorado Department of Corrections.  In this position, Mr. Bennett used a variety of strategies and services to instill pro-social behaviors in offenders transitioning into the community.  Mr. Bennett joined the Aurora, Colorado Police Department in 1980, served as the Aurora Chief of Police between 2002 and 2005, and retired as a commander in 2007.


Ted Daniels founded Blue Line Protection Group, LLC in August 2013.  Mr. Daniels has served in most aspects of law enforcement, including patrol officer, detective, narcotics officer, SWAT member and bike patrol officer.  Mr. Daniels has served on executive protection details, street crime units, undercover operations, gang units, and traffic units.  He is a certified police instructor and has achieved the rank of deputy chief of police.  He was named State of Maryland Law Enforcement Officer of the year in 2002.


After Mr. Daniels left law enforcement, he joined the United States Army infantry. While deployed to Afghanistan, Mr. Daniels conducted intelligence/surveillance and reconnaissance operations which were designed was to find and track enemy commanders. Upon his return to the states, Mr. Daniels was assigned to the Battalion Personal Security Detail where he was responsible for the protection of army battalion commanders. Mr. Daniels received numerous commendations in the military and for his actions in combat, including a Purple Heart.


Dan Sullivan has been a Deputy with the Jefferson County sheriff’s department for the past 22 years.  Mr. Sullivan’s law enforcement experience includes patrol operations, detentions, and special unit operations.  Mr. Sullivan’s business experience includes working with start-up companies in several industries and the former owner operator of several franchises in the food industry.  Mr. Sullivan has also been the broker/owner of a real estate company in the Denver metro area for over 16 years.

17



Compensation Committee, Interlocks and Insider Participation


Sean Campbell, our only director, acts as our compensation committee.  During the year ended December 31, 2013, none of our officers was a member of the compensation committee or a director of another entity, which other entity  had one of its executive officers serving as one of our directors or as a member of our compensation committee.


Involvement on Certain Material Legal Proceedings During the Last Five Years


No director, officer, significant employee or consultant has been convicted in a criminal proceeding, exclusive of traffic violations.


No bankruptcy petitions have been filed by or against any business or property of any director, officer, significant employee or consultant of the Company nor has any bankruptcy petition been filed against a partnership or business association where these persons were general partners or executive officers.


No director, officer, significant employee or consultant has been permanently or temporarily enjoined, barred, suspended or otherwise limited from involvement in any type of business, securities or banking activities.


No director, officer or significant employee has been convicted of violating a federal or state securities or commodities law.


Audit Committee and Financial Expert


We do not have an Audit Committee. Our directors perform some of the same functions of an Audit Committee, such as: recommending a firm of independent certified public accountants to audit the annual financial statements; reviewing the independent auditors independence, the financial statements and their audit report; and reviewing management's administration of the system of internal accounting controls. The Company does not currently have a written audit committee charter or similar document.


We have no financial expert. We believe the cost related to retaining a financial expert at this time is prohibitive. Further, because of our start-up operations, we believe the services of a financial expert are not warranted.


Code of Ethics


We have not adopted a Code of Business Conduct and Ethics that applies to our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions in that our sole officer and director serves in all the above capacities.


Corporate Governance


Nominating Committee


We do not have a Nominating Committee or Nominating Committee Charter. Our directors perform the functions associated with a Nominating Committee. We have elected not to have a Nominating Committee in that we are a development stage company.


Director Nomination Procedures


Nominees for Directors are identified and suggested by the members of the Board or management using their business networks. The Board has not retained any executive search firms or other third parties to identify or evaluate director candidates and does not intend to in the near future. In selecting a nominee for director, the Board or management considers the following criteria:


1.

Whether the nominee has the personal attributes for successful service on the Board, such as demonstrated character and integrity; experience at a strategy/policy setting level; managerial experience dealing with complex problems; an ability to work effectively with others; and sufficient time to devote to our affairs;


2.

Whether the nominee has been the chief executive officer or senior executive of a public company or a leader of a similar organization, including industry groups, universities or governmental organizations;




18



 

 

3.

Whether the nominee, by virtue of particular experience, technical expertise or specialized skills or contacts relevant to our current or future business, will add specific value as a Board member; and


4.

Whether there are any other factors related to the ability and willingness of a new nominee to serve, or an existing Board member to continue his service.


The Board or management has not established any specific minimum qualifications that a candidate for director must meet in order to be recommended for Board membership. Rather, the Board or management will evaluate the mix of skills and experience that the candidate offers, consider how a given candidate meets the Board’s current expectations with respect to each such criterion and make a determination regarding whether a candidate should be recommended to the stockholders for election as a Director. During 2013, we received no recommendation for Directors from our stockholders.


We will consider for inclusion in our nominations of new Board of Directors nominees proposed by stockholders who have held at least 1% of our outstanding voting securities for at least one year. Board candidates referred by such stockholders will be considered on the same basis as Board candidates referred from other sources. Any stockholder who wishes to recommend for our consideration a prospective nominee to serve on the Board of Directors may do so by giving the candidate’s name and qualifications in writing to our Secretary at the following address: 1350 Independence St., Lakewood, CO 80215.


Director Independence

 

Sean Campbell is not independent in accordance with applicable director independence standards.


ITEM 11. EXECUTIVE COMPENSATION


Summary Compensation Table


The following table sets forth, for the last completed fiscal years ended December 31, 2013 and 2012 the cash compensation paid by the Company, as well as certain other compensation paid with respect to those years to our officers:


Summary Compensation Table

 

Name and

Principal Position

Year

Salary

 ($)

Bonus

($)

Stock

Awards

($)

Option

Awards

($)

Non-

Equity

Incentive

 Plan

Compen-

sation

($)

Non-

qualified

Deferred

Compen-

sation

Earnings

($)

All

Other

Compen-

sation

($)

Total

($)

 

 

 

 

 

 

 

 

 

 

David Uddman (1)

2013

0

0

0

0

0

0

0

0

Former President

2012

0

0

0

0

0

0

0

0

 

 

 

 

 

 

 

 

 

 

Jolene Uddman (1)

2013

0

0

0

0

0

0

0

0

Former Treasurer

2012

0

0

0

0

0

0

0

0

 

 

 

 

 

 

 

 

 

 

Sean Campbell (2)

2014

0

0

0

0

0

0

0

0

CEO

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ricky G. Bennett (3)

2014

0

0

0

0

0

0

0

0

VP of Operations

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ted Daniels (2)

2014

0

0

0

0

0

0

0

0

VP of Sales

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dan Sullivan (2)

2014

0

0

0

0

0

0

0

0

VP of Marketing

 

 

 

 

 

 

 

 

 

 

19



 

(1)

Mr. and Mrs. Uddman resigned as our officers and directors on February 19, 2014.

(2)

Messrs. Campbell, Daniels and Sullivan were appointed as officers on March 14, 2014.

(3)

Mr. Bennett was appointed as an officer on March 24, 2014.


Directors' Compensation


Our directors are not entitled to receive compensation for services rendered to us, or for each meeting attended except for reimbursement of out-of-pocket expenses.  We have no formal or informal arrangements or agreements to compensate our director for services she provides as a director of our company.

 

Projected Compensation

 

The following shows the amounts we expect to pay to our officers during the twelve months ending December 31, 2014 and the amount of time these persons expect to devote to our business.

 

 

Percent of time

 

Projected

to be devoted to the

Name

Compensation

Company

 

 

 

Sean Campbell

$120,000

80%

Ricky G. Bennett

$  72,000

100%

Ted Daniels

$  84,000

100%

Dan Sullivan

$  84,000

100%

 

We have employment contracts with Mr. Bennet, Mr. Daniels and Mr. Sullivan. These employment contracts, which expire in March 2017, provide for the payment of the annual salaries shown above.

 

Stock Option Plan And Other Long-term Incentive Plans


We currently do not have existing or proposed option/SAR grants.


Liability and Indemnification of Officers and Directors


Under our Articles of Incorporation, our directors are not liable for monetary damages for breach of fiduciary duty, except in connection with:


·

A breach of a directors duty of loyalty to us or our stockholders;

·

Acts or omissions not in good faith or which involve intentional misconduct, fraud or a knowing violation of law;

·

A transaction from which a director received an improper benefit; or

·

An act or omission for which the liability of a director is expressly provided under Nevada law.

 

Our Articles of Incorporation and Bylaws require us to indemnify our officers and directors and other persons against expenses, judgments, fines and amounts incurred or paid in settlement in connection with civil or criminal claims, actions, suits or proceedings against such persons by reason of serving or having served as officers, directors, or in other capacities, if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to our best interests and, in a criminal action or proceeding, if he had no reasonable cause to believe that his/her conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction or upon a plea of no contest or its equivalent shall not, of itself, create a presumption that the person did not act in good faith and in a manner which he or she reasonably believed to be in or not opposed to our best interests or that he or she had reasonable cause to believe his or her conduct was unlawful.  Indemnification as provided in our Bylaws will be made only as authorized in a specific case and upon a determination that the person met the applicable standards of conduct.  Insofar as the limitation of, or indemnification for, liabilities arising under the Securities Act of 1933 may be permitted to directors, officers, or persons controlling us pursuant to the foregoing, or otherwise, we have been advised that, in the opinion of the SEC, such limitation or indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable.



 

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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT


Security Ownership of Certain Beneficial Owners and Management


The following table shows the beneficial ownership of the Company’s common stock as of March 31, 2014 by (i) each person whom the Company knows beneficially owns more than 5% of the outstanding shares of the Company’s common stock; (ii) each of the Company’s officers and directors; and (iii) all the officers and directors as a group.  Unless otherwise indicated, each owner has sole voting and investment powers over his shares of common stock.

 

Title Of

Class

 

Name, Title and Address of Beneficial Owner of Shares

 

Amount of

Beneficial

Ownership

 

Percent of

Class

 

 

 

 

 

 

 

Common

 

Sean Campbell, CEO

 

192,308

 

2.2%

Common

 

Ricky G. Bennett, VP of Operations and Compliance

 

0

 

0.0%

Common

 

Ted Daniels, VP of Sales

 

2,495,000

 

28.9%

Common

 

Dan Sullivan, VP of Marketing

 

2,495,000

 

28.9%

 

 

 

 

 

 

 

 

 

All Directors and Officers as a group (4 persons)

 

5,182,308

 

60.0%


Note: As used in this table, “beneficial ownership” means the sole or shared power to vote, or to direct the voting of, a security, or the sole or share investment power with respect to a security (i.e., the power to dispose of, or to direct the disposition of a security).


ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE


From our inception to December 31, 2013, David Uddman, an officer and director, donated cash in the amount of $58,925.  Mr. Uddman has donated this entire amount and does not expect to be repaid.


Additionally, during the year ended December 31, 2013, we use office space and services provided without charge by Mr. and Mrs. Uddman, our former directors and officers.


ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES


The following table sets forth fees billed to us by our independent auditors for the years ended 2013 and 2012 for (i) services rendered for the audit of our annual financial statements and the review of our quarterly financial statements, (ii) services rendered that are reasonably related to the performance of the audit or review of our financial statements that are not reported as Audit Fees, and (iii) services rendered in connection with tax preparation, compliance, advice and assistance.


SERVICES

2013

 

2012

 

 

 

 

Audit fees

$

10,575

 

$

10,750

Audit-related fees

 

-

 

 

-

Tax fees

 

-

 

 

-

All other fees

 

-

 

 

-

 

 

 

 

 

 

Total fees

$

10,575

 

$

10,750


Audit fees and audit related fees represent amounts billed for professional services rendered for the audit of our annual financial statements and the review of our interim financial statements.  Before our independent accountants were engaged by to render these services, their engagement was approved by our Directors.


 



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ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES


Exhibit Number

Name and/or Identification of Exhibit

 

 

3

Articles of Incorporation & By-Laws

 

 

 

(a) Articles of Incorporation (1)

 

 

 

(b) By-Laws (1)

 

 

31

Rule 13a-14(a)/15d-14(a) Certifications

 

 

32

Certification under Section 906 of the Sarbanes-Oxley Act (18 U.S.C. Section 1350)

 

 

(1)

Incorporated by reference to the Registration Statement on Form 10-SB, previously filed with the SEC on November 28, 2007.































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SIGNATURES


In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereto duly authorized.


THE ENGRAVING MASTERS, INC.



By: /s/ Sean Campbell

Sean Campbell, Chief Executive Officer


In accordance with the requirements of the Securities Exchange Act of 1934, this Annual Report was signed by the following persons in the capacities and on the dates stated:


Signature

Title

Date

 

 

 

/s/ Sean Campbell

Chief Executive Officer and a Director

April 4, 2014

Sean Campbell

 

 

 

 

 

/s/ Sean Campbell

Chief Financial Officer

April 4, 2014

Sean Campbell

 

 

 

 

 

/s/ Sean Campbell

Chief Accounting Officer

April 4, 2014

Sean Campbell

 

 





























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