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EX-32 - GARB OIL & POWER CORP | ex32garb123115.htm |
EX-31 - GARB OIL & POWER CORP | ex311garb123115.htm |
EX-31 - GARB OIL & POWER CORP | ex312garb123115.htm |
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2015
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to _______________
Commission File No. 000-14859
GARB OIL & POWER CORPORATION
(Exact name of registrant as specified in its charter)
Utah | 87-0296694 |
(State or other jurisdiction of | (I.R.S. Employer Identification. No.) |
incorporation or organization) |
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1185 Gooden Xing |
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Largo, FL | 33778 |
(Address of principal executive offices) | (Zip Code) |
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Registrants Telephone Number, Including Area Code: (888) 573-6622 | |
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, no par value | |
(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 Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 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 is not contained herein, and will not be contained, to the best of registrants 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]
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Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer o | Accelerated filer o | |
Non-accelerated filer o |
| Smaller reporting company x |
(Do not check if a smaller reporting company) |
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act.) Yes [ ] No[X]
State the aggregate market value of the voting and non-voting common stock held by non-affiliates computed by reference to the price at which the common stock was sold, or the average bid and asked price of such common stock, as of the last business day of the registrants most recently completed second fiscal quarter, June 30, 2015: $4,018,439.
The number of shares of issuers common stock outstanding as of May 18, 2016: 47,497,578,456.
DOCUMENTS INCORPORATED BY REFERENCE
None.
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FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 2015
INDEX
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Item 1. |
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Item 1A. |
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Item 1B. |
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Item 2. |
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Item 3. |
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Item 4. |
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Item 5. |
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Item 6. |
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Item 7. |
| Managements Discussion and Analysis of Financial Condition and Results of Operations | 8 |
Item 7A. |
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Item 8. |
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Item 9. |
| Changes in and Disagreements with Accountants on Accounting and Financial Disclosure | 11 |
Item 9A. |
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Item 9B. |
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Item 10. |
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Item 11. |
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Item 12. |
| Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters | 15 |
Item 13. |
| Certain Relationships and Related Transactions, and Director Independence | 16 |
Item 14. |
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Item 15. |
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USE OF CERTAIN DEFINED TERMS
Except as otherwise indicated by the context, references in this report to we, us, our, our Company, the Company, or Garb are to the combined business of Garb Oil & Power Corporation and its consolidated subsidiaries.
In addition, unless the context otherwise requires and for the purposes of this report only:
?
Commission refers to the Securities and Exchange Commission;
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Exchange Act refers to the Securities Exchange Act of 1934, as amended;
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Securities Act refers to the Securities Act of 1933, as amended; and
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current management or management of the Company or management refers to the following individuals, who represent the directors and executive officers of the Company as of the date of this annual report on Form 10-K, and those officers and directors that were appointed on August 21, 2013, after former management resigned:
o
Tammy Taylor is the Companys current Chief Executive Officer, President, Director and Principal Financial Officer,
o
M. Aimee Coleman is current Corporate Secretary and Principal Accounting Officer.
CAUTIONARY STATEMENT RELATED TO FORWARD-LOOKING STATEMENTS
This report contains forward-looking statements. The Securities and Exchange Commission encourages companies to disclose forward-looking information so that investors can better understand a companys future prospects and make informed investment decisions. This annual report on Form 10-K and other written and oral statements that we make from time to time contain such forward-looking statements that set out anticipated results based on managements plans and assumptions regarding future events or performance. We have tried, wherever possible, to identify such statements by using words such as anticipate, estimate, expect, project, intend, plan, believe, will and similar expressions in connection with any discussion of future operating or financial performance. In particular, these include statements relating to future actions, future performance or results of current and anticipated sales efforts, expenses, the outcome of contingencies, such as legal proceedings, and financial results. A list of factors that could cause our actual results of operations and financial condition to differ materially is set forth below:
| ● | Our ability to continue as a going concern. |
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| ● | Our ability to achieve profitability and history of losses. |
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| ● | Our need for significant additional capital to fund our business plan. |
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| ● | Our ability to attract customers to our products. |
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| ● | Economic conditions that have an adverse effect on consumer and corporate spending. |
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| ● | Changes in applicable Federal and State manufacturing laws and regulations that have an adverse effect on our operations. |
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| ● | The market price for shares of our common stock has been and may continue to be highly volatile and the impact of penny stock rules on the liquidity of our common stock. |
We caution that the factors described herein and other factors could cause our actual results of operations and financial condition to differ materially from those expressed in any forward-looking statements we make and that investors should not place undue reliance on any such forward-looking statements. Further, any forward-looking statement speaks only as of the date on which such statement is made, and we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which such statement is made or to reflect the occurrence of anticipated or unanticipated events or circumstances. New factors emerge from time to time, and it is not possible for us to predict all of such factors. Further, we cannot assess the impact of each such factor on our results of operations or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.
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PART I
Item 1.Business
BUSINESS OVERVIEW
The Company has a long history in the fast growing industry of waste recycling and specifically related to waste-to-energy, upon which the Company is building. Garb is organized to utilize both next-generation machines and new technologies to vertically integrate into the waste refinement, recycling and energy industries. The company emphasis is in profitable new and green solutions for waste-to-energy, alternate energy sources, gas drilling, fuel enhancements, improving energy usage efficiency and utilizing recycled material in producing both useful and desirable products manufactured in its own plants. The Companys use of its first industrial manufacturing property and equipment will be to manufacture wood pellets to be used as an alternate power fuel and for farm and agricultural applications. In addition, this manufacturing facility will utilize power saving technology including the use of recycled materials as fuel that will result in lower operating costs. Also, excess electricity will be generated that may be sold back to the power company, thereby generating an additional source of revenue.
HISTORY OF COMPANY
Garb Oil & Power Corporation (the Company or Garb) was incorporated in the State of Utah in 1972 under the name Autumn Day, Inc. The Company changed its name to Energy Corporation International in 1978 and to Garb-Oil Corporation of America in 1981, which marked the start of the Companys development state in the energy and recycling industries. The Company changed its name to Garb Oil & Power Corporation in 1985 and then to Garb Corporation in May 2013. In February 2014, the Company changed its name back to Garb Oil & Power Corporation. The Companys activities have consisted of raising capital and developing technology related to waste-to-energy electricity production, pyrolysis (extraction of oil, carbon, and steel from used tires), and recovery of used rubber from large off-the-road tires, repair and sale of used truck tires, sale of new truck tires and sale of industrial shredders.
Effective August 21, 2013, all of the Companys former executive officers and directors resigned. Also effective August 21, 2013, following the resignation of the Companys former management, Ms. Tammy Taylor was appointed as the Companys Chief Executive Officer, President and Principal Financial Officer, and Ms. M. Aimee Coleman was appointed as the Companys Corporate Secretary and Principal Accounting Officer. Ms. Taylor was also appointed as the Companys sole director.
COMPANY SUBSIDIARIES
Garb Global Services, Inc.
On January 24, 2014, the Company signed a letter of intent (the LOI) and a collaborative effort agreement (the CE Agreement) with Shredderhotline.com Company (Shredderhotline) and Dan Scott Burda, Shredderhotlines President/Owner. The LOI included a stock purchase equal to 10% of each stock classes authorized shares at the time of execution in exchange for $448,683 in total cash and other assets to the Company. The cash portion was $44,868. The shares by stock class issued February 4, 2014 was two restricted shares of the Companys Class A preferred stock, 441,930 restricted shares of the Companys Class B preferred stock and 3,796,521,515 restricted shares of the Companys common stock. In general, the CE Agreement was a long-term collaboration with the intent of the Company receiving over time all of Shredderhotlines assets, including complete customer database, shredder patents and recycle plant designs. In addition, the CE Agreement provided that the two ranking executive officers of both companies would collaborate on future sales and operations within a newly formed wholly owned subsidiary of the Company, Garb Global Services, Inc. (Garb Global).
On November 18, 2014, the Company and Shredderhotline mutually determined that their business interests had diverged and the Company and Shredderhotline released one another from their rights and obligations under the LOI and CE Agreement both dated January 24, 2014. Garb Global continues as a wholly owned operating subsidiary of the Company but had no operations or activity during the year ended December 31, 2015. As of December 31, 2015, the Company's consolidated financial statements include the accounts of Garb and Garb Global. All intercompany accounts and transactions have been eliminated in consolidation.
OUR INDUSTRY
The industry in which Garb is operating is still in its maturing stages. Technological developments, the economic climate and the growing global awareness of waste as a possible raw material resource, have changed the recycling industry, placing demands on the industry for new products and for new solutions. Garb is dedicated to creating products that increases energy efficiency and reduces the carbon footprint while helping to preserve the environment. With its knowledge of solutions, its comprehensive product portfolio,
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its experience and, above all, with personnel and advisors who understand the industry, Garb will provide superior products and services into profitable solutions that will provide the Company with a competitive advantage in the market and do our part in making the world a greener place while passing cost savings on tour customers.
OUR MARKETS
Tires and Commercial Waste Shredders: Garbs past has been resurrected by current management, new truck tires and commercial waste shredders. In addition, Garb is currently in the development stage to enter into the retread truck tire production and sales market.
Waste-to-Energy: Waste-to-energy is considered a renewable resource since its fuel source, garbage and other materials that have been destined to landfills, is sustainable and non-depletable. According to the U.S. Environmental Protection Agency, waste-to-energy is a clean, reliable, renewable source of energy.
In 2013, Americans generated about 254 million tons of trash and recycled and composted about 87 million tons of this material, equivalent to a 34.3 percent recycling rate.
Opportunities abound in the recycling industry to produce power and Garb is developing this area.
Biomass and Alternate Fuels: The United States has been moving towards greater energy independence and the increase of clean renewable fuels. Biofuel is simple to use, biodegradable, nontoxic, and essentially free of sulfur and aromatics. Alternate energy sources can produce more net energy for less money than current technologies. Garb is currently pursuing multiple avenues in this growing arena.
Useful products manufactured from recycled materials: Garb is developing the potential for recycled materials to be utilized as raw materials in the production of useful products, alternate fuels, and energy. The first product being developed is to include recovered rubber in producing retread tires and as an alternate fuel source in the generation of electric power.
PATENTS, TRADEMARKS AND PROPRIETARY DATA
The Company has received United States Patent No. 5,299,748 on the OTR Tire Disintegrator System design which expired April 5, 2011, Patent No. 5,590,838 which expired January 7, 2014 and patent number 6,015,105 which expires January 18, 2018. An additional patent improvement was granted in Canada on July 6, 1999 as Canadian Patent No. 2,178,326 which expired March 23, 2015.
EMPLOYEES
The Companys President and CEO, Tammy Taylor, devotes 40 hours, or more, per week to the Companys business. The Companys Corporate Secretary, M. Aimee Coleman, devotes 10 hours, or more, per week to the Companys business. All additional work is performed on a sub-contract basis.
Additional personnel will be required when the Company expands its business or enters into agreements for construction of waste-to-energy plants, waste-rubber plants or scrap plants. The Company does not anticipate problems in finding suitable additional personnel.
The Company believes its relationship with its employees to be good. The Company is not a party to any collective bargaining agreement.
RESEARCH AND DEVELOPMENT
During the years ended December 31, 2015 and 2014, the Company has not expended funds on research and development activities. Garb plans to grow its research and development budget to 8% of its revenue during 2016.
ENVIRONMENTAL REGULATION
Neither the Company nor its subsidiaries believe that any of its activities result in harmful discharge of pollutants in the air, water or soil.
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Power plants to be built by the Company in the future utilizing tires as fuel will be required to comply with state and federal regulations regarding the discharge of pollutants into the atmosphere. The Company believes that the plants can comply with such regulations without material impact on the Company.
AVAILABLE INFORMATION
We file current reports on Form 8-K, proxy statements and other reports as required pursuant to Sections 13(a) and 15(d) of the Exchange Act. The public may read and copy any materials we file or furnish with the SEC at the SECs web site that contains reports, proxy and information statements, and other information regarding reports that we file or furnish electronically with them at http://www.sec.gov.
Item 1A. Risk Factors
Not required for smaller reporting companies.
Item 1B. Unresolved Staff Comments
Not required for smaller reporting companies.
Item 2. Properties
The Companys current executive offices are located at 1185 Gooden Xing, Bldg. C, Largo, FL under a lease to purchase agreement. The offices and warehouse consist of approximately 16,838 square feet. The purchase of the entire 55,785 square foot offices and warehouses space is expected to occur during the third quarter of 2016.
Item 3. Legal Proceedings
We are not a party to any material litigation, nor to the knowledge of management, is any litigation threatened against us that may materially affect us.
Item 4. Mine Safety Disclosures
Not applicable.
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PART II
Item 5. Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Our common stock is quoted in The OTC Pink tier of the OTC Markets under the symbol of GARB.
The following table sets forth the range of high and low representative bid quotations for the periods indicated.
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Fiscal Year 2015 |
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First Quarter | $ | 0.0001 | $ | 0.0001 |
Second Quarter | $ | 0.0001 | $ | 0.0001 |
Third Quarter | $ | 0.0001 | $ | 0.0001 |
Fourth Quarter | $ | 0.0001 | $ | 0.0001 |
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Fiscal Year 2014 |
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First Quarter | $ | 0.0006 | $ | 0.0001 |
Second Quarter | $ | 0.0002 | $ | 0.0001 |
Third Quarter | $ | 0.0001 | $ | 0.0001 |
Fourth Quarter | $ | 0.0001 | $ | 0.0001 |
The foregoing OTC Market quotations are inter-dealer quotations without retail mark-ups, mark-downs or commissions and may not represent actual transactions.
Holders
As of May 9, 2016 there were approximately 747 holders of record of our common stock. This number does not include shares held by brokerage clearing houses, depositories or others in unregistered form.
Dividends
No cash dividends have been paid by the Company in the past, and dividends are not contemplated in the foreseeable future. Utah law currently prohibits the payment of dividends since the Companys liabilities exceed its assets. Dividends will be dependent directly upon the earnings of the Company, financial needs, and other similar unpredictable factors. For the foreseeable future, it is anticipated that any earnings that may be generated from the operations of the Company will be used to finance the operations of the Company and dividends will not be declared for shareholders. The Company is not subject to any contractual restrictions on the payment of dividends.
Securities Authorized for Issuance under Compensation Plans
The Company has no equity compensation plans under which equity securities of the Company are authorized for issuance.
Sales of Unregistered Securities
During the year ended December 31, 2015, the Company did not have sales of unregistered securities.
Item 6. Selected Financial Data
Not applicable.
Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
Current Management Overview
Effective August 21, 2013, all of the Companys former executive officers and directors resigned. Also effective August 21, 2013, following the resignation of the Companys former management, Ms. Tammy Taylor was appointed as the Companys Chief Executive Officer, President and Principal Financial Officer, and Ms. M. Aimee Coleman was appointed as the Companys Corporate Secretary and Principal Accounting Officer. Ms. Taylor was also appointed as the Companys sole director effective August 21, 2013.
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Current management of the Company is pursuing avenues of generating cash or revenues during the next twelve months. The Company is pursuing sales of new/retread truck tires and commercial waste shredders and is developing waste-to-energy and biomass alternate fuels. The first product being developed is recovered rubber in producing retread tires and as an alternate fuel source in the generation of electric power. The Company continues to pursue financing to build and operate its own manufacturing plants. We believe that our current Company personnel and advisors have the necessary industry expertise and marketing skills to implement our current business model.
Results of Operations
Comparison of the Year Ended December 31, 2015 and 2014
Revenues
During the year ended December 31, 2015 the Company recognized no sales.During the year ended December 31, 2014 the Company recognized $300,000 from sale of equipment.
Selling, General, and Administrative Expenses
Selling, general, and administrative expenses decreased $263,998 to $537,582 for the year ended December 31, 2015, from $801,580 for the year ended December 31, 2014. The decrease was related to professional fees decreasing $79,482, consulting fees decreasing $100,000 and commissions decreasing $110,000. The decreases were partially offset with rent increasing $16,000 and depreciation expense increasing $18,749.
Interest Expense
Interest expense was $1,164,099 and $486,530 for the years ended December 31, 2015 and 2014, respectively. The increase in expense for the year ended December 31, 2015 was primarily related to recognizing liquidating damages that may be settled to some lower amount at the time of payment in full.
Loss on write-off of subscription receivable
Write-off of subscription receivable was $403,815 and $0 for the years ended December 31, 2015 and 2014, respectively. The increase in subscription receivable write-off of $403,815 was based on writing off of aged balances.
Loss on Extinguishment of Debt
Conversion of debt and settlement of accrued interest resulted in no gain or loss and a loss of $320,617 for the years ended December 31, 2015 and 2014, respectively. This is a non-cash expense reported on the statements of operations. The change from a loss to no gain or loss was due to no Company shares being issued during the current fiscal year reported.
Loss on derivative liability valuation
The loss on derivative liability valuation was $1,550,620 and $2,159,980 for the years ended December 31, 2015 and 2014, respectively. The decrease in derivative liability expense of $609,360 during the year ended December 31, 2015 was due to a decrease in the annualized volatility of the observed weekly closing market price of the Company's common stock during the year ended December 31, 2015 as compared to the observed weekly closing market price of the Company's common stock during the year ended December 31, 2014. The $2,159,980 loss recognized for the year ended December 31, 2014 was a $2,159,980 increase in derivative liability expense during the year ended December 31, 2014 was due to the change in the fair value of the derivative liability after first recognizing the derivative liability at December 31, 2014.
Net Loss
Comprehensive loss was $3,656,116 and $3,658,707 for the years ended December 31, 2015 and 2014, respectively. Net loss was attributable to a lack of consistent revenues. While the Company has substantially decreased selling, general, and administrative expenses, we expect to continue to incur losses until such time as we can begin to generate consistent revenue from operations.
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Liquidity and Capital Resources
Liquidity is the ability of an enterprise to generate adequate amounts of cash to meet its needs for cash requirements. The Company is not generating consistent revenues. Operating expenses for the Company have been paid in part from short-term unsecured notes and the issuance of Company stock. The Company also has a stockholders deficit of $36,779,787 at December 31, 2015.
The Company has incurred and continued to incur indebtedness in order to finance its operations. As of December 31, 2015, the Companys total liabilities were $11,292,654, with a working capital deficit of $11,292,651. See Note 6 Notes Payable, Note 7 Derivative Liability, Note 8 Notes Payable-Related Party, and Note 9 Derivative Liability-Related Party of the Companys financial statements appearing elsewhere in this annual report on Form 10-K.
Net cash used in operating activities was $9,733 and $161,925 for the years ended December 31, 2015 and 2014, respectively. Cash was primarily used to fund our net losses from operations.
Net cash used in investing activities was $0 for both of the years ended December 31, 2015 and 2014. During the years ended December 31, 2015 and 2014, the Company did not use cash that was received for investing activities.
Net cash provided by financing activities was $9,540 and $162,118 for the years ended December 31, 2015 and 2014, respectively. During the year ended December 31, 2015, we received cash of $9,540 from the issuance of notes payable, of which $0 cash was used as repayments of financing activities.
The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the ordinary course of business. As shown in the consolidated financial statements, during the years ended December 31, 2015 and 2014, the Company has incurred a net loss of $3,656,116 and $3,658,707, respectively, and as of December 31, 2015, the Companys accumulated deficit was $23,056,260. These factors, among others, raise substantial doubt about the Companys ability to continue as a going concern for a reasonable period of time. The consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amount and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. The Companys ability to continue as a going concern is dependent upon its ability to generate consistent cash flows to meet its obligations on a timely basis, to obtain additional financing as may be required, and its ability to continue its implementation of operations. Management is continuing its efforts to obtain the necessary financing as may be required to generate sufficient cash flows for current and future operations. Management is pursuing avenues of generating cash or revenues during the next twelve months. The Company is also attempting to interest purchasers, or potential purchasers, of shredders, recycling equipment and new tires, and establishing manufacturing plants. The Company also continues to pursue financing to build and operate its own waste refinement and recycling industrial manufacturing plants.
There is no assurance that the Company will be able to obtain additional cash flow from operations or to obtain additional financing. If these are not available to the Company, the Company may not be able to continue operations. While management remains confident that transactions will proceed, no assurances can be expressed as to the Companys continuing viability in the absence of consistent revenues. Current funding has come from operations and sales and the Company is currently in negotiations with several investment sources for equity investment in the company, which if successful, will satisfy long-term operations and capital expenditures. There are no guarantees that such negotiations will be successful.
Off Balance Sheet Arrangements
None.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
Not applicable
Item 8. Financial Statements and Supplementary Data
See Index to Financial Statements and Financial Statement Schedules appearing on pages F-1 through F-23 of this annual report on Form 10-K.
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INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2015 and 2014
F-1
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors
Garb Oil & Power Corporation
Largo, Florida
We have audited the accompanying consolidated balance sheet of Garb Oil & Power Corporation and subsidiaries as of December 31, 2015, and the related consolidated statements of operations, stockholders deficit and cash flows for the year then ended. These financial statements are the responsibility of the Company's management. 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 Companys 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 audit provides a reasonable basis for our opinion.
In our opinion, the consolidated 2015 financial statements referred to above present fairly, in all material respects, the financial position of Garb Oil & Power Corporation and subsidiaries as of December 31, 2015, and the results of their operations and their cash flows for the year then ended in conformity with U.S. generally accepted accounting principles.
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, the Companys continual net losses and large accumulated deficit, among other issues, raise substantial doubt about its ability to continue as a going concern. Managements plans concerning these matters are also described in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/Mac Accounting Group, LLP
Mac Accounting Group, LLP
Midvale, Utah
May 18, 2016
F-2
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors
Garb Oil & Power Corporation
Largo, Florida
We have audited the accompanying consolidated balance sheet of Garb Oil & Power Corporation and subsidiaries as of December 31, 2014, and the related consolidated statements of operations, stockholders' equity (deficit), and cash flows for the year then ended. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated 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 consolidated 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 Companys 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 consolidated financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Garb Oil & Power Corporation and subsidiaries as of December 31, 2014, and the results of their operations and their cash flows for the year then ended, in conformity with U.S. generally accepted accounting principles
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, the Companys continual net losses and large accumulated deficit, among other issues, raise substantial doubt about its ability to continue as a going concern. Managements plans concerning these matters are also described in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ HJ & Associates, LLC
HJ & Associates, LLC
Salt Lake City, Utah
April 15, 2015
F-3
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Garb Oil & Power Corporation and Subsidiaries |
Consolidated Balance Sheets |
| December 31, | ||||
| 2015 |
| 2014 | ||
ASSETS |
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Current assets: |
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Cash | $ | 3 |
| $ | 196 |
Receivables, net |
| - |
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| - |
Total current assets |
| 3 |
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| 196 |
Property and equipment, net |
| 1,142,297 |
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| 1,257,802 |
|
|
|
|
|
|
Total assets | $ | 1,142,300 |
| $ | 1,257,998 |
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS EQUITY (DEFICIT) |
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
Accounts payable and accrued expenses | $ | 1,712,684 |
| $ | 1,189,558 |
Related party payable |
| 12,120 |
|
| 3,947 |
Notes payable, net |
| 1,960,965 |
|
| 1,454,062 |
Derivative liability |
| 3,787,124 |
|
| 2,250,243 |
Notes payable related party, net |
| 185,475 |
|
| 155,645 |
Derivative liability related party |
| 57,766 |
|
| 33,987 |
Capital lease payable |
| 1,292,349 |
|
| 1,292,571 |
Accrued interest |
| 1,833,854 |
|
| 1,520,894 |
Accrued interest - related party |
| 62,346 |
|
| 173 |
Wage and payroll taxes payable |
| 387,971 |
|
| 254,971 |
Total current liabilities |
| 11,292,654 |
|
| 8,156,051 |
|
|
|
|
|
|
Total liabilities |
| 11,292,654 |
|
| 8,156,051 |
|
|
|
|
|
|
Mezzanine Equity: |
|
|
|
|
|
Class A preferred as of December 31, 2015; ($.0001 par value) 1,000,000 shares authorized, 24 shares outstanding as of December 31, 2015 and 24 shares outstanding as of December 31, 2014 |
| - |
|
| - |
Class B preferred as of December 31, 2015; ($2.50 par value) 10,000,000 shares authorized, 4,419,918 shares outstanding as of December 31, 2015 and 4,419,918 shares issued and outstanding as of December 31, 2014 |
| 11,049,795 |
|
| 11,049,795 |
Preferred Class A additional paid in capital |
| 1,486,010 |
|
| 1,486,010 |
Preferred Class B additional paid in capital |
| 14,093,628 |
|
| 14,093,628 |
Total mezzanine equity |
| 26,629,433 |
|
| 26,629,433 |
|
|
|
|
|
|
Stockholders Deficit: |
|
|
|
|
|
Common stock as of December 31, 2015; (no par value) 50,000,000,000 shares authorized, 47,497,578,456 shares outstanding at December 31, 2015 and 47,497,578,456 shares outstanding at December 31, 2014 |
| (13,723,527) |
|
| (13,723,527) |
Subscription Receivable |
| - |
|
| (403,815) |
Accumulated deficit |
| (23,056,260) |
|
| (19,400,144) |
Total stockholders' deficit |
| (36,779,787) |
|
| (33,527,486) |
Total liabilities, mezzanine equity and stockholders' deficit | $ | 1,142,300 |
| $ | 1,257,988 |
The accompanying notes are an integral part of these consolidated financial statements.
F-4
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Garb Oil & Power Corporation and Subsidiaries |
Consolidated Statements of Operations |
| Year Ended December 31, | |||||
| 2015 |
| 2014 | |||
SALES |
|
|
|
|
| |
Sales | $ | - |
| $ | 300,000 | |
TOTAL SALES |
| - |
|
| 300,000 | |
COST OF SALES |
| - |
|
| 190,000 | |
GROSS PROFIT |
| - |
|
| 110,000 | |
|
|
|
|
|
| |
OPERATING EXPENSES |
|
|
|
|
| |
Selling, general and administrative |
| 537,582 |
|
| 801,580 | |
Total Operating Expenses |
| 537,582 |
|
| 801,580 | |
|
|
|
|
|
| |
LOSS FROM OPERATIONS |
| (537,582) |
|
| (691,580) | |
|
|
|
|
|
| |
OTHER INCOME (EXPENSE) |
|
|
|
|
| |
Loss on write-off of subscription receivable |
| (403,815) |
|
| - | |
Loss on extinguishment of debt |
| - |
|
| (320,617) | |
Loss on derivative liability valuation |
| (1,550,620) |
|
| (2,159,980) | |
Interest expense |
| (1,096,451) |
|
| (486,357) | |
Interest expense - related party |
| (67,648) |
|
| (173) | |
Total Other Income (Expense) |
| (3,118,534) |
|
| (2,967,127) | |
LOSS BEFORE INCOME TAXES |
| (3,656,116) |
|
| (3,658,707) | |
PROVISION (BENEFIT) FOR INCOME TAXES |
| - |
|
| - | |
|
|
|
|
|
| |
NET LOSS | $ | (3,656,116) |
| $ | (3,658,707) | |
|
|
|
|
|
| |
BASIC AND DILUTED LOSS PER COMMON SHARE ATTRIBUTABLE TO GARB OIL & POWER SHAREHOLDERS | $ | (0.00) |
| $ | (0.00) | |
|
|
|
|
|
| |
WEIGHTED AVERAGE OF COMMON SHARES OUTSTANDING |
| 47,497,578,456 |
|
| 43,188,026,388 |
The accompanying notes are an integral part of these consolidated financial statements.
F-5
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Garb Oil & Power Corporation and Subsidiaries |
Consolidated Statements of Stockholders Deficit |
| Common Stock (no par value) |
| Subscription | Accumulated | Total Stockholders' | ||||
| Shares | Amount |
| Receivable | Deficit | Deficit | |||
Balance, December 31, 2013 | 37,965,215,153 | $ | (15,713,804) | $ | - | $ | (15,741,437) | $ | (31,455,241) |
Common shares issued for services | 960,000,000 |
| 106,000 |
| - |
| - |
| 106,000 |
Common shares issued for cash | 4,063,188,182 |
| 133,896 |
| - |
| - |
| 133,896 |
Common shares issued upon conversion of notes payable and accrued interest | 4,596,071,428 |
| 459,606 |
| - |
| - |
| 459,606 |
Class B preferred shares exchanged for Common shares | 1,750,000,000 |
| 1,750,000 |
| - |
| - |
| 1,750,000 |
Common shares exchanged for Class B preferred shares | (1,836,896,307) |
| (459,225) |
| - |
| - |
| (459,225) |
Subscription receivable | - |
| - |
| (403,815) |
| - |
| (403,815) |
Net loss for the year ended December 31, 2014 | - |
| - |
| - |
| (3,658,707) |
| (3,658,707) |
Balance, December 31, 2014 | 47,497,578,456 |
| (13,723,527) |
| (403,815) |
| (19,400,144) |
| (33,527,486) |
Subscription receivable write-off | - |
| - |
| 403,815 |
| - |
| 403,815 |
Net loss for the year ended December 31, 2015 | - |
| - |
| - |
| (3,656,116) |
| (3,656,116) |
Balance, December 31, 2015 | 47,497,578,456 | $ | (13,723,527) | $ | - | $ | (23,056,259) | $ | (36,779,787) |
The accompanying notes are an integral part of these consolidated financial statements.
F-6
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Garb Oil & Power Corporation and Subsidiaries |
Consolidated Statements of Cash Flows |
| Year Ended December 31, | |||||
| 2015 |
| 2014 | |||
Cash flows from operating activities: |
|
|
|
|
| |
Net loss | $ | (3,656,116) |
| $ | (3,658,707) | |
Adjustments to reconcile net loss to net cash used in operating activities: |
|
|
|
|
| |
Depreciation expense |
| 29,592 |
|
| 10,843 | |
Common stock issued for services |
| - |
|
| 106,000 | |
Loss on write-off of subscription receivable |
| 403,815 |
|
| - | |
Loss on extinguishment of debt |
| - |
|
| 320,617 | |
Amortization of debt discount |
| 77,170 |
|
| 59,429 | |
Loss on derivative liability valuation |
| 1,550,620 |
|
| 2,159,980 | |
Accretion of present value of capital lease |
| 85,691 |
|
| 30,926 | |
Loan fees |
| 443,250 |
|
| 77,250 | |
Changes in operating assets and liabilities: |
|
|
|
|
| |
Accounts payable and accrued expenses |
| 523,125 |
|
| 382,392 | |
Accrued interest |
| 324,299 |
|
| 259,169 | |
Related party payable |
| 8,173 |
|
| (338) | |
Related party accrued interest |
| 67,648 |
|
| - | |
Wages and payroll taxes payable |
| 133,000 |
|
| 90,514 | |
Net cash used in operating activities |
| (9,733) |
|
| (161,925) | |
|
|
|
|
|
| |
Cash flows from investing activities |
| - |
|
| - | |
|
|
|
|
|
| |
Cash flows from financing activities: |
|
|
|
|
| |
Proceeds from notes payable |
| 5,040 |
|
| 99,250 | |
Proceeds from notes payable related parties |
| 4,500 |
|
| 25,000 | |
Payments on notes payable |
| - |
|
| (20,000) | |
Cash received on issuances of common stock |
| - |
|
| 64,868 | |
Payments on capital lease |
| - |
|
| (7,000) | |
Net cash provided by financing activities |
| 9,540 |
|
| 162,118 | |
|
|
|
|
|
| |
Net increase (decrease) in cash |
| (193) |
|
| 193 | |
Cash at beginning of period |
| 196 |
|
| 3 | |
Cash at end of period | $ | 3 |
| $ | 196 | |
|
|
|
|
|
| |
Supplemental disclosures of cash flow information: |
|
|
|
|
| |
|
|
|
|
|
| |
Cash paid for: |
|
|
|
|
| |
Interest | $ | - |
| $ | - | |
Income taxes | $ | - |
| $ | - | |
|
|
|
|
|
| |
Non-cash financing activities: |
|
|
|
|
| |
Common shares issued for debt and accrued interest | $ | - |
| $ | 138,990 | |
Debt discount | $ | 10,040 |
| $ | 124,250 | |
Purchase of property, plant and equipment financed by capital lease | $ | - |
| $ | 1,268,645 | |
Adjustment to net present value for capital lease | $ | 85,913 |
| $ | - | |
Accounts payable reclassified to note principal | $ | - |
| $ | 25,000 | |
Wages payable reclassified to note payable | $ | - |
| $ | 38,990 | |
Accrued interest reclassified to note principal | $ | 16,814 |
| $ | 21,469 | |
Class B preferred shares exchanged for Common shares | $ | - |
| $ | 1,290,774 | |
Common shares for subscription receivable | $ | - |
| $ | 69,028 | |
Preferred shares for subscription receivable | $ | - |
| $ | 334,787 |
The accompanying notes are an integral part of these consolidated financial statements.
F-7
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Garb Oil & Power Corporation and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2015 and 2014
Note 1 Organization and Summary of Significant Accounting Principles
a. Organization To Date
Garb Oil & Power Corporation (the Company or Garb) was incorporated in the State of Utah in 1972 under the name Autumn Day, Inc. The Company changed its name to Energy Corporation International in 1978 and to Garb-Oil Corporation of America in 1981, which marked the start of the Companys development state in the energy and recycling industries. The Company changed its name to Garb Oil & Power Corporation in 1985 and then to Garb Corporation in May 2013. In February 2014, the Company changed its name back to Garb Oil & Power Corporation.
The Company has a long history in the fast growing industry of waste recycling and specifically related to waste-to-energy, upon which the Company is building. Garb is organized to utilize both next-generation machines and new technologies to vertically integrate into the waste refinement, recycling and energy industries. The current revised company emphasis (effective August 21, 2013) is in profitable new and green solutions for waste-to-energy, alternate energy sources, gas drilling, fuel enhancements, improving energy usage efficiency and utilizing recycled material in producing both useful and desirable products manufactured in its own plants. The Companys use of its first industrial manufacturing property and equipment will be to manufacture wood pellets to be used as an alternate power fuel and for farm and agricultural applications. In addition, this manufacturing facility will utilize power saving technology including the use of recycled materials as fuel that will result in lower operating costs. Also, excess electricity will be generated that may be sold back to the power company, thereby generating an additional source of revenue.
Effective August 21, 2013, all of the Companys former executive officers and directors resigned. Also effective August 21, 2013, following the resignation of the Companys former management, Ms. Tammy Taylor was appointed as the Companys Chief Executive Officer, President and Principal Financial Officer, and Ms. M. Aimee Coleman was appointed as the Companys Corporate Secretary and Principal Accounting Officer. Ms. Taylor was also appointed as the Companys sole director.
b. Principles of Consolidation and Company Subsidiaries
The consolidated financial statements contained in this annual filing include the accounts of Garb and Garb Global Services, Inc. (Garb Global). All intercompany accounts and transactions have been eliminated in consolidation.
Garb Global Services, Inc.
On January 24, 2014 the Company signed a letter of intent (the LOI) and a collaborative effort agreement (the CE Agreement) with Shredderhotline.com Company (Shredderhotline) and Dan Scott Burda, Shredderhotlines President/Owner. The LOI included a stock purchase equal to 10% of each stock classes authorized shares at the time of execution in exchange for $448,683 in total cash and other assets to the Company. The cash portion was $44,868. The shares by stock class issued February 4, 2014 was two restricted shares of the Companys Class A preferred stock, 441,930 restricted shares of the Companys Class B preferred stock and 3,796,521,515 restricted shares of the Companys common stock. In general, the CE Agreement was a long-term collaboration with the intent of the Company receiving over time all of Shredderhotlines assets including complete customers database, shredder patents and recycle plant designs. In addition, the CE Agreement provided that the two ranking executive officers of both companies would collaborate on future sales and operations within a newly formed wholly owned subsidiary of the Company, Garb Global Services, Inc. (Garb Global). On November 18, 2014, the Company and Shredderhotline mutually determined that their business interests had diverged and the Company and Shredderhotline released one another from their rights and obligations under the LOI and CE Agreement both dated January 24, 2014.Garb Global continues as a wholly owned operating subsidiary of the Company, but had no operations or activity during the year ended December 31, 2015 or 2014.
c. Use of Estimates
The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
d. Basis of Presentation - Going Concern
F-8
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The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the ordinary course of business. As shown in the consolidated financial statements, during the years ended December 31, 2015 and 2014, the Company has incurred a net loss of $3,656,116 and $3,658,707, respectively, and as of December 31, 2015, the Companys accumulated deficit was $23,056,260. These factors, among others, raise substantial doubt about the Companys ability to continue as a going concern for a reasonable period of time. The consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amount and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. The Companys ability to continue as a going concern is dependent upon its ability to generate consistent cash flows to meet its obligations on a timely basis, to obtain additional financing as may be required, and its ability to continue its implementation of operations. Management is continuing its efforts to obtain the necessary financing as may be required to generate sufficient cash flows for current and future operations. Management is pursuing avenues of generating cash or revenues during the next twelve months. The Company is also attempting to interest purchasers, or potential purchasers, of shredders, recycling equipment and new tires, and establishing manufacturing plants. The Company also continues to pursue financing to build and operate its own waste refinement and recycling industrial manufacturing plants.
There is no assurance that the Company will be able to obtain additional cash flow from operations or to obtain additional financing. If these are not available to the Company, the Company may not be able to continue operations. While management remains confident that transactions will proceed, no assurances can be expressed as to the Companys continuing viability in the absence of revenues. Current funding has come from operations and sales and the Company is currently in negotiations with several investment sources for equity investment in the company, which if successful, will satisfy long-term operations and capital expenditures. There are no guarantees that such negotiations will be successful.
e. Property and Equipment
Property and equipment is recorded at cost and is depreciated using the straight-line method based on the expected lives of the assets (see Note 2 Property and Equipment). Leases determined to be capital leases are classified as being owned by the Company and recorded in accordance with ASC 840-30-30 where an asset and liability are recorded at the present value of the minimum lease terms. (Also see Note 10 Capital Lease.)
The Company records impairment losses when indicators of impairment are present and undiscounted cash flows estimated to be generated by those assets are less than the assets carrying amount. No impairment loss was recorded during the years ended December 31, 2015 and 2014.
f. Revenue Recognition To Date
Revenue is recognized when the following criteria are met: 1. persuasive evidence of an arrangement exists, which is generally in the form of a signed contract which specifies a fixed price, 2. the sales amount is determinable, 3. when title is transferred, which is when goods shipped to the customer has been received and accepted or services have been rendered, and 4. collection is reasonably assured. The Company engages in product sales.
g. Accounts Receivable/Allowance for Bad Debt
As of December 31, 2015 and December 31, 2014 the Company's receivables include $249,051 related to cash received by former management without supportive cash receipts and $350,000 of accounts receivable derived from sales of products and services to customers operating as recyclers and tire wholesalers. Amounts that have been invoiced are recorded in accounts receivable when revenue recognition criteria have been met. The Company's allowance for doubtful accounts is based on its historical bad debt experience and on current management's evaluation of its ability to collect individual outstanding balances. The Company had an allowance for doubtful accounts of $599,051 as of December 31, 2015 and December 31, 2014.
h. Advertising Costs
The Company expenses all advertising costs as incurred. The Company recorded $0 advertising expense for the years ended December 31, 2015 and 2014.
F-9
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i. Basic Income (Loss) Per Share
The following is an illustration of the reconciliation of the numerators and denominators of the basic loss per share calculation:
| For the Years Ended December 31, | |||
|
| 2015 |
| 2014 |
Comprehensive loss (numerator) | $ | (3,656,116) | $ | (3,658,707) |
Weighted average shares outstanding (denominator) |
| 47,497,578,456 |
| 43,188,026,388 |
Basic loss per share | $ | (0.00) | $ | (0.00) |
For the year ended December 31, 2015 and 2014, the Company had no common stock equivalents that are excluded from the computation of diluted earnings per share as their effect is anti-dilutive due to net losses.
j. Financial Instruments
Cash equivalents include highly liquid short-term investments with original maturities of three months or less, readily convertible to known amounts of cash. The amounts reported as cash, prepaid expenses, trade accounts payable and notes payable to related parties are considered to be reasonable approximations of their fair values. The fair value estimates presented herein were based on available market information for the year ended December 31, 2015. The use of different market assumptions and/or estimation methodologies could have a material effect on the estimated fair value amounts. The reported fair values do not take into consideration potential expenses that would be incurred in an actual settlement.
k. Stock-Based Compensation
The Company records expense associated with the fair value of stock-based compensation. For fully vested stock and restricted stock grants the Company calculates the stock based compensation expense based upon estimated fair value on the date of grant. For stock options, the Company uses the Black-Scholes option valuation model to calculate stock based compensation at the date of grant. Option pricing models require the input of highly subjective assumptions, including the expected price volatility. Changes in these assumptions can materially affect the fair value estimate.
l. Concentration of Credit and Other Risks
The Company maintains cash in federally insured bank accounts. At times these amounts exceed insured limits. The Company does not anticipate any losses from these deposits.
The Company had no customers or sales for the year ended December 31, 2015. Sales recorded in 2014 were from a single customer.
m. Derivative Liability
The Company has embedded conversion options in its convertible notes payable, with conversion rates that prevent calculating the number of shares into which the notes could eventually be converted into. The Company values these conversion features using the Black Scholes option valuation model. The resulting derivative liability is valued at each reporting date and the change in the liability is reflected as change in derivative liability valuation in the statement of operations. (Also see Note 7 Derivative Liability and Note 9 Derivative Liability Related Party.)
n. Fair Value of Financial Instruments
The Company's financial instruments include accounts receivable, accounts payable and accrued expenses, related party payable, notes payable, related party notes payable and derivative liabilities. The principal balance of accounts receivable, accounts payable and accrued expenses, related party payable, notes payable and related party notes payable approximate fair value because current interest rates and terms available to the Company for similar instruments are substantially the same. Derivative liabilities are recorded at fair value.
The Company uses a framework for measuring fair value with 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
F-10
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Level 3. Unobservable inputs in which there is little or no market data, which requires the reporting entity to develop its own assumptions.
The fair value hierarchy for recurring fair value measurements is as follows:
|
| Fair Value |
| Fair Value Measurements at December 31, 2015 | |||||||
|
| as of |
| Using Fair Value Hierarchy | |||||||
|
| December 31, 2015 |
| Level 1 |
| Level 2 |
| Level 3 | |||
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
Derivative liability | $ | 3,787,124 |
| $ | - |
| $ | - |
| $ | 3,787,124 |
Derivative liability related party | $ | 57,766 |
| $ | - |
| $ | - |
| $ | 57,766 |
|
| Fair Value |
| Fair Value Measurements at December 31, 2014 | |||||||
|
| as of |
| Using Fair Value Hierarchy | |||||||
|
| December 31, 2014 |
| Level 1 |
| Level 2 |
| Level 3 | |||
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
Derivative liability | $ | 2,250,243 |
| $ | - |
| $ | - |
| $ | 2,250,243 |
Derivative liability related party | $ | 33,987 |
| $ | - |
| $ | - |
| $ | 33,987 |
(Also see Note 7 Derivative Liability and Note 9 Derivative Liability Related Party)
o. Income Taxes
Deferred income taxes are provided using the liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carry forwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of the changes in tax laws and rates of the date of enactment.
When tax returns are filed, it is highly certain that some positions taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately sustained. The benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence, management believes it is more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions. Tax positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more than 50 percent likely of being realized upon settlement with the applicable taxing authority. The portion of the benefits associated with tax positions taken that exceeds the amount measured as described above is reflected as a liability for unrecognized tax benefits in the accompanying balance sheet along with any associated interest and penalties that would be payable to the taxing authorities upon examination.
Interest and penalties associated with unrecognized tax benefits are classified as additional income taxes in the statement of income.
p. Recent Accounting Standards
The Company does not expect the adoption of any recently issued accounting pronouncement to have a significant impact on its financial position, results of operations or cash flows.
q. Reclassifications
Certain reclassifications have been made to the 2014 financial statements in order for them to conform to 2015 presentation. Such reclassifications have no impact on the Company's financial position or results of operations.
F-11
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Note 2 Property And Equipment
The major classes of property and equipment as of December 31, 2015 and 2014 are as follows:
|
| December 31, 2015 |
|
| December 31, 2014 |
| Estimated Service Lives in Years |
Property | $ | 1,182,732 |
| $ | 1,268,645 |
| 39 |
Total property and equipment |
| 1,182,732 |
|
| 1,268,645 |
|
|
Less accumulated depreciation |
| (40,435) |
|
| (10,843) |
|
|
Property and equipment, net | $ | 1,142,297 |
| $ | 1,257,802 |
|
|
Depreciation expense for the years ended December 31, 2015 and 2014 was $29,592 and $10,843, respectively.
Leases determined to be capital leases are classified as being owned by the Company and recorded in accordance with ASC 840-30-30 where an asset and liability are recorded at the present value of the minimum lease terms. The value of property decreased $85,913 to $1,182,732 as of December 31, 2015 from a balance of $1,268,645 as of December 31, 2014 due to a revised net present value calculation in accordance with ASC 840-30-35. The revised calculation took into account the purchase closing date being extended until September 30, 2016 and an additional $100,000 being added to the purchase price, for a total purchase price of $1,485,000. (Also see Note 10 Capital Lease.)
Note 3 Related Party Transactions
During the years ended December 31, 2015 and 2014, the Company accrued $133,000 and $137,500 in salaries to managers and directors of the Company.
During the year ended December 31, 2015, the Company did not approve or issue shares of stock to related parties.
In March 2014, the Company approved the issuance of 266,666,667 shares of Common Stock to Kindness Wave, Inc. for cash of $20,000. Tammy Taylor is a director of Kindness Wave, Inc.
In March 2014, Corporate Business Advisors, Inc. converted 700,000 shares of Class B Preferred Stock to 1,750,000,000 shares of Common Stock using a conversion rate of $2.50.
Related party payable consisted of the following at December 31, 2015 and 2014:
|
| December 31, 2015 |
|
| December 31, 2014 |
Accounts payable to a related parties, due on demand, no interest, unsecured to: |
|
|
|
|
|
Tammy Taylor, Chief Executive Officer | $ | 11,993 |
| $ | 3,820 |
Corporate Business Advisors, Inc. |
| 127 |
|
| 127 |
|
|
|
|
|
|
Total | $ | 12,120 |
| $ | 3,947 |
For related party notes payable balances at December 31, 2015 and 2014, see Note 8 Notes Payable - Related Party.
Related party accrued interest was $62,346 and $173 at December 31, 2015 and 2014, respectively.
For related party derivative liability balances at December 31, 2015 and 2014, see Note 9 Derivative Liability - Related Party.
Note 4 Income Taxes
The Company accounts for income taxes in accordance with Accounting Standards Codification Topic 740, Income Taxes (Topic 740), which requires the recognition of deferred tax liabilities and assets at currently enacted tax rates for the expected future tax consequences of events that have been included in the financial statements or tax returns. A valuation allowance is recognized to reduce the net deferred tax asset to an amount that is more likely than not to be realized. Topic 740 provides guidance on the accounting for uncertainty in income taxes recognized in a companys financial statements. Topic 740 requires a company to determine whether it is more likely than not that a tax position will be sustained upon examination based upon the technical merits of the position. If the more-likely-than-not threshold is met, a company must measure the tax position to determine the amount to recognize in the financial statements. At the adoption date of January 1, 2007, the Company had no unrecognized tax benefit which would affect the effective tax rate if recognized. The Company includes interest and penalties arising from the underpayment of
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income taxes in the statements of operation in the provision for income taxes. As of December 31, 2015, the Company had no accrued interest or penalties related to uncertain tax positions.
The Company files income tax returns in the U.S. federal jurisdiction and in the state of Utah. Deferred taxes are provided on a liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carry forwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. Net deferred tax liabilities consist of the following components as of December 31, 2015 and 2014.
| December 31, 2015 |
| December 31, 2014 | ||
Deferred tax assets: |
|
|
|
|
|
NOL carryover | $ | 3,943,900 |
| $ | 3,200,900 |
Allowance for doubtful accounts |
| 233,600 |
|
| 233,600 |
Accrued wages |
| 149,600 |
|
| 91,800 |
Deferred tax liabilities: |
|
|
|
|
|
Depreciation |
| 3,300 |
|
| 1,300 |
Valuation allowance |
| (4,330,400) |
|
| (3,527,600) |
Net deferred tax liability | $ | - |
| $ | - |
The income tax provision differs from the amount of income tax determined by applying the U.S. federal and state income tax rates to pretax income from continuing operations for the years ended December 31, 2015 and 2014 due to the following:
| December 31, 2015 |
| December 31, 2014 | ||
Book income (loss) | $ | (1,425,900) |
| $ | (1,426,900) |
Allowance for doubtful accounts |
| - |
|
| - |
Accrued wages |
| 51,900 |
|
| 15,200 |
Non-deductible meals and entertainment |
| - |
|
| 100 |
Other non-deductible expenses |
| 604,700 |
|
| 1,008,800 |
Valuation allowance |
| 769,300 |
|
| 402,800 |
Income tax provision | $ | - |
| $ | - |
At December 31, 2015, the Company had net operating loss carry forwards of approximately $10,112,000 that may be offset against future taxable income from the year 2016 through 2035. No tax benefit has been reported in the December 31, 2015 consolidated financial statements since the potential tax benefit is offset by a valuation allowance of the same amount.
Due to the change in ownership provisions of the Tax Reform Act of 1986, net operating loss carry forwards for Federal income tax reporting purposes are subject to annual limitations. Since a change in ownership has occurred during the year ended December 31, 2013, net operating loss carry forwards may be limited as to use in future years.
Note 5 Commitments To Date
The Company has employment agreements with its current officers installed during August 2013. The Companys current Chief Executive Officer, Tammy Taylors starting salary was $120,000 per year and the Companys current Corporate Secretary, M. Aimee Colemans started part time at $250 per week, with hours over 10 hours a week at the hourly rate of $25 per hour. Company officers' salaries are determined by the Board and neither officer's salaries have increased from their respective starting salary. Both current officers agreed to allow unpaid salaries to accrue and be paid as operations cash flows improve. The terms of employment for the length of employment service of both agreements are open ended, at will for both parties, except for agreement violations remedies as specified.
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As of December 31, 2015 and 2014 the Company had accrued a total of $387,971 and $ 254,971 in wages and payroll taxes payable related to officer compensation. The following table is the information pertaining to the accrued wages for both the Companys current and former officers for the fiscal years ended December 31, 2015 and December 31, 2014.
Accrued wages by Name and Principal Position: |
|
| December 31, 2015 |
|
| December 31, 2014 |
Tammy Taylor (1) Current Chief Executive Officer |
| $ | 271,000 |
| $ | 151,000 |
M Aimee Coleman (1) Current Corporate Secretary |
|
| 30,500 |
|
| 17,500 |
Matt Shepard (2) Former Executive Vice President |
|
| 70,000 |
|
| 70,000 |
Bill Anderson (2) Former Secretary |
|
| 12,000 |
|
| 12,000 |
Total accrued wages |
| $ | 383,500 |
| $ | 250,500 |
(1)
Mss. Taylor and Coleman have been the Companys current executive officers in their respective capacity since August 21, 2013.
(2)
Mesrrs. Shepard and Anderson ceased to serve in his respective capacity as of June 11, 2010.
Note 6 Notes Payable
Both secured and unsecured notes payable balance net of discounts as of December 31, 2015 and December 31, 2014 were $1,960,965, net of debt discounts of $414 and $1,454,062, net of debt discounts of $48,189, respectively.
January 1, 2003 Note
A $68,493 unsecured promissory note was entered into on January 1, 2003, is due on demand and plus interest of 12%. The balance of the Note as of December 31, 2015 and December 31, 2014 was $68,493, net of debt discounts of $0.
January 1, 2003 Note
A $165,000 unsecured promissory note was entered into on January 1, 2003, is due on demand and plus interest of 12%. The balance of the Note as of December 31, 2015 and December 31, 2014 was $165,000, net of debt discounts of $0.
January 21, 2003 Note
A $20,000 unsecured promissory note was entered into on January 21, 2003, is due on demand and plus interest of 10%. The balance of the Note as of December 31, 2015 and December 31, 2014 was $20,000, net of debt discounts of $0.
June 24, 2006 Note
A $53,000 promissory note was entered into on June 24, 2006 secured by sales contract and officer guarantee, is due on demand, plus interest of 12% and plus a $5,000 default interest penalty per week. During the year ended December 31, 2013, the Company and the note holder entered into a debt settlement agreement on this note and the January 3, 2002 Note that resulted in forgiveness of the June 24, 2006 Note principal over $35,000 and all accrued interest. During the year ended December 31, 2014, the Company paid $20,000 cash payments toward the June 24, 2006 Note that was settled as a principal only note. The balance of the Note as of December 31, 2015 and December 31, 2014 was $15,000, net of debt discounts of $0.
July 5, 2006 Note
A $2,250 unsecured promissory note was entered into on July 5, 2006, was due September 5, 2006, plus interest of 5% per month and is in default. The balance of the Note as of December 31, 2015 and December 31, 2014 was $2,250, net of debt discounts of $0.
July 5, 2006 Note
A $2,750 unsecured promissory note was entered into on July 5, 2006, was due September 5, 2006, plus interest of 5% per month and is in default. The balance of the Note as of December 31, 2015 and December 31, 2014 was $2,750, net of debt discounts of $0.
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October 11, 2007 Note
A $129,327 unsecured promissory note was entered into on October 11, 2007, is due on demand, plus interest of 18% from October 7, 2005 through January 6, 2006 then $500 per week through April 1, 2009, then $5,000 per month. During the year ended December 31, 2012, the Company issued a total of 15,250,000,000 shares of common stock at an average conversion price of $.000001, or $15,250 as repayment to the original debt holder for principal and accrued interest. During the year ended December 31, 2013 the original debt holder assigned $6,000 worth of notes accrued interest. During the year ended December 31, 2012 the original debt holder assigned $49,000 worth of notes principal and accrued interest. The balance of the October 11, 2007 Note owed to the original debt holder as of December 31, 2015 and December 31, 2014 was $327, net of debt discounts of $0.
During the year ended December 31, 2012, the Company issued a total of 6,350,000,000 shares of common stock at an average conversion price of $.000006, or $35,750, as repayment for a portion of the year ended December 31, 2012 Assigned October 11, 2007 Note. The Assigned October 11, 2007 Notes balances total $13,250 as of December 31, 2015 and December 31, 2014, net of debt discounts of $0.
December 31, 2009 Note
A $6,000 unsecured promissory note was entered into on December 31, 2009, is due on demand and plus interest of 36%. The balance of the Note as of December 31, 2015 and December 31, 2014 was $6,000, net of debt discounts of $0.
December 31, 2009 Note
A $7,500 unsecured promissory note was entered into on December 31, 2009, is due on demand and plus interest of 10%. The balance of the Note as of December 31, 2015 and December 31, 2014 was $7,500, net of debt discounts of $0.
December 31, 2009 Note
A $3,000 unsecured promissory note was entered into on December 31, 2009, is due on demand and plus interest of 36%. The balance of the Note as of December 31, 2015 and December 31, 2014 was $3,000, net of debt discounts of $0.
June 23, 2010 Note
On June 23, 2010 the Company converted $43,217 of accounts payable into an unsecured promissory note. The note bears interest at 6% per annum and is due on demand. The balance of the June 22, 2010 Note as of December 31, 2015 and December 31, 2014 was $43,217, net of debt discounts of $0.
June 29, 2010 Note
On June 29, 2010 the Company issued an unsecured promissory note to a professional services provider for $300,000 related to consulting services rendered. The note bears interest at 18% per annum and has a maturity date of July 1, 2010. The note agreement contains a 10% penalty clause if the Company fails to make payment at the maturity date. On July 2, 2010 the Company was in default of the note and recorded penalties of $30,296 to interest expense. During the year ended December 31, 2011, the professional services provider (Assignor) entered into $309,250 worth of certain assignment of debt agreements with several investors (Assignees) pursuant to which the Assignor granted, transferred and set over until the Assignees its right, title and interest in the June 29, 2010 Note including, without limitation, all rights, interest terms, benefits and advantages of the Assignor to be derived here from and burdens, obligations and liabilities to be derived thereunder. The balance of the June 29, 2010 Note owed to the professional services provider as of December 31, 2015 and December 31, 2014 was $21,046, net of debt discounts of $0.
During the year ended December 31, 2012, the Company issued a total of 324,285,714 shares of common stock at an average conversion price of $.00012, or $39,000, as repayment for several of the year ended December 31, 2011 Assigned June 29, 2010 Note. The Assigned June 29, 2010 Notes balances as of December 31, 2015 and December 31, 2014 was $57,000, net of debt discounts of $0.
December 29, 2010 Note
On December 29, 2010 the Company issued an unsecured promissory note to a professional services provider for $50,000 related to consulting services rendered. The note bears interest at 18% per annum and has a maturity date of December 31, 2010. The note agreement contains a 10% penalty clause if the Company fails to make payment at the maturity date. On December 31, 2010 the
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Company was in default of the Note and recorded penalties of $5,049 to interest expense. The balance of the December 29, 2010 Note as of December 31, 2015 and December 31, 2014 was $55,049, net of debt discounts of $0.
September 22, 2011 Note
On September 22, 2011 the Company issued an unsecured convertible note in the principal amount of $20,000 in exchange for $20,000 in cash consideration. The note bears interest at 8% per annum, has a maturity date of September 22, 2012 and has a 24% default interest rate should the note go into default. On September 23, 2012 the Company defaulted on the note and the note interest per annum increased to 24%. The balance of the September 22, 2011 Note as of December 31, 2015 and December 31, 2014 was $20,000, both net of debt discounts of $0.
October 1, 2011 Note
On October 1, 2011 the Company issued an unsecured promissory note to a professional services provider for $40,700 related to consulting services rendered. The note bears interest at 10% per annum and has a maturity date of April 1, 2012. On April 2, 2012 the Company defaulted on the note. The balance of the October 1, 2011 Note as of December 31, 2015 and December 31, 2014 was $40,700, both net of debt discounts of $0.
November 2, 2011 Note
On November 2, 2011 the Company issued an unsecured convertible note in the principal amount of $33,000 in exchange for $33,000 in cash consideration. The note bears interest at 8% per annum, has a maturity date of November 2, 2012 and has a 24% default interest rate should the note go into default. On November 3, 2012 the Company defaulted on the note and the note interest per annum increased to 24%. The balance of the November 2, 2011 Note as of December 31, 2015 and December 31, 2014 was $33,000, both net of debt discounts of $0.
December 30, 2011 Note 3
On December 30, 2011 the Company issued an unsecured promissory note in the principal amount of $22,000 in exchange for $22,000 in cash consideration. The note bears interest at 10% per annum and has a maturity date of June 30, 2012. On July 1, 2012 the Company defaulted on the note. The balance of the December 30, 2011 Note 3 as of December 31, 2015 and December 31, 2014 was $22,000, both net of debt discounts of $0.
March 7, 2012 Note
On March 7, 2012 the Company borrowed $10,000 pursuant to an unsecured convertible note. The note bears interest at 7% per annum and has a maturity date of January 24, 2013. The note agreement contains a change in the interest rate to 20% default interest rate should the note go into default. On January 25, 2013 the Company defaulted on the note and the note interest per annum increased to 20%. The balance of the March 7, 2012 Note as of December 31, 2015 and December 31, 2014 was $10,000, net of debt discounts of $0.
May 16, 2012 Note
On May 16, 2012 the Company borrowed $20,000 pursuant to an unsecured convertible note. The note bears interest at 15% per annum, has a maturity date of February 16, 2013, and unpaid accrued interest is added to the notes principal balance at the end of each quarter. The note agreement contains a change in the interest rate to $500 per day default interest rate (or the highest rate allowed by law) should the note go into default. On February 17, 2013 the Company defaulted on the note and the note interest increased to $500 per day. The balance of the May 16, 2012 Note as of December 31, 2015 was $33,486 including added accrued interest to date of $13,486 and December 31, 2014 was $28,901 including added accrued interest to date of $8,901, both net of debt discounts of $0.
May 23, 2012 Note
On May 23, 2012 the Company borrowed $15,000 pursuant to an unsecured convertible note. The note bears interest at 15% per annum, has a maturity date of May 23, 2013, and unpaid accrued interest is added to the notes principal balance at the end of each quarter. The note agreement contains a change in the interest rate to $500 per day default interest rate (or the highest rate allowed by law) should the note go into default. On May 24, 2013 the Company defaulted on the note and the note interest increased to $500 per day. The balance of the May 23, 2012 Note as of December 31, 2015 was $25,115 including added accrued interest to date of $10,115 and December 31, 2014 was $21,676 including added accrued interest to date of $6,676, both net of debt discounts of $0.
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June 16, 2012 Note
On June 16, 2012 the Company issued a $700,000 unsecured convertible note in exchange for consolidating and paying in full the unsecured notes outstanding principal and accrued interest that are identified below. The principal total of the notes consolidated into the June 16, 2012 Note was $544,787 with the Company recognizing the additional $155,213 principal as consulting services expense. The note bears interest at 6% per annum and has a maturity date of June 16, 2014. The note agreement contains a change in the interest rate to 24% default interest rate should the note go into default. On June 17, 2014 the Company defaulted on the note and the note interest per annum increased to 24%. During the year ended December 31, 2014, the Company issued a total of 1,428,571,429 shares of common stock at an average conversion price of $0.0007, or $100,000 as partial repayment of the June 16, 2012 Note. The balance of the June 16, 2012 Note as of December 31, 2015 and December 31, 2014 was $600,000, net of debt discounts of $0.
Notes consolidated into the June 16, 2012 Note
June 29, 2010 Note for consulting services, an assignee $19,000 remaining assigned principal plus accrued interest
June 29, 2010 Note for consulting services, an assignee $12,500 remaining assigned principal plus accrued interest
October 15, 2010 Note 1 for consulting services, an assignee $25,000 assigned principal plus accrued interest
October 15, 2010 Note 2 for consulting services, an assignee $25,000 assigned principal plus accrued interest
December 14, 2010 Note for cash received $3,902 remaining principal plus accrued interest
January 24, 2011 Note for consulting services $615 principal plus accrued interest
February 2, 2011 Note for consulting services $500 principal plus accrued interest
February 24, 2011 Note for consulting services, an assignee $16,000 remaining assigned principal plus accrued interest
April 1, 2011 Note 1 for consulting services $1,336 principal plus accrued interest
April 1, 2011 Note 2 for consulting services, an assignee $50,000 assigned principal plus accrued interest
May 12, 2011 Note for consulting services $100,000 principal plus accrued interest
July 1, 2011 Note 1 for consulting services, an assignee $10,500 assigned principal plus accrued interest
July 1, 2011 Note 2 for consulting services, an assignee $30,000 assigned principal plus accrued interest
October 7, 2011 Note for cash received $25,000 principal plus accrued interest
December 13, 2011 Note for consulting services $7,000 principal plus accrued interest
January 13, 2012 Note for cash received $25,000 principal plus accrued interest
February 15, 2012 Note for consulting services, an assignee $22,500 assigned principal plus accrued interest
February 20, 2012 Note for consulting services, an assignee $40,000 assigned principal plus accrued interest
July 2, 2012 Note
On July 2, 2012 the Company borrowed $15,000 pursuant to an unsecured convertible note. The note bears interest at 15% per annum, has a maturity date of July 2, 2013, and unpaid accrued interest is added to the notes principal balance at the end of each quarter. The note agreement contains a change in the interest rate to $500 per day default interest rate (or the highest rate allowed by law) should the note go into default. The balance of the July 2, 2012 Note as of December 31, 2015 was $24,207 including added accrued interest to date of $9,207 and December 31, 2014 was $20,892 including added accrued interest to date of $5,892, both net of debt discounts of $0.
March 12, 2013 Note
On March 12, 2013 the Company borrowed $14,000 pursuant to an unsecured convertible note. The note bears interest at 10% per annum, has a maturity date of March 12, 2014, and accrues liquidating damages of $250 per day added to the principal balance of the note that may be settled to some lower amount at the time of payment in full. The note agreement contains a change in the interest rate to 20% default interest rate should the note go into default. On March 13, 2014 the Company defaulted on the note and the note interest per annum increased to 20%. The balance of the March 12, 2013 Note as of December 31, 2015 was $178,500 including $164,500 of accrued liquidating damages to date and December 31, 2014 was $87,250 including $73,250 of accrued liquidating damages to date, both net of debt discounts of $0.
April 17, 2013 Note
On April 17, 2013 the Company borrowed $3,000 pursuant to an unsecured promissory note. The note bears interest at 10% per annum and has a maturity date of June 15, 2013. On June 16, 2013 the Company defaulted on the note. The balance of the April 17, 2013 Note as of December 31, 2015 and December 31, 2014 was $3,000, net of debt discounts of $0.
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April 27, 2013 Note
On April 27, 2013 the Company borrowed $700 pursuant to an unsecured promissory note. The note bears interest at 10% per annum and has a maturity date of August 25, 2013. On August 26, 2013 the Company defaulted on the note. The balance of the April 27, 2013 Note as of December 31, 2015 and December 31, 2014 was $700, net of debt discounts of $0.
May 19, 2014 Note
On May 19, 2014 the Company entered into a $60,000 unsecured convertible note for $50,000 cash to be borrowed during the year ended December 31, 2014 plus a total of $10,000 in loan fees the Company recorded as an administrative expense as cash was borrowed. The note bears interest at 8% per annum and has a maturity date 12 months after cash is borrowed. The note agreement contains a change in the interest rate to 20% default interest rate should the note go into default and required 300,000,000 shares of Companys common stock to be reserved, but was canceled on October 8, 2014. Also if the note should go into default, the note accrues liquidating damages of $1,000 per day added to the principal balance of the note that may be settled to some lower amount at the time of payment in full. During the year ended December 31, 2014 the Company borrowed $50,000 cash and incurred $10,000 in loan fees. $12,000 of the note has a maturity date of May 19, 2015, $6,000 of the note has a maturity date of July 3, 2015, and $42,000 of the note has a maturity date of September 18, 2015.
On May 20, 2015 the Company defaulted on the note and the entire note interest per annum increased to 20%. The balance of the May 19, 2014 Note as of December 31, 2015 was $286,000 including $226,000 of accrued liquidating damages to date, net of debt discounts of $0 and December 31, 2014 was $22,339, net of debt discounts of $37,661.
June 3, 2014 Note
On June 3, 2014 the Company entered into a $6,250 unsecured convertible note for a $5,000 cash loan plus $1,250 in documentation fees the Company recorded as an administrative expense. The note bears interest at 0% per annum and has a maturity date of June 3, 2015. The note agreement contains a change in the interest rate to 10% default interest rate should the note go into default, interest accruing from the June 3, 2014 Note date. On June 4, 2015 the Company defaulted on the note and the note interest per annum increased to 10% accruing from the June 3, 2014 Note date. The balance of the June 3, 2014 Note as of December 31, 2015 was $6,250, net of debt discounts of $0 and December 31, 2014 was $3,613, net of debt discounts of $2,637.
August 13, 2014 Note
On August 13, 2014 the Company borrowed $33,000 pursuant to a discounted unsecured convertible note amount of $46,500 when the note matures. The $13,500 discount will be an administrative expense once the note matures. The note bears interest at 0% per annum, has a maturity date of February 13, 2015 and has a 12% default interest rate should the note go into default. The note agreement required 3,000,000,000 shares of Companys common stock to be reserved, but was canceled on September 23, 2014. On February 14, 2015 the Company defaulted on the note and the note interest per annum increased to 12%. The balance of the August 13, 2014 Note as of December 31, 2015 was $46,500, net of debt discounts of $0 and December 31, 2014 was $25,109, net of debt discounts of $7,891.
September 10, 2014 Note
On September 10, 2014 the Company entered into a $29,000 unsecured convertible note for $25,000 cash borrowed during the nine months ended June 30, 2012 plus $4,000 in loan fees the Company recorded as an administrative expense. The note bears interest at 8% per annum, has a maturity date of September 10, 2015, and accrues liquidating damages of $1,000 per day added to the principal balance of the note that may be settled to some lower amount at the time of payment in full. The note agreement contains a change in the interest rate to 20% default interest rate should the note go into default. On September 11, 2015 the Company defaulted on the note and the note interest per annum increased to 20%. The balance of the September 10, 2014 Note as of December 31, 2015 was $141,000 including $112,000 of accrued liquidating damages to date and December 31, 2014 was $29,000, both net of debt discounts of $0.
January 30, 2015 Note 1
On January 30, 2015 the Company borrowed $4,200 pursuant to a discounted unsecured convertible note amount of $5,040. The Company recorded the $840 discount at inception of the note. The note bears interest at 8% per annum and has a maturity date of January 30, 2016. The note agreement contains a change in the interest rate to 20% default interest rate or the highest allowed by law should the note go into default and requires the Company to reserve 100,000,000 shares of the Companys common stock. The balance of the January 30, 2015 Note 1 as of December 31, 2015 was $4,626, net of debt discounts of $414.
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Note 7 - Derivative Liability
The Companys derivative liability consists of the embedded conversion feature of its convertible notes payable. As the notes payable have conversion rates that prevent calculating the number of shares into which they can convert, the conversion feature has been separated from the underlying notes and valued as a derivative liability.
Prior to 2014, it was believed that previous management could cause the counterparties to overlook this conversion feature, and settle for the value of the notes themselves. So they estimated the fair value of the derivative liability was zero. In 2014, new management reassessed the nature of the notes payable and determined that a possibility exists that the conversion feature could be utilized by holders of the notes. As a result, the Company estimated the fair value of the derivative liability as of December 31, 2015 was $3,787,124 and December 31, 2014 was $2,250,243.
Following is a table showing activity in the derivative liability account.
Balance January 1, 2014 | $ | - |
Additions |
| - |
Deletions |
| - |
Change in derivative liability |
| 2,250,243 |
Balance December 31, 2014 |
| 2,250,243 |
Additions |
| 5,040 |
Deletions |
| - |
Change in derivative liability |
| 1,531,841 |
Balance December 31, 2015 | $ | 3,787,124 |
The derivative liability was valued using the Black Scholes option valuation model with the following inputs.
Expected life in years |
| 1.00 |
Stock price volatility |
| 202.0% |
Discount rate |
| 0.575% |
Expected dividends |
| None |
Note 8 - Notes Payable - Related Party
Unsecured related party notes payable balance net of discounts as of December 30, 2015 was $185,475, net of debt discounts of $0 and December 31, 2014 was $155,645, net of debt discounts of $19,355.
September 26, 2013 Note
On September 26, 2013 the Company issued an unsecured promissory note to Corporate Business Advisors, Inc. for $150,000 as part of a non-cash select assets and liabilities purchase agreement. The note bears no interest and has a maturity date of August 31, 2014. On September 1, 2014 the Company defaulted on the note. On May 18, 2015, the Company issued a second unsecured promissory note to Corporate Business Advisors, Inc. in regard to the defaulted September 26, 2013 Note which increased the note interest to 18% on all unpaid principal balances since the original note's balance was created and continues until the note principal balance is paid in full. The balance of the September 26, 2013 Note as of December 31, 2015 and December 31, 2014 was $150,000, net of debt discounts of $0.
December 17, 2014 Note
On December 17, 2014 the Company entered into a $25,000 unsecured convertible note with Corporate Business Advisors, Inc. for $24,500 in total cash loans to date plus $500 in documentation fees the Company recorded as an administrative expense. The note bears interest at 18% per annum, has a maturity date of February 17, 2015, and has a 24% default compound interest rate should the note remain in default after a five day grace period. On February 22, 2015 the Company remained defaulted on the note and the note interest increased to 24% compound interest. The balance of the December 17, 2014 Note as of December 31, 2015 was $30,475 including added accrued interest to date of $5,475, net of debt discounts of $0 and December 31, 2014 was $5,645, net of debt discounts of $19,355.
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January 30, 2015 Note 2
On January 30, 2015 the Company borrowed $4,500 pursuant to a discounted unsecured convertible note amount of $5,000. The Company recorded the $500 discount at inception of the note. The note bears interest at 18% per annum and has a maturity date of March 16, 2015. The note agreement contains a change in the interest rate to 24% default interest rate or the highest allowed by law should the note go into default. On March 17, 2015 the Company defaulted on the note and the note interest per annum increased to 24%. The balance of the January 30, 2015 Note 2 as of December 31, 2015 was $5,000, net of debt discounts of $0.
Note 9 - Derivative Liability Related Party
The Companys derivative liability related party consists of the embedded conversion feature of its convertible notes payable to a related party. As the notes payable to a related party have conversion rates that prevent calculating the number of shares into which they can convert, the conversion feature has been separated from the underlying notes and valued as a derivative liability related party. During the year ended 2014, the Company entered into one convertible note payable to a related party. The estimated fair value of derivative liability related party at December 31, 2015 was $57,766.
Following is a table showing activity in the derivative liability related party account.
Balance January 1, 2014 | $ | - |
Additions |
| - |
Deletions |
| - |
Change in derivative liability |
| 33,987 |
Balance December 31, 2014 |
| 33,987 |
Additions |
| 5,000 |
Deletions |
| - |
Change in derivative liability |
| 18,779 |
Balance December 31, 2015 | $ | 57,766 |
The derivative liability related party was valued using the Black Scholes option valuation model with the following inputs.
Expected life in years |
| 1.00 |
Stock price volatility |
| 202.0% |
Discount rate |
| 0.575% |
Expected dividends |
| None |
Note 10 Capital Lease
On September 1, 2014, the Company entered into a lease to own lease agreement for an office and warehouses 16,838 square foot portion of the propertys total 55,785 square foot space. The lease is considered a capital lease, therefore the building asset and an offsetting note payable has been recorded on the Companys books. Lease payments are $7,000 per month with $5,000 per month being applied to the $1,385,000 purchase price. On January 5, 2016, the Company entered into an unsecured promissory note for the unpaid rents and utilities for $109,500. The promissory note carries 0% interest and is due on January 5, 2017. On February 9, 2016, the Company entered into a new lease to own lease agreement for the same property to extend the term dates beyond the original agreement including extensions and to add an additional $100,000 due at closing as a hold over fee. In addition, the unpaid rents and utilities promissory note was accelerated to be due on June 30, 2016. These agreements that were entered into subsequent to the balance sheet date required retroactive reporting as of the balance sheet date. The balance of the February 9, 2016 capital lease agreement as of September 30, 2015 was $1,292,349. The balance of the September 1, 2014 capital lease agreement as of December 31, 2014 was $1,292,571.
The Company's capital lease mentioned above is classified as being owned by the Company and recorded in accordance with ASC 840-30 where an asset and liability are recorded at the present value of the minimum lease terms. The amendments to the lease described above resulted in an $84,913 adjustment to the net present value of the capital lease during the year ending December 31, 2015 in accordance with ASC 840-30-35.
F-20
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Following is a table showing the activity in the Capital Lease Payable account for the years ended December 31, 2015 and 2014.
Balance January 1, 2014 | $ | - |
Net present value at inception |
| 1,268,645 |
Payments on capital lease |
| (7,000) |
Accretion of present value of capital lease |
| 30,926 |
Balance December 31, 2014 |
| 1,292,571 |
Adjustment to net present value of capital lease |
| (85,913) |
Accretion of present value of capital lease |
| 85,691 |
Balance December 31, 2015 | $ | 1,292,349 |
Note 11 Equity
On May 20, 2013 and on June 12, 2014 the Company filed amendments with the Utah Secretary of State amending Article IV of the Corporation Articles of Incorporation such that the Authorized capital stock of the Company is as stated below.
Authorized capital stock consists of:
50,000,000,000 common shares with no par value; |
1,000,000 preferred Class A shares with a par value of $0.0001 per share; and |
10,000,000 preferred Class B shares with a par value of $2.50 per share. |
Changes in par values have been retroactively reported in the Company's financial statements.
A summary of the pertinent rights and privileges of the classes of preferred stock are as follows:
Class A Preferred Stock
Conversion Rights-Each outstanding share of Class A Preferred Stock shall be convertible, at the option of the holder into shares of Common Stock equal to (i) four times the total number of shares of Common Stock which are issued and outstanding at the time of such conversion plus (ii) the total number of shares of Class B Preferred Stock which are issued and outstanding at the time of such conversion minus (iii) the number of other shares of Class A Preferred Stock issued and outstanding immediately prior to the time of such conversions.
Voting Rights -The total aggregate issued shares of Class A Preferred Stock shall have aggregate right to a number of votes equal to (i) four times the total number of shares of Common Stock which are issued and outstanding at the time of voting, plus (ii) the total number of shares of Class B Stock which are issued and outstanding at the time of voting minus (iii) the number of shares of Class A Preferred Stock issued and outstanding at the time of voting.
Class B Preferred Stock
On May 20, 2013 and on June 12, 2014 the Company filed amendments with the Utah Secretary of State amending Article IV of the Corporation Articles of Incorporation such that the Authorized capital stock of the Company is as stated below for Class B Preferred Stock. The change in Class B Preferred Stocks par value to $2.50 has been retroactively reported in the Company's financial statements.
Dividends -Class B shareholders shall be entitled to receive dividends, when, as and if declared by the Board of Directors.
Conversion Rights -Each share of Class B Preferred Stock shall be convertible into the number of shares of Common Stock equal to the Class B Preferred Stock, $2.50 par value, to the proportional calculation of converting to common stock based on the total par value of the Class B Preferred Stock being converted, divided by the average closing price per share of the Companys common stock over the preceding 10 trading days.
Voting Rights -Each share of Class B Preferred Stock shall have ten votes.
F-21
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Common Stock
Common Shares Issued for Services
During the year ended December 31, 2015, the Company did not issue common stock as payment for services.
During the year ended December 31, 2014, the Company issued a total of 960,000,000 shares of common stock at an average per share purchase price of $0.00011, or $106,000. The Company issued these shares as payment for various outside services received including investor relations, consulting and marketing related services and recorded the value in general and administrative expenses during the year ended December 31, 2014.
Common Shares Issued for Cash
During the year ended December 31, 2015, the Company did not issue common stock as payment for cash.
During the year ended December 31, 2014, the Company issued a total of 4,063,188,182 shares of common stock for cash at an average price of $0.00003 or $133,896 in the aggregate and was valued at the purchase price according to the respective stock purchase agreement.
Common Shares Issued for Debt and Accrued Interest
During the year ended December 31, 2015, the Company did not issue common stock as payment for debt and accrued interest.
During the year ended December 31, 2014, the Company issued a total of 4,596,071,428 shares of common stock at an average price of $0.0001 or $459,606 in the aggregate, as discussed in Note 6 Notes Payable.
Common Stock converted to Class B Preferred Stock
During the year ended December 31, 2015, the Company did not issue Class B Preferred stock as conversion for common stock.
During the year ended December 31, 2014, 1,836,896,307 shares of Common Stock were converted to 183,690 shares of Class B Preferred Stock at the conversion rate of $0.00025.
Class A Preferred Stock
Class A Preferred Shares Issued for Cash
During the year ended December 31, 2015, the Company did not issue Class A Preferred stock as payment for cash.
During the year ended December 31, 2014, the Company issued a total of 2 shares of Class A Preferred stock for cash at an average price of $1,670 or $3,340 in the aggregate and was valued at the purchase price according to the respective stock purchase agreement.
Class B Preferred Stock
Class B Preferred Shares Issued for Cash
During the year ended December 31, 2015, the Company did not issue Class B Preferred stock as payment for cash.
During the year ended December 31, 2014, the Company issued a total of 441,930 shares of Class B Preferred stock for cash at an average price of $0.75 or $331,448 in the aggregate and was valued at the purchase price according to the respective stock purchase agreement.
Class B Preferred Stock converted to Common Stock
During the year ended December 31, 2015, the Company did not issue common stock as conversion for Class B Preferred stock.
During the year ended December 31, 2014, 700,000 shares of Class B Preferred Stock were converted to 1,750,000,000 shares of Common Stock at the conversion rate of $2.50.
F-22
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Subscription Receivable
In January 2014, the Company approved the issuance of 3,796,521,515 shares of Common Stock, 2 shares of Class A Preferred Stock, and 441,930 shares of Class B Preferred Stock to Shredderhotline.com Company for $448,683 in total cash and other assets to the Company. The terms of the sale was $44,868 cash and the remaining $403,815 as other assets to be transferred to the Company, recognized as Subscription Receivable on the Companys books. The balance of Subscription Receivable as of December 31, 2014 was $403,815. During the year ended December 31, 2015, $403,815 of Subscription Receivable was written off to expense. The balance of Subscription Receivable as of December 31, 2015 was $0. (Also see Note 1a.)
Note 12 Stock Options/Stock-Based Compensation and Warrants
During the years ended December 31, 2015 and 2014 no options or warrants were issued by the Company and no expense was recognized related to any outstanding options or warrants.
Changes in stock options for the years ended December 31, 2015 and 2014 consisted of the following:
| Number of shares |
| Weighted Average Exercise Price |
| Remaining Contractual Term (in years) |
| Intrinsic Value | ||
Beginning balance January 1, 2014 | 100,500,000 |
| $ | 0.01 |
| 0.84 |
| $ | - |
Granted | - |
|
|
|
|
|
|
|
|
Exercised | - |
|
|
|
|
|
|
|
|
Forfeited/expired | 100,000,000 |
| $ | 0.45 |
|
|
|
|
|
Outstanding at December 31, 2014 | 500,000 |
| $ | 0.45 |
| 0.04 |
| $ | - |
Granted | - |
|
|
|
|
|
|
|
|
Exercised | - |
|
|
|
|
|
|
|
|
Forfeited/expired | (500,000) |
| $ | 0.45 |
|
|
|
|
|
Outstanding at December 31, 2015 | - |
| $ | - |
| - |
| $ | - |
|
|
|
|
|
|
|
|
|
|
Exercisable at December 31, 2014 | 500,000 |
| $ | 0.45 |
| 0.04 |
| $ | - |
Exercisable at December 31, 2015 | - |
| $ | - |
| - |
| $ | - |
Note 13 Subsequent Events
The Company has evaluated subsequent events pursuant to ASC Topic 855 from the balance sheet date through the date of this filing and determined that the following subsequent events have occurred.
On January 5, 2016, the Company entered into an unsecured promissory note for the unpaid rents and utilities for $109,500. The promissory note carries 0% interest and is due on January 5, 2017. On February 9, 2016, the Company entered into a new lease to own lease agreement for the same property to extend the term dates beyond the original agreement including extensions and to add an additional $100,000 due at closing as a hold over fee. In addition, the unpaid rents and utilities promissory note was accelerated to be due on June 30, 2016.
On April 20, 2016 the Company borrowed $20,000 pursuant to a discounted secured convertible note. The note bears interest at 12% per annum and has a maturity date of April 20, 2017. The note agreement contains a change in the interest rate to 24% default interest rate should the note go into default and requires the Company to reserve 500,000,000 shares of the Companys common stock.
On April 20, 2016 the Company borrowed $20,000 pursuant to a discounted secured convertible note. The note bears interest at 12% per annum and has a maturity date of April 20, 2017. The note agreement contains a change in the interest rate to 24% default interest rate should the note go into default and requires the Company to reserve 500,000,000 shares of the Companys common stock.
F-23
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Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures.
Under the supervision and with the participation of our current management, including our Chief Executive Officer and Corporate Secretary as our Principal Accounting Officer (the Certifying Officers), we evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) under the Securities Exchange Act of 1934 (the Exchange Act)) as of December 31, 2015. Based upon that evaluation, the Certifying Officers concluded that, as of the end of the period covered by this report, our disclosure controls and procedures were not effective. We identified material weaknesses as discussed below in the report of management on internal control over financial reporting.
Report of Management on Internal Control over Financial Reporting.
Our current management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) under the Exchange Act. Our current internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles. The Certifying Officers evaluated the effectiveness of the Companys internal control over financial reporting and concluded that, as of the end of the period covered by this report, the Companys internal control over financial reporting was not effective. Our internal control over financial reporting 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 our assets;
(ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and
(iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of assets that could have a material effect on the financial statements.
Management conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and has concluded that as of the end of the period covered by this report, our internal control over financial reporting was not effective.
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement to the Companys annual or interim financial statements will not be prevented or detected. In connection with our evaluation of the effectiveness of our internal control over financial reporting, management identified the following material weaknesses:
·
We lacked the controls necessary to ensure timely filings of our SEC filings,
·
We lacked the controls necessary to ensure recorded amounts were accurately stated (resulting in multiple audit adjustments), and
·
We lacked sufficient segregation of duties.
We believe that our consolidated financial statements contained in this Annual Report on Form 10-K fairly present our financial position, results of operations and cash flows for the fiscal year ended December 31, 2015 in all material respects.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.
This Annual Report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Managements Report was not subject to attestation by the companys registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit us to provide only Managements Report in this Annual Report.
11
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Changes in Internal Control Over Financial Reporting.
There has been a change in our internal control over financial reporting during the year ended December 31, 2015 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. The Company is utilizing an outside accountant to review monthly expenses to ensure all moneys used are for business expenditures only.
Item 9B. Other Information
In order for the Company to have effective and strong internal controls over financial reporting, we believe the Company needs to be able to financially support bringing in-house the accounting and financial reporting functions. Management will be bringing in-house the accounting and financial reporting functions once we have consistent revenues to justify adding additional employees. This will include the Company obtaining a full time Chief Financial Officer.
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PART III
Item 10. Directors, Executive Officers and Corporate Governance
The following sets forth information about our current directors and officers of the Company.
Name |
| Age |
| Position |
Tammy Taylor |
| 48 |
| CEO, President, Director, (Principal Financial Officer) |
M. Aimee Coleman |
| 43 |
| Corporate Secretary (Principal Accounting Officer) |
The term of office of each director is one year or until his or her successor is elected at the Companys annual meeting and qualified. The term of office for each officer of the Company is at the pleasure of the Board.
Tammy Taylor has been our President and Chief Executive Officer since August 21, 2013. With over 25 years combined experience in the business, sales, real estate and human services industries and as a business owner for over 10 years, Ms. Taylor has gained a wealth of experience in all aspects of running a successful company. Ms. Taylor has the ability to be strategic, detailed and thorough when presented with any type of business challenge. Mr. Taylor has the ability to analyze an issue and then develop and implement successful solutions in the development of new businesses and markets. With her combined experience in a number of business industries, Ms. Taylor serves with passion and is driven to make any professional experience a success.Ms. Taylor has been a licensed real estate agent in Florida since 2005 and the President of Tammy Taylor, PA, a company she founded in 2008 that has been engaged in locating buyers and sellers of commercial and residential properties. Ms. Taylor founded Hope4UsNow, Inc. in 2012 and The Kindness Wave, Inc. in 2011 which operate online inspirational communities. Ms. Taylor served as a board member of the Pinellas Realtor Organization and the Florida Realtors Association from 2008 to 2010. She is also the former Chairman of the International Council for the Pinellas Realtor Organization in 2010 and has served on the Grievance, Government Relations and Political Action Committees 2008 to 2010. Ms. Taylor earned sales and service awards six consecutive years as a realtor since 2005, including top new real estate agent in Pinellas County, Florida. She has also been a spokesperson for the American Cancer Society. Ms. Taylor earned a B.A. in Business/Organizational Development from Rosemont College in 1988.
We believe that Ms. Taylors significant business, sales and management experience qualifies her to serve as a member of our board.
M. Aimee Coleman has been our Corporate Secretary and Principal Accounting Officer since August 28, 2013. Ms. Coleman has over 25 years of accounting and office management experience. Her experience includes major accounting and business software applications, attention to back office operations that have provided major contributions to companies operations. She has proved to be instrumental in the accurate and timely efforts required to move companies forward as quickly as possible including her current position as bookkeeper at Brookridge Community Property Owners, Inc. where she has been employed since November 2008. In 1994, Ms. Coleman received an Associate in Arts and Sciences degree in Chemistry from Community College of the Finger Lakes.
Family Relationships
There are no family relationships among any of our officers and directors.
Conflicts of Interest
There are no conflicts of interest that are inherent in the relationships between our officers and directors.
Involvement in Certain Legal Proceedings
To the best of our knowledge, none of our directors or executive officers has been convicted in a criminal proceeding, excluding traffic violations or similar misdemeanors, or has been a party to any judicial or administrative proceeding during the past 10 years that resulted in a judgment, decree, or final order enjoining the person from future violations of, or prohibiting activities subject to, federal or state securities laws, or a finding of any violation of federal or state securities laws, except for matters that were dismissed without sanction or settlement. Except as set forth in our discussion below in Certain Relationships and Related Transactions, and Director IndependenceTransactions with Related Persons, none of our directors, director nominees, or executive officers has been involved in any transactions with us or any of our directors, executive officers, affiliates, or associates which are required to be disclosed pursuant to the rules and regulations of the Commission.
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Corporate Governance
Our board has not established any committees, including an audit committee, a compensation committee or a nominating committee, or any committee performing a similar function. The functions of those committees are being undertaken by our board. Because we do not have any independent directors, our board believes that the establishment of committees of our board would not provide any benefits to our Company and could be considered more form than substance.
We do not have a policy regarding the consideration of any director candidates that may be recommended by our stockholders, including the minimum qualifications for director candidates, nor have our officers and directors established a process for identifying and evaluating director nominees. We have not adopted a policy regarding the handling of any potential recommendation of director candidates by our stockholders, including the procedures to be followed. Our officers and directors have not considered or adopted any of these policies as we have not received a recommendation from any stockholder for any candidate to serve on our board of directors.
Given our relative size and lack of directors and officers insurance coverage, we do not anticipate that any of our stockholders will make such a recommendation in the near future. While there have been no nominations of additional directors proposed, in the event such a proposal is made, all current members of our board will participate in the consideration of director nominees.
As with most small, early stage companies until such time as our Company further develops our business, achieves a stronger revenue base and has sufficient working capital to purchase directors and officers insurance, we do not have any immediate prospects to attract independent directors. When we are able to expand our board to include one or more independent directors, we intend to establish an audit committee of our board of directors. It is our intention that one or more of these independent directors will also qualify as an audit committee financial expert. Our securities are not quoted on an exchange that has requirements that a majority of our board members be independent and we are not currently otherwise subject to any law, rule or regulation requiring that all or any portion of our board of directors include independent directors, nor are we required to establish or maintain an audit committee or other committee of our board.
Code of Ethics
The Company has adopted a written code of ethics applicable to its principal executive officer, principal financial officer, principal accounting officer, or persons performing similar functions, which complies with the requirement to adopt such a code of ethics and is available on the Companys website at www.garbreorg.com. We intend to post any amendments to the code, or any waivers of its requirements related to certain matters, on our website.
Board Oversight in Risk Management
Risk is inherent with every business, and how well a business manages risk can ultimately determine its success. We face a number of risks, including liquidity risk, operational risk, strategic risk and reputation risk. Our Chief Executive Officer also serves as our sole director and therefore, we do not have a lead director. In the context of risk oversight, at the present stage of our operations, we believe that our selection of one person to serve in both positions provides the board with additional perspective which combines the operational experience of a member of management with the oversight focus of a member of the board. The business and operations of our company are managed by our board as a whole, including oversight of various risks that our company faces.
Section 16 Compliance
Section 16(a) of the Exchange Act requires the Companys directors and executive officers, and persons who own more than 10% percent of a registered class of the Companys equity securities, to file with the Securities and Exchange Commission initial reports of ownership and reports of changes in ownership of common stock and other equity securities of the Company. Officers, directors and greater than 10% shareholders are required by SEC regulations to furnish the Company with copies of all Section 16(a) forms they file. To the Companys knowledge, based solely on review of the copies of such reports furnished to the Company and written representations that no other reports were required, during the fiscal year ended December 31, 2015 all Section 16(a) filing requirements applicable to its officers, directors and greater than 10% beneficial owners were complied with.
Item 11. Executive Compensation
2015 Summary Compensation Table
The following table is the information pertaining to the total compensation for both the Companys current and former executive officers for the fiscal years ended December 31, 2015 and December 31, 2014.
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Name and Principal Position |
| Fiscal Year |
|
| Salary ($) |
|
| Bonus ($) |
| Total ($) | |
Tammy Taylor (1) |
| 2015 |
| $ | 120,000 |
| $ | - |
| $ | 120,000 |
Current Chief Executive Officer |
| 2014 |
| $ | 120,000 |
|
| - |
| $ | 120,000 |
|
|
|
|
|
|
|
|
|
|
|
|
M Aimee Coleman (1) |
| 2015 |
| $ | 13,000 |
| $ | - |
| $ | 13,000 |
Current Corporate Secretary |
| 2014 |
| $ | 13,000 |
| $ | - |
| $ | 13,000 |
(1)
Mss. Taylor and Coleman have been the Companys current executive officers in their respective capacity since August 21, 2013.
All or substantially all of the listed salary amounts for current officers were being accrued rather than paid in cash.
The Company currently has two employment agreements with its officers or directors and has no retirement, profit sharing, pension or insurance plans, agreements or understanding covering them.
Compensation of Directors
The Companys directors received no compensation. Directors who are or were also employees (only Ms. Taylor) are not paid for board services in addition to their regular employee compensation.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
A change in control of the Company occurred on August 21, 2013.
The following tables set forth certain information, as of May 9, 2016, with the respect of beneficial ownership of the Companys outstanding common stock and preferred stock by (i) any holder of more than five (5%) percent, (ii) each of the Companys executive officers and directors and (iii) the Companys executive officers and directors as a group.
Unless otherwise indicated, the business address of each person listed is in care of Garb Oil & Power Corporation, 1185 Gooden Xing, Building C, Largo FL 33778. Except as otherwise indicated, the persons listed below have sole voting and investment power with respect to all shares of the Companys stock owned by them.
Class A Preferred Stock (1)
Name and Address of Stockholder |
| Amount and Nature of Beneficial Ownership |
| Percentage of Preferred Classes (1) |
Tammy Taylor(2) |
| 2 (3) |
| 8.3% |
M. Aimee Coleman (4) |
| 1 |
| 4.2% |
|
|
|
|
|
All executive officers and directors as a group (two persons) |
| 3 |
| 12.5% |
|
|
|
|
|
Corporate Business Advisors, Inc.(5) Rachelle Hoffmann, President and Registered Agent |
| 19 (1) |
| 79.2% |
Dan Scott Burda |
| 2 |
| 8.3% |
(1)
The voting rights of each share of the Class A Preferred Stock is equal to its percent of total outstanding Class A Preferred Shares times the product of four times the sum of all other outstanding classes of the Companys stock (Class B Preferred Stock and Common Stock). As of May 9, 2016 there are 24 shares of Class A Preferred Stock outstanding with each share of Class A Preferred Stock holding 7,933,666,396 voting rights, a total of 190,407,993,496 votes in the aggregate.
(2)
Tammy Taylor is the Companys Director, Chief Executive Officer and President and is the President of Hope4UsNow, Inc.
(3)
The number of shares owned by Ms. Taylor includes 2 shares of the Class A Preferred Stock currently outstanding and owned by Hope4UsNow, Inc. Ms. Taylor has voting and dispositive control over securities held by Hope4UsNow, Inc.
(4)
M. Aimee Coleman is the Corporate Secretary and Principal Accounting Officer.
(5)
Ms. Rachelle Hoffman who is the President of Corporate Business Advisors, Inc. has voting and dispositive control over securities held by Corporate Business Advisors, Inc.
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Class B Preferred Stock
Name and Address of Stockholder |
| Amount and Nature of Beneficial Ownership |
| Percentage of Preferred Classes (1) |
Tammy Taylor(2) |
| 0 |
| 0% |
M. Aimee Coleman (3) |
| 0 |
| 0% |
|
|
|
|
|
All executive officers and directors as a group (two persons) |
| 0 |
| 0% |
|
|
|
|
|
Corporate Business Advisors, Inc.(4) |
| 3,600,000 |
| 81.4% |
Dan Scott Burda |
| 441,930 |
| 10.0% |
(1)
Each share of Class B Preferred Stock is entitled to 10 votes per share. As of May 9, 2016 there are 4,419,918 shares of Class B Preferred Stock outstanding with each share of Class B Preferred Stock holding 10 voting rights, a total of 44,199,180 votes.
(2)
Ms. Taylor is Director, Chief Executive Officer and President is the President of Hope4UsNow, Inc. Ms. Taylor has voting and dispositive control over securities held by Hope4UsNow, Inc.
(3)
Ms. Coleman is the Companys Corporate Secretary and Principal Accounting Officer.
(4)
Ms. Rachelle Hoffman who is the President of Corporate Business Advisors, Inc. has voting and dispositive control over securities held by Corporate Business Advisors, Inc.
Common Stock
Name and Address of Stockholder |
| Amount and Nature of Beneficial Ownership |
| Percentage of Common (1) |
Tammy Taylor(2) |
| 566,666,667 (2) |
| 1.2% |
M. Aimee Coleman (3) |
| 600,000,000 |
| 1.3% |
|
|
|
|
|
All executive officers and directors as a group (two persons) |
| 1,166,666,667 |
| 2.5% |
|
|
|
|
|
Corporate Business Advisors, Inc.(4) |
| 2,350,000,000 |
| 4.9% |
Dan Scott Burda |
| 3,796,521,515 |
| 8.0% |
(1)
Amounts based on 47,497,578,456 shares of Common Stock outstanding as of May 9, 2016.
(2)
Ms. Taylor is Director, Chief Executive Officer and President who is Managing Director of Hope4UsNow, Inc. that owns 300,000,000 Common shares. Ms. Taylor has voting and dispositive control over securities held by Hope4UsNow, Inc. She is also partial owner of The Kindness Wave, Inc. that purchased 266,666,667 Common shares.
(3)
Ms. Coleman is the Corporate Secretary and Principal Accounting Officer.
(4)
Ms. Rachelle Hoffman who is the President of Corporate Business Advisors, Inc. has voting and dispositive control over securities held by Corporate Business Advisors, Inc.
Item 13. Certain Relationships and Related Transactions, and Director Independence
On August 21, 2013, the Company executed an employment agreement with Tammy Taylor. Ms. Taylors starting base salary approved by the Board was $10,000 per month. To date the Board has not approved a change in Ms. Taylors starting salary amount. The terms of employment for the length of employment service included in Ms. Taylors employment agreement is open ended, at will for both parties, except for agreement violations remedies as specified.
On August 28, 2013, the Company executed an employment agreement with M Aimee Coleman. The Board approved Ms. Coleman starting part time at $250 per week, with hours over 10 hours a week at the hourly rate of $25 per hour. To date the Board has not approved a change to Ms. Colemans starting part time status or weekly wage amount. The terms of employment for the length of employment service included in Ms. Colemans employment agreement is open ended, at will for both parties, except for agreement violations remedies as specified.
Accounts payable to related parties was $12,120 and $3,947 as of the years ended December 31, 2015 and 2014, respectively.
Notes payable to related parties was $180,475 and $155,645 as of the years ended December 31, 2015 and 2014, respectively.
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Director Independence
We did not, during the fiscal year ended December 31, 2015, and currently, we do not, have any independent directors. Because our common stock is not currently listed on a national securities exchange, we have used the definition of independence of The NASDAQ Stock Market to make this determination.
The Companys board of directors does not have a separately designated audit, nominating or compensation committee.
Item 14. Principal Accountant Fees and Services
The following table shows the fees that were billed for the audit and other services for the fiscal years ended December 31, 2015 and December 31, 2014.
| 2015 |
| 2014 | ||
Audit Fees | $ | 32,750 |
| $ | 32,700 |
Audit-related Fees |
| - |
|
| - |
Tax Fees |
| - |
|
| - |
All other fees |
| - |
|
| - |
Total Fees | $ | 32,750 |
| $ | 32,700 |
Audit Fees This category includes the audit of our annual financial statements, review of financial statements included in our quarterly reports and services that are normally provided by the independent registered public accounting firm in connection with engagements for those years and services that are normally provided by our independent registered public accounting firm in connection with statutory audits and Securities and Exchange Commission regulatory filings or engagements.
Audit-Related Fees This category consists of assurance and related services by the independent registered public accounting firm that are reasonably related to the performance of the audit or review of our financial statements and are not reported above under Audit Fees.
Tax Fees This category consists of professional services rendered by our independent registered public accounting firm for tax compliance and tax advice. The services for the fees disclosed under this category include tax return preparation and technical tax advice.
Other Fees This category consists of fees for the audits on the financial statements of our client companies and all other miscellaneous items.
Pre-Approval Policies and Procedure for Audit and Permitted Non-Audit Services
The Company has not adopted any written pre-approval policies or procedures as described in paragraph (c)(7)(i) of Rule 2.01 of Regulation S-X.
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PART IV
Item 15. Exhibits and Financial Statement Schedules
(a)(1)
Financial Statements
The consolidated financial statements and Report of Independent Registered Public Accounting Firm are listed in the Index to Financial Statements on page F-1 and included on pages F-2 through F-26.
(2)
Financial Statement Schedules
All other schedules are omitted as the required information is either inapplicable or it is presented in the consolidated financial statements and notes thereto.
(3)
Exhibits
The Exhibits required by Item 601 of Regulation S-K are listed in paragraph (b) below.
(b) Exhibits
The following exhibits are filed or furnished herewith or are incorporated herein by reference to exhibits previously filed with the SEC.
Exhibit No. |
| Description |
| Location |
31.1 |
| Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer and Principal Financial Officer. |
| Filed herewith. |
31.2 |
| Rule 13a-14(a)/15d-14(a) Certification of Principal Accounting Officer. |
| Filed herewith. |
32.1 |
| Certification of Chief Executive Officer, Principal Financial Officer and Principal Accounting Officer Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
| Filed herewith. |
101.INS |
| XBRL Instance Document |
| Filed herewith. |
101.SCH |
| XBRL Taxonomy Extension Schema Document |
| Filed herewith. |
101.CAL |
| XBRL Taxonomy Extension Calculation Linkbase Document |
| Filed herewith. |
101.DEF |
| XBRL Taxonomy Extension Definition Linkbase Document |
| Filed herewith. |
101.LAB |
| XBRL Taxonomy Extension Label Linkbase Document |
| Filed herewith. |
101.PRE |
| XBRL Taxonomy Extension Presentation Linkbase Document |
| Filed herewith. |
(c) None.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
|
| GARB OIL & POWER CORPORATION |
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|
|
Date: May 18, 2016 | By: | /s/ Tammy Taylor |
|
| Tammy Taylor, Chief Executive Officer |
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Signature |
| Title |
| Date |
|
|
|
|
|
/s/ Tammy Taylor |
| Chief Executive Officer and Director (principal executive officer and principal financial officer) |
| May 18, 2016 |
Tammy Taylor |
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|
|
|
/s/ M. Aimee Coleman |
| Corporate Secretary (principal accounting officer) |
| May 18, 2016 |
M. Aimee Coleman |
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|
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