ITEM 1. BUSINESS
Description of Business and History
Evergreen-Agra Inc. (hereinafter referred to as the "Company") was incorporated on June 13, 2008 by filing Articles of Incorporation under the Nevada Secretary of State. The Company was incorporated under the name AMF Capital Group, Inc. In June 2009, the Company changed its name to Blackrock Resources, Inc. In January 2010 the Company changed its name to Artepharm Global Corp. Effective July 20, 2011, the Company changed its name to Sharprock Resources Inc. Effective October 23, 2013 the Company changed its name to Evergreen-Agra, Inc. During the Company's quarter ended September 30, 2011, the Company shifted its focus from mineral exploration to organic veterinary medical products. In the quarter ended December 31, 2013, the Company shifted its focus to medical marijuana coincident with its acquisition of Evergreen Systems effective November 19, 2013.
On November 19, 2013, pursuant to a letter of intent dated September 10, 2013, the Company issued 20,000,000 post-split shares of its common stock to Rene Hamouth in exchange for 100% ownership of Evergreen Systems ("ES"). Except for conducting research on the medical marijuana industry, ES had no assets, liabilities, or business operations prior to the acquisition. At closing, the Company also issued 19,600,000 post-split shares of its common stock to Harpreet Sangha (then director and former chief executive officer of the Company from September 19, 2009 to September 1, 2013) for future services to be rendered and 1,000,000 post-split shares of its common stock to Richard Specht (secretary and director of the Company from September 1, 2013 to November 21, 2014) for services rendered. ES became a wholly owned subsidiary of the Company.
The acquisition resulted in a change of control of the Company on November 19, 2013. The accompanying consolidated financial statements reflect the assets, liabilities and operations of Evergreen Systems from its inception on August 15, 2013 to November 19, 2013 and are consolidated with Evergreen-Agra, Inc. thereafter.
Search for Business Opportunities
The Company's search will be directed toward medical marijuana assets and small and medium-sized enterprises in that industry which have a desire to become reporting corporations and which are able to provide audited financial statements. While the Company is focused on the medical marijuana industry, the Company does not propose to restrict its search for investment opportunities to any particular geographical area or solely to that industry, and may, therefore, engage in essentially any business, to the extent of its limited resources. The Company's discretion in the selection of business opportunities is unrestricted, subject to the availability of such opportunities, economic conditions, and other factors. No assurance can be given that the Company will be successful in finding or acquiring a desirable business opportunity, and no assurance can be given that any acquisition, which does occur, will be on terms that are favorable to the Company or its current stockholders.
The Company may merge with a company that has retained one or more consultants or outside advisors. In that situation, the Company expects that the business opportunity will compensate the consultant or outside advisor. As of the date of this filing, there have been no discussions, agreements or understandings with any party regarding the possibility of a merger or acquisition between the Company and such other company. Consequently, the Company is unable to predict how the amount of such compensation would be calculated at this time.
The Company will not restrict its search to any specific kind of firm or type of assets, but may acquire a venture, which is in its preliminary or development stage, one which is already in operation, or in a more mature stage of its corporate existence, or simply acquire assets from which it will build its (desire to have its shares publicly traded, or may seek other perceived advantages which the Company may offer.
Evaluation of Business Opportunities
The analysis of business opportunities will be under the supervision of the Company's management and directors, who are not professional business analysts. In analyzing prospective business opportunities, management will consider such matters as available technical, financial and managerial resources; working capital and other financial requirements; history of operations, if any; prospects for the future; nature of present and expected competition; the quality and experience of management services which may be available and the depth of that management; the potential for further research, development, or exploration; specific risk factors not now foreseeable, but which then may be anticipated to impact the proposed activities of the Company; the potential for growth or expansion; the potential for profit; the perceived public recognition or acceptance of products, services, or trades; name identification; and other relevant factors. In many instances, it is anticipated that the historical operations of a specific business opportunity may not necessarily be indicative of the potential for the future because of a variety of factors, including, but not limited to, the possible need to expand substantially, shift marketing approaches, change product emphasis, change or substantially augment management, raise capital and the like. To the extent possible, the Company intends to utilize written reports and personal investigation to evaluate the above factors. Prior to making a decision to participate in a business opportunity, the Company will generally request that it be provided with written materials regarding the business opportunity containing as much relevant information as possible, including, but not limited to, such items as a description of products, services and company history; management resumes; financial information; available projections, with related assumptions upon which they are based; an explanation of proprietary products and services; evidence of existing patents, trademarks, or service marks, or rights thereto; present and proposed forms of compensation to management; a description of transactions between such company and its affiliates during the relevant periods; a description of present and required facilities;, an analysis of risks and competitive conditions; a financial plan of operation and estimated capital requirements; audited financial statements, or if they are not available at that time, unaudited financial statements, together with reasonable assurance that audited financial statements would be able to be produced within a required period of time; and the like.
The Company is currently subject to the reporting requirements of the Exchange Act. Under the Exchange Act, any merger or acquisition candidate will become subject to the same reporting requirements of the Exchange Act as the Company following consummation of any merger or acquisition. Thus, in the event the Company successfully completes the acquisition of or merger with an operating business entity, that business entity must provide audited financial statements for at least two most recent fiscal years or, in the event the business entity has been in business for less than two years, audited financial statements will be required from the period of inception. Acquisition candidates that do not have or are unable to obtain the required audited statements will not be considered appropriate for acquisition.
Management believes that various types of potential merger or acquisition candidates might find a business combination with the Company to be attractive. These include acquisition candidates desiring to create a public market for their shares in order to enhance liquidity for current stockholders, acquisition candidates which have long-term plans for raising capital through public sale of securities and believe that the possible prior existence of a public market for their securities would be beneficial, and acquisition candidates which plan to acquire additional assets through issuance of securities rather than for cash, and believe that the possibility of development of a public market for their securities will be of assistance in that process. Acquisition candidates, who have a need for an immediate cash infusion, are not likely to find a potential business combination with the Company to be an attractive alternative. Nevertheless, the Company has not conducted market research and is not aware of statistical data which would support the perceived benefits of a merger or acquisition transaction for the owners of a business opportunity. The Company is unable to predict when it may participate in a business opportunity. It expects, however, that the analysis of specific proposals and the selection of a business opportunity may take several months or more. There can also be no assurances that we are able to successfully pursue a business opportunity. In that event, there is a substantial risk to the Company that failure to complete a business combination will significantly restrict its business operation and force management to cease operations and liquidate the Company.
Bankruptcy or similar proceedings
We have not been the subject of a bankruptcy, receivership or similar proceedings.
Competition
We operate in a highly competitive industry, many of our competitors have financial resources, staff and facilities substantially greater than ours. The principal area of competition is encountered in the financial ability to cost effectively acquire prospects and then exploit such prospects. Competition for the acquisition of exploration properties is intense, with many properties available in a competitive bidding process in which we may lack technological information or expertise available to other bidders. Therefore, we may not be successful in acquiring, exploring and developing profitable properties in the face of this competition. No assurance can be given that a sufficient number of suitable exploration properties will be available for acquisition, exploration and development.
Employees
We have no significant employees other than our officers and directors. We plan to retain independent consultants on a contract basis to conduct the work to carry out our plan of operations.
Research and Development Expenditures
We have not incurred any research or development expenditures since our incorporation.
Subsidiaries
Our Company has one subsidiary business: Evergreen Systems.
Patents and Trademarks
We do not own, either legally or beneficially, any patent or trademark.
Reports to Securities Holders
We provide an annual report that includes audited financial information to our shareholders. We will make our financial information equally available to any interested parties or investors through compliance with the disclosure rules of Regulation S-K for a small business issuer under the Securities Exchange Act of 1934. We are subject to disclosure filing requirements including filing Form 10-K annually and Form 10-Q quarterly. In addition, we will file Form 8-K and other proxy and information statements from time to time as required. We do not intend to voluntarily file the above reports in the event that our obligation to file such reports is suspended under the Exchange Act. The public may read and copy any materials that we file with the Securities and Exchange Commission, ("SEC"), at the SEC's Public Reference Room at 100 F Street NE, Washington, DC 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains an Internet site (http://www.sec.gov) that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC.
ITEM 1A.
ITEM 1A. RISK FACTORS
We are a company that is investigating the medical marijuana industry and we expect to incur operating losses for the foreseeable future.
The Company shifted its focus to medical marijuana coincident with its acquisition of Evergreen Systems from November 19, 2013. We have no way to evaluate the likelihood that our business will be successful. We have earned no revenues as of the date of this annual report. Potential investors should be aware of the difficulties normally encountered by early stage companies and the high rate of failure of such enterprises. The likelihood of success must be considered in light of the problems, expenses, difficulties, complications and delays encountered in connection with the development of the business plan we undertake. These potential problems include, but are not limited to, unanticipated problems relating to additional costs and expenses that may exceed current estimates. Prior to realization of our business plan, we anticipate that we will incur increased operating expenses without any significant revenues. We expect to incur significant losses into the foreseeable future. We recognize that if success is not forthcoming, we will not be able to continue business operations. There is no history upon which to base any assumption as to the likelihood that we will prove successful, and it is doubtful that we will generate significant revenues to achieve profitable operations. If we are unsuccessful in addressing these risks, our business will most likely fail.
We may not be able to continue as a going concern if we do not obtain additional financing.
Our independent accountants' audit report states that there is substantial doubt about our ability to continue as a going concern. We had negative working capital of $993,865 at December 31, 2015 and have had no revenues from inception on August 15, 2013. Therefore, our ability to continue as a going concern is highly dependent upon obtaining additional financing for our planned operations. There can be no assurance that we will be able to raise any additional funds, or if we are able to raise additional funds, that such funds will be in the amounts required or on terms favorable to us.
Our competition is intense in all phase of our business.
We operate in a highly competitive industry, competing with other companies, in the medical marijuana business. Many of our competitors have financial resources, staff and facilities substantially greater than ours. We are subject to regulation by a number of governmental entities at the Federal, State, and Local levels. We are also subject to laws and regulations relating to business corporations in general. In recent years, Congress and State legislatures have introduced an increasing number of proposals to make significant changes in the healthcare system. Changes in law and regulatory interpretations could reduce our revenue and profitability.
Corporate Practice of Medicine and Other Laws
Every State in which our business operates or in which we anticipate it will operate limits the practice of medicine to licensed individuals or professional organizations comprised of licensed individuals. We will structure all operations to comply with applicable State statutes regarding corporate practice of veterinary medicine, distribution and similar issues. However, there can be no assurance that private parties, or courts or governmental officials with the power to interpret or enforce these regulations, will not assert that we are in violation of such laws and regulations. That future interpretations of such laws and regulations will not require us to modify the structure and organization of our business, or that any such enforcement action, which could subject us and our affiliated professional groups to penalties or restructuring or reorganization of our business, will not adversely affect our business or results of operations.
Environmental
Although we currently contract with providers, who are responsible for compliance with environmental laws, our operations may be subject to various Federal, State, and Local laws and regulations relating to the protection of human health and the environment, including those governing the management and disposal of infectious medical waste and other waste generated and the cleanup of contamination. If an environmental regulatory agency finds any of our facilities to be in violation of environmental laws, penalties and fines may be imposed for each day of violation and the affected facility could be forced to cease operations. The responsible party could also incur other significant costs, such as cleanup costs or claims by third parties, as a result of violations of, or liabilities under, environmental laws. Although we believe that our independent medical providers' environmental practices, including waste handling and disposal practices, will be in material compliance with applicable laws, future claims or violations, or changes in environmental laws, could have an adverse effect on our business.
Competition
There are a number of companies who are involved in the cultivation and distribution of medical marijuana, but the interest in developing products for the veterinary healthcare market is extremely limited. We anticipate that new companies enter the industry will increase in competition resulted from the new laws adopted by the States of Colorado and Washington permitting the sale of marijuana for recreational use.
We depend on key management personnel.
The success of our operations and activities is dependent to a significant extent on the efforts and abilities of our management. We do not maintain key-man life insurance on any of our officers. A loss of any of them could adversely affect our business.
We have requirements for and there is an uncertainty of access to additional capital.
At December 31, 2015, the Company had negative working capital of $993,865. Further, the Company has had no revenues from inception on August 15, 2013. Ultimately, our ability to continue our business activities depends in part on our ability to commence operations to generate revenues or to obtain financing through joint ventures, debt financing, equity financing, production sharing agreements or some combination of these or other means. There can be no assurance that we will be able to obtain any such financing.
We have no cash flow from operations and depend on equity financing for our operations.
Our current operations do not generate any cash flow. Any work on any business projects we may acquire may require additional equity financing. If we seek funding from joint venture partners, our project interests will be diluted. If we seek additional equity financing, the issuance of additional shares will dilute the current interests of our shareholders. We may not be able to obtain additional funding to allow us to fulfill our obligations on any future business properties. Our failure to obtain such additional financing could result in delay or indefinite postponement of the realization of future projects and the possible partial or total loss of our potential interest in certain projects or dilution of our interest in certain projects which would have a material adverse effect on our business.
Our directors and officers are indemnified for any monies they pay in settlement of actions performed while a director or officer.
Sections 78.7502 and 78.751 of the Nevada Revised Statutes provide for indemnification of our officers and directors in certain situations where they might otherwise personally incur liability, judgments, penalties, fines and expenses in connection with a proceeding or lawsuit to which they might become parties because of their position with our Company. We have authorized the indemnification of our officers and directors to the full extent available under the Nevada Revised Statutes.
Risks Related to Our Common Stock
The trading price of our common stock may be volatile.
The price of our common shares may increase or decrease in response to a number of events and factors, including: trends in the industry in which we operate; changes in the market price of gold; current events affecting the global economic situation; changes in financial estimates; our acquisitions and financings; quarterly variations in our operating results; the operating and share price performance of other companies that investors may deem comparable; and purchase or sale of blocks of our common shares. These factors, or any of them, may materially adversely affect the prices of our common shares regardless of our operating performance.
A decline in the price of our common stock could affect our ability to raise further working capital and adversely impact our operations.
A decline in the price of our common stock could result in a reduction in the liquidity of our common stock and a reduction in our ability to raise additional capital for our operations. Because our operations to date have been principally financed through the sale of equity securities, a decline in the price of our common stock could have an adverse effect upon our liquidity and our continued operations. A reduction in our ability to raise equity capital in the future would have a material adverse effect upon our business plan and operations, including our ability to continue our current operations. If our stock price declines, we may not be able to raise additional capital or generate funds from operations sufficient to meet our obligations.
Our stock is a penny stock. Trading of our stock may be restricted by the SEC's penny stock regulations and FINRA's sales practice requirements, which may limit a stockholder's ability to buy and sell our stock.
Our common stock is subject to the "Penny Stock" Rules of the SEC, which will make transactions in our common stock cumbersome and may reduce the value of an investment in our common stock.
Our common stock is quoted on the OTC Markets, which is generally considered to be a less efficient market than markets such as NASDAQ or the national exchanges, and which may cause difficulty in conducting trades and difficulty in obtaining future financing. Further, our securities will be subject to the "penny stock rules" adopted pursuant to Section 15(g) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). The penny stock rules apply generally to companies whose common stock trades at less than $5.00 per share, subject to certain limited exemptions. Such rules require, among other things, that brokers who trade "penny stock" to persons other than "established customers" complete certain documentation, make suitability inquiries of investors and provide investors with certain information concerning trading in the security, including a risk disclosure document and quote information under certain circumstances. Many brokers have decided not to trade "penny stock" because of the requirements of the "penny stock rules" and, as a result, the number of broker-dealers willing to act as market makers in such securities is limited. In the event that we remain subject to the "penny stock rules" for any significant period, there may develop an adverse impact on the market, if any, for our securities. Because our securities are subject to the "penny stock rules", investors will find it more difficult to dispose of our securities. Further, it is more difficult: (i) to obtain accurate quotations, (ii) to obtain coverage for significant news events because major wire services, such as the Dow Jones News Service, generally do not publish press releases about such companies, and (iii) to obtain needed capital.
In addition to the "penny stock" rules promulgated by the SEC, FINRA has adopted rules that require a broker-dealer to have reasonable grounds for believing that an investment is suitable for a customer when recommending the investment to that customer. Prior to recommending speculative low-priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer's financial status, tax status, investment objectives and other information. Under interpretations of these rules, FINRA believes that there is a high probability that speculative low priced securities will not be suitable for at least some customers. FINRA requirements make it more difficult for broker-dealers to recommend that their customers buy our common stock, which may limit your ability to buy and sell our stock and have an adverse effect on the market for our shares.
ITEM 1B.
ITEM 1B. UNRESOLVED STAFF COMMENTS
Not applicable.
ITEM 2.
ITEM 2. PROPERTIES
We currently do not own any physical property or own any real property. Our principal executive office is located at 19800 MACARTHUR SUITE 300 IRVINE CA 92612.
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS
We are not currently involved in any legal proceedings and we are not aware of any pending or potential legal actions.
ITEM 4.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Market Information
Shares of our common stock have been quoted on the OTC Markets since December 26, 2008. From December 26, 2008 to June 17, 2009 shares of our common stock were quoted under the symbol "AFCP", from June 18, 2009 to January 13, 2010 under the symbol "BCKR", from January 14, 2010 to July 19, 2011 under the symbol "ARGC", from July 20, 2011 to October 23, 2013 shares quoted under the symbol "SHRK", currently, the Company's shares have been quoted under the symbol "EGRN". The range of high and low closing trading price information for each quarter in the past two years is set forth below. These quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not represent actual transactions.
____________
(A)The last reported transaction was 200 shares on December 3, 2014 at $4.10 per share
Shareholders
As of December 31, 2015, we had 25,486,602 shares of common stock issued and outstanding.
Dividends
We have not, since the date of our incorporation, declared or paid any dividends on our common shares. We anticipate that we will retain future earnings and other cash resources for the operation and development of our business for the foreseeable future. The payment of dividends in the future will depend on our earnings, if any, and our financial condition and such other factors as our board of directors considers appropriate.
Equity Compensation Plans
We do not currently have any equity compensation plans in place at this time. We have no outstanding options.
Recent Sales of Unregistered Securities
On September 8, 2014, the Company issued a total of 138,800 shares of its common stock to 31 investors of a private placement completed in July 2014 for net proceeds of $62,400.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
We did not purchase any of our shares of common stock or other securities during the year ended December 31, 2015.
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA
Not applicable.
ITEM 7.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with our most recent audited financial statements which are included in this annual report, and the related notes to such financial statements. This section of this report includes a number of forward-looking statements that reflect our current views with respect to future events and financial performance. Forward-looking statements are often identified by words like: believe, expect, estimate, anticipate, intend, project and similar expressions, or words which, by their nature, refer to future events. You should not place undue certainty on these forward-looking statements, which apply only as of the date of our report. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from historical results or our predictions. We have yet to generate revenues to achieve profitability.
Plan of Operations
Evergreen-Agra Inc. (hereinafter referred to as the "Company") was incorporated on June 13, 2008 by filing Articles of Incorporation under the Nevada Secretary of State. The Company was incorporated under the name AMF Capital Group, Inc. In June 2009, the Company changed its name to Blackrock Resources, Inc. In January 2010 the Company changed its name to Artepharm Global Corp. Effective July 20, 2011, the Company changed its name to Sharprock Resources Inc. Effective October 23, 2013 the Company changed its name to Evergreen-Agra, Inc. During the Company's quarter ended September 30, 2011, the Company shifted its focus from mineral exploration to organic veterinary medical products. In the quarter ended December 31, 2013, the Company shifted its focus to medical marijuana coincident with its acquisition of Evergreen Systems effective November 19, 2013.
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and the liquidation of liabilities in the normal course of business. At December 31, 2015, the Company had negative working capital of $993,865. Further, the Company has had no revenues from inception on August 15, 2013. These factors raise substantial doubt about the Company's ability to continue as a going concern. The financial statements do not include any adjustments that might result from this uncertainty.
On September 8, 2014, the Company issued a total of 138,800 shares of its common stock to 31 investors of a private placement completed in July 2014 for net proceeds of $62,400. The proceeds were used for business operating of the Company.
The future of the Company is dependent upon its ability to obtain financing and upon future profitable operations. Management has plans to seek additional capital through a private placement of its common stock. The financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts of and classification of liabilities that might be necessary in the event the Company cannot continue in existence.
Year Ended December 31, 2015 Compared to Year Ended December 31, 2014
For the years ended December 31, 2015 and 2014, we had no revenues. Total operating expenses decreased $687,513 from $630,557 in 2014 to negative $56,956 in 2014. Stock-based compensation decreased $583,000 from $627,000 in 2014 to $44,000 in 2015. General and administrative expenses decreased $52,812 from $64,803 in 2014 to $11,991 in 2015. Foreign exchange gain increased $52,301 from $61,446 in 2014 to $113,747 in 2015. For both 2014 and 2015, the foreign exchange gain resulted from a decrease in the Canadian Dollar exchange rate used to translate our liabilities denominated in Canadian Dollars to United States Dollars.
Stock-based costs relating to terminated acquisitions of OtherSideFarms and Strategic Plans Pharma LLC decreased $880,000 from $880,000 in 2014 to $0 in 2015.
Net income (loss) increased $1,567,513 from a net loss of $1,510,557 in 2014 to net income of $56,956 in 2015. The increase was due to the $687,513 decrease in total operating expenses and the $880,000 decrease in stock-based costs related to terminated acquisitions of OtherSideFarms and Strategic Plans Pharma LLC explained above.
Liquidity and Capital Resources
We had a working capital deficit of $993,865 at December 31, 2015. At both December 31, 2015 and 2014, we had no cash or cash equivalents. General and administrative expenses paid in 2015 were paid directly by or on behalf of our Chairman of the Board of Directors.
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of
Evergreen-Agra, Inc.
I have audited the accompanying consolidated balance sheets of Evergreen-Agra, Inc. (the "Company") as of December 31, 2015 and 2014 and the related consolidated statements of operations, stockholders' equity, and cash flows for the years ended December 31, 2015 and 2014. These financial statements are the responsibility of the Company's management. My responsibility is to express an opinion on these financial statements based on my audits.
I conducted my audits in accordance with the standards of the Public Company's Accounting Oversight Board (United States). Those standards require that I plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. I believe that my audits provide a reasonable basis for my opinion.
In my opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Evergreen-Agra, Inc. as of December 31, 2015 and 2014 and the results of its operations and cash flows for the years ended December 31, 2015 and 2014 in conformity with accounting principles generally accepted in the United States.
The accompanying financial statements referred to above have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company's present financial situation raises substantial doubt about its ability to continue as a going concern. Management's plans in regard to this matter are also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ Michael T. Studer CPA P.C.
Michael T. Studer CPA P.C.
Freeport, New York
June 28, 2016
Evergreen-Agra, Inc.
(Formerly Sharprock Resources Inc.)
Consolidated Balance Sheets
As of December 31,
The accompanying notes are an integral part of these consolidated financial statements.
Evergreen-Agra, Inc.
(Formerly Sharprock Resources Inc.)
Consolidated Statements of Operations
For the Year Ended December 31,
The accompanying notes are an integral part of these consolidated financial statements.
Evergreen-Agra, Inc.
(Formerly Sharprock Resources Inc.)
Consolidated Statements of Cash Flows
For the Year Ended December 31,
The accompanying notes are an integral part of these consolidated financial statements.
Evergreen-Agra, Inc.
(Formerly Sharprock Resources Inc.)
Consolidated Statements of Stockholders' Equity
For the Years Ended December 31, 2015 and 2014
The accompanying notes are an integral part of these consolidated financial statements.
EVERGREEN-AGRA, INC.
(Formerly Sharprock Resources Inc.)
Notes to Consolidated Financial Statements
For the Years Ended December 31, 2015 and 2014
NOTE 1. NATURE OF OPERATIONS
Description of Business and History
Evergreen-Agra Inc. (hereinafter referred to as the "Company") was incorporated on June 13, 2008 by filing Articles of Incorporation under the Nevada Secretary of State. The Company was incorporated under the name AMF Capital Group, Inc. In June 2009, the Company changed its name to Blackrock Resources, Inc. In January 2010 the Company changed its name to Artepharm Global Corp. Effective July 20, 2011, the Company changed its name to Sharprock Resources Inc. Effective October 23, 2013 the Company changed its name to Evergreen-Agra, Inc. During the Company's quarter ended September 30, 2011, the Company shifted its focus from mineral exploration to organic veterinary medical products. In the quarter ended December 31, 2013, the Company shifted its focus to medical marijuana coincident with its acquisition of Evergreen Systems effective November 19, 2013.
On November 19, 2013, pursuant to a letter of intent dated September 10, 2013, the Company issued 20,000,000 post-split shares of its common stock to Rene Hamouth in exchange for 100% ownership of Evergreen Systems ("ES"). Except for conducting research on the medical marijuana industry, ES had no assets, liabilities, or business operations prior to the acquisition. At closing, the Company also issued 19,600,000 post-split shares of its common stock to Harpreet Sangha (then director and former chief executive officer of the Company from September 19, 2009 to September 1, 2013) for future services to be rendered and 1,000,000 post-split shares of its common stock to Richard Specht (secretary and director of the Company from September 1, 2013 to November 21, 2014) for services rendered. ES became a wholly owned subsidiary of the Company.
The acquisition resulted in a change of control of the Company on November 19, 2013. The accompanying consolidated financial statements reflect the assets, liabilities and operations of Evergreen Systems from its inception on August 15, 2013 to November 19, 2013 and are consolidated with Evergreen-Agra, Inc. thereafter.
Reverse Stock Split
Effective October 23, 2013, the Company completed a 1 for 100 reverse stock split of its common stock resulting in the reduction of the issued and outstanding shares of common stock from 82,280,000 shares to 822,800 shares at October 23, 2013. The accompanying consolidated financial statements retroactively reflect this reverse stock split.
NOTE 2. GOING CONCERN UNCERTAINTY
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and the liquidation of liabilities in the normal course of business. At December 31, 2015, the Company had negative working capital of $993,865. Further, the Company has had no revenues from inception on August 15, 2013. These factors raise substantial doubt about the Company's ability to continue as a going concern. The financial statements do not include any adjustments that might result from this uncertainty.
The future of the Company is dependent upon its ability to obtain financing and upon future profitable operations. Management has plans to seek additional capital through a private placement of its common stock. The financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts of and classification of liabilities that might be necessary in the event the Company cannot continue in existence.
NOTE 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of Evergreen-Agra, Inc. (from November 19, 2013 to December 31, 2015) and its wholly owned subsidiary ES (from inception on August 15, 2013 to December 31, 2015). All significant intercompany balances and transactions have been eliminated in consolidation.
Basis of Presentation
The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP") and are expressed in U.S. dollars.
Use of Estimates
In preparing the consolidated financial statements in conformity with U.S. GAAP, management makes estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the dates of the consolidated financial statements, as well as the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.
Cash and Cash Equivalents
The Company considers all highly liquid instruments with original maturities of three months or less when acquired, to be cash equivalents. We had no cash equivalents at December 31, 2015 and 2014.
Equipment
Equipment is stated at historical cost less accumulated depreciation. Depreciation is provided using the straight-line method over the estimated useful lives of the assets, generally ranging from three to five years.
Stock-Based Compensation
Stock-based compensation is accounted for at estimated fair value in accordance with Accounting Standards Codification 718, "Compensation - Stock Compensation."
Income Taxes
The Company accounts for income taxes under the provisions issued by the FASB which requires recognition of deferred tax liabilities and assets for the expected future tax consequences of events that have been included in the consolidated financial statements or tax returns. Under this method, deferred tax liabilities and assets are determined based on the difference between the financial statements and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. The Company computes tax assets benefits for net operating losses carried forward. The potential benefit of net operating losses has not been recognized in these consolidated financial statements because the Company cannot be assured it is more likely than not it will utilize the net operating losses carried forward in future years.
Income (Loss) Per Common Share
The Company reports net income (loss) per share in accordance with provisions of the FASB. The provisions require dual presentation of basic and diluted income (loss) per share. Basic net income (loss) per share excludes the impact of common stock equivalents. Diluted net income (loss) per share utilizes the average market price per share when applying the treasury stock method in determining common stock equivalents. For the periods presented, there were no common stock equivalents outstanding.
Fair Value of Financial Instruments
Pursuant to ASC No. 820, "Fair Value Measurements and Disclosures", the Company is required to estimate the fair value of all financial instruments included on its balance sheet as of December 31, 2015 and 2014. The Company's financial instruments consist of cash and accounts payable. The Company considers the carrying value of such amounts in the financial statements to approximate their fair value due to the short-term nature of these financial instruments.
Recent Accounting Pronouncements
Certain accounting pronouncements have been issued by the FASB and other standard setting organizations which are not yet effective and therefore have not yet been adopted by the Company. The impact on the Company's financial position and results of operations from adoption of these standards is not expected to be material.
NOTE 4 - ACQUISITION OF EVERGREEN SYSTEMS
Effective November 19, 2013, the Company acquired 100% ownership of Evergreen Systems ("ES") in exchange for 20,000,000 newly issued shares of the Company's common stock (See Note 1). The transaction has been accounted for as a "reverse acquisition" in the accompanying consolidated financial statements. The financial position and results of operations of the Company prior to November 19, 2013 have been excluded from the accompanying consolidated financial statements.
The estimated fair values of the identifiable net assets of the Company at November 19, 2013 (effective date of the reverse acquisition) consisted of:
NOTE 5. ACCOUNTS PAYABLE
Accounts payable at December 31, 2015 and 2014 consists of:
At December 31, 2015, $139,315 of the total $547,838 accounts payable is denominated in Canadian Dollars. These accounts payable were translated to United States Dollars using the December 31, 2015 exchange rate of $0.7215.
At December 31, 2014, $168,431 of the total $574,879 accounts payable is denominated in Canadian Dollars. These accounts payable were translated to United States Dollars using the December 31, 2014 exchange rate of $0.86356.
The above accounts payable represent amounts primarily recorded in the records of Evergreen-Agra, Inc. (formerly Sharprock Resources, Inc.) prior to the reverse acquisition of Evergreen Systems on November 19, 2013. Current management of the Company disputes these recorded liabilities.
NOTE 6. ACCOUNTS PAYABLE - RELATED PARTIES
Accounts payable - related parties at December 31, 2015 and 2014 consists of:
At December 31, 2015, $436,992 of the total $446,109 accounts payable - related parties is denominated in Canadian Dollars. These accounts payable were translated to United States Dollars using the December 31, 2015 exchange rate of $0.7215.
At December 31, 2014, $523,032 of the total $532,149 accounts payable - related parties is denominated in Canadian Dollars. These accounts payable were translated to United States Dollars using the December 31, 2014 exchange rate of $0.86356.
The above accounts payable represent amounts primarily recorded in the records of Evergreen-Agra, Inc. (formerly Sharprock Resources, Inc.) prior to the reverse acquisition of Evergreen Systems on November 19, 2013. Current management of the Company disputes these recorded liabilities.
NOTE 7. COMMON STOCK ISSUANCES
Issuances in 2014
On February 21, 2014, the Company issued a total of 200,000 shares of its common stock (100,000 shares to Facundo L. Bacardi, director of the Company from December 13, 2013, and 100,000 shares to Adrian Towning, chief financial officer of the Company from September 21, 2013 to July 2, 2014) for services. The Company valued the common stock at $0.44 per share and recognized stock-based compensation expense of $88,000 in the three months ended March 31, 2014.
On July 31, 2014, the Company issued a total of 1,500,000 shares of its common stock (1,100,000 shares to Chadd McKeen, chief executive officer and director of the Company from July 17, 2014 to October 9, 2014; 100,000 shares to Alysha McKeen; 200,000 shares to Paolo Galido, chief information officer and director of the Company since July 17, 2014; and 100,000 shares to Todd Hazlewood, chief financial officer and director of the Company since July 17, 2014) in connection with the acquisition of OtherSideFarms ("OSF"), an entity engaged in the research of marijuana. At the July 17, 2014 closing date, OSF had no tangible assets, no employees, and no revenue producing operations. In October 2014, the Company terminated its involvement with OSF. The $660,000 estimated fair value of the 1,500,000 shares of Company common stock has been charged to "Stock-based costs relating to terminated acquisitions" in the statement of operations for the three months ended September 30, 2014.
On August 1, 2014, the Company issued 1,000,000 shares of its common stock to Ryan Hamouth, chief operating officer and director of the Company from July 17, 2014 to September 22, 2014, for services. The $440,000 estimated fair value of the 1,000,000 shares of Company common stock has been charged to "Stock-based compensation" in the statement of operations for the three months ended September 30, 2014.
On September 8, 2014, the Company issued a total of 138,800 shares of its common stock to 31 investors of a private placement completed in July 2014 for net proceeds of $62,400.
On October 30, 2014, the Company issued 225,000 shares of its common stock to Robert Shaw for consulting services. The $99,000 estimated fair value of the 225,000 shares of Company common stock has been charged to "Stock-based compensation" in the statement of operations for the three months ended December, 31, 2014.
Issuances in 2015
On March 2, 2015, the Company issued 500,000 shares of its common stock to David Duroure, chief executive officer and director of the Company from November 13, 2014 to December 5, 2014, in connection with the November 13, 2014 acquisition of Strategic Plans Pharma LLC ("SPP"), an entity which planned to provide educational programs for military veterans. In December 2014, the Company terminated its involvement with SPP. The $220,000 estimated fair value of the 500,000 shares of Company common stock has been charged to "Stock-based costs relating to terminated acquisitions" in the statement of operations for the three months ended December 31, 2014.
On June 30, 2015, the Company issued 100,000 shares of its common stock to Bram Solloway for consulting services. The $44,000 estimated fair value of the 100,000 shares of Company common stock has been charged to "Stock-based compensation" in the statement of operations for the three months ended June 30, 2015.
On August 2, 2015, the 19,600,000 shares of Company common stock issued to Harpreet Sangha on November 19, 2013 was returned to the Company transfer agent and cancelled due to the resignation of Harpreet Sangha as Chairman of the Board and as a director on May 4, 2014.
NOTE 8. INCOME TAXES
The Company has generated taxable losses for the periods presented. Accordingly, no provisions for income taxes have been recorded.
The Company's effective tax rate differs from the United States Federal income tax rate as follows:
At December 31, 2015, the Company has net operating loss carryforwards which expire from 2028 to 2035. The deferred tax asset relating to these net operating loss carryforwards has been fully reserved for at December 31, 2015 since management's assessment has not yet determined it to be more likely than not that the net operating loss carryforwards will be realized.
Current United States income tax laws limit the amount of loss available to be offset against future taxable income when a substantial change in ownership occurs. Therefore, the amount available to offset future taxable income may be limited.
NOTE 9. SUBSEQUENT EVENTS
On January 4, 2016, the Company executed an Executive Agreement with Matt Rhoden (the "Executive") and Rene Hamouth (the "Principal Shareholder"). The agreement provides for the employment of the Executive as Chief Executive Officer of the Company for a period of 5 years, unless sooner terminated by the Board of Directors. The agreement also provides for the issuance to the Executive of the number of shares of Company common stock equal to the number held by the Principal Shareholder (17,339,889 shares). The agreement also provides for the Executive and Principal Stockholder to vote together on all matters presented to the shareholders for vote and for each to grant the other a right of first refusal on shares owned by each during the term of the agreement.
As of March 31, 2016, there were 42,826,491 shares of Company common stock issued and outstanding.
ITEM 9.
ITEM 9. CHANGES IN AND DISAGREEMENT WITH ACCOUNTANTS ON FINANCIAL DISCLOSURE
None.
ITEM 9A.
ITEM 9A. CONTROLS AND PROCEDURES
Management
Mr. Rene Hamouth is our Company's Chairman and President and Mr. Matthew Rhoden is our Chief Executive Officer. All references herein to management of the Company is to Mr. Hamouth and Mr.Rhoden. Mr. Hamouth and Mr. Rhoden have agreed to allocate their time to the activities of the Company for which they will be compensated.
Management's Report On Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rule 13a-15(f) or 15d-15(f) of the Exchange Act.
Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2015 based on the criteria for effective internal control over financial reporting established in Internal Control--Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO") and SEC guidance on conducting such assessments. Based on that evaluation, our management concluded that, during the period covered by this report, such internal controls over financial reporting were not effective to detect the inappropriate application of US GAAP rules as more fully described below. This was due to deficiencies that existed in the design or operation of our internal controls over financial reporting that adversely affected our internal controls and that may be considered to be material weaknesses.
The matters involving internal controls and procedures that our management considered to be material weaknesses under the standards of the Public Company Accounting Oversight Board were: (1) lack of a functioning audit committee due to a lack of a majority of independent members and a lack of a majority of outside directors on our board of directors, resulting in ineffective oversight in the establishment and monitoring of required internal controls and procedures; (2) inadequate segregation of duties consistent with control objectives; and (3) ineffective controls over period end financial disclosure and reporting processes. The aforementioned material weaknesses were identified by our Chief Executive Officer and our Chief Financial Officer in connection with the review of our financial statements as of December 31, 2015.
Management believes that the material weaknesses set forth in items (2) and (3) above did not have an effect on our financial results. However, management believes that the lack of a functioning audit committee and the lack of a majority of outside directors on our board of directors results in ineffective oversight in the establishment and monitoring of required internal controls and procedures, which could result in a material misstatement in our financial statements in future periods.
This Annual Report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by our registered public accounting firm pursuant to rules of the Securities and Exchange Commission that permit the company to provide only management's report.
Management's Remediation Initiatives
In an effort to remediate the identified material weaknesses and other deficiencies and enhance our internal controls, we plan to initiate, the following series of measures once we have the financial resources to do so:
We intend to create a position to segregate duties consistent with control objectives and to increase our personnel resources and technical accounting expertise within the accounting function when funds are available to us. In addition, we plan to appoint one or more outside directors to our board of directors who shall be appointed to an audit committee resulting in a fully functioning audit committee who will undertake the oversight in the establishment and monitoring of required internal controls and procedures such as reviewing and approving estimates and assumptions made by management when funds are available to us.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting that occurred during the last quarter of our fiscal year ended December 31, 2015, which have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
ITEM 9B.
ITEM 9B. OTHER INFORMATION
Not applicable.
PART III
ITEM 10.
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The name, age and titles of our executive officers and directors are as follows:
Mr. Rene Hamouth is our Company's Chairman and Matthew Rhoden is the Chief Executive Officer. All references herein to management of the Company is to Mr. Hamouth and Mr. Rhoden. They have agreed to allocate their time to the activities of the Company for which they will be compensated.
Term of Office
Our directors are appointed to hold office until the next annual meeting of our stockholders or until their successor is elected and qualified, or until they resign or are removed in accordance with the provisions of the State of Nevada Statutes. Our officers are appointed by our Board of Directors and holds office until removed by the Board.
Significant Employees
We have no significant employees other than our officers and directors.
Family Relationships
Randy Rhoden is the father of Matthew Rhoden.
There are currently no family relationships between any other of the members of our board of directors or our executive officers.
Committees of the Board of Directors
Our Board of Directors acts as our nominating committee and our audit committee; we do not have separate committees that perform these functions.
Involvement in Certain Legal Proceedings
Except as disclosed in this annual report, during the past ten years none of the following events have occurred with respect to any of our directors or executive officers:
1.
A petition under the Federal bankruptcy laws or any state insolvency law was filed by or against, or a receiver, fiscal agent or similar officer was appointed by a court for the business or property of such person, or any partnership in which he was a general partner at or within two years before the time of such filing, or any corporation or business association of which he was an executive officer at or within two years before the time of such filing;
2.
Such person was convicted in a criminal proceeding or is a named subject of a pending criminal proceeding (excluding traffic violations and other minor offenses);
3.
Such person was the subject of any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining him from, or otherwise limiting, the following activities:
i.
Acting as a futures commission merchant, introducing broker, commodity trading advisor, commodity pool operator, floor broker, leverage transaction merchant, any other person regulated by the Commodity Futures Trading Commission, or an associated person of any of the foregoing, or as an investment adviser, underwriter, broker or dealer in securities, or as an affiliated person, director or employee of any investment company, bank, savings and loan association or insurance company, or engaging in or continuing any conduct or practice in connection with such activity;
ii.
Engaging in any type of business practice; or
iii.
Engaging in any activity in connection with the purchase or sale of any security or commodity or in connection with any violation of Federal or State securities laws or Federal commodities laws;
4.
Such person was the subject of any order, judgment or decree, not subsequently reversed, suspended or vacated, of any Federal or State authority barring, suspending or otherwise limiting for more than 60 days the right of such person to engage in any activity described in paragraph (3)(i) above, or to be associated with persons engaged in any such activity;
5.
Such person was found by a court of competent jurisdiction in a civil action or by the Commission to have violated any Federal or State securities law, and the judgment in such civil action or finding by the Commission has not been subsequently reversed, suspended, or vacated;
6.
Such person was found by a court of competent jurisdiction in a civil action or by the Commodity Futures Trading Commission to have violated any Federal commodities law, and the judgment in such civil action or finding by the Commodity Futures Trading Commission has not been subsequently reversed, suspended or vacated;
7.
Such person was the subject of, or a party to, any Federal or State judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended or vacated, relating to an alleged violation of:
i.
Any Federal or State securities or commodities law or regulation; or
ii.
Any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order; or
iii.
Any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or
8.
Such person was the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined in Section 3(a)(26) of the Exchange Act), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member.
There are currently no legal proceedings to which our officers and directors are a party adverse to us or in which our officers and director has a material interest adverse to us.
Compliance with Section 16 of the Securities Exchange Act
Section 16(a) of the Exchange Act requires the executive officers and directors, and persons who beneficially own more than ten percent of our equity securities, to file reports of ownership and changes in ownership with the Securities and Exchange Commission. Officers, directors and greater than ten percent shareholders are required by SEC regulation to furnish us with copies of all Section 16(a) forms they file. We have not received copies of any such forms from our executive officers and directors during the fiscal year ended December 31, 2015.
Code of Ethics
Our board of directors adopted our code of ethical conduct that applies to all of our employees and directors, including our principal executive officer, principal financial officer, principal accounting officer or controller, and persons performing similar functions.
We believe the adoption of our Code of Ethical Conduct is consistent with the requirements of the Sarbanes-Oxley Act of 2002.
Our Code of Ethical Conduct is designed to deter wrongdoing and to promote:
·
Honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships;
·
Full, fair, accurate, timely and understandable disclosure in reports and documents that we file or submit to the Securities & Exchange Commission and in other public communications made by us;
·
Compliance with applicable governmental laws, rules and regulations;
·
The prompt internal reporting to an appropriate person or persons identified in the code of violations of our Code of Ethical Conduct; and
·
Accountability for adherence to the Code.
·
We will provide a copy of the Code of Ethics to any person without charge, upon request. Requests can be sent to: 19800 MACARTHUR SUITE 300 IRVINE CA 92612.
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION
Management Compensation
The table below summarizes all compensation awarded to, earned by, or paid to our named executive officers during our fiscal years ended December 31, 2015 and 2014.
Summary Compensation Table
____________
(1)
Mr. Rene Hamouth, Chief Executive Officer of the Company from September 1, 2013 to July 17, 2014, director of the Company from September 1, 2013, and Chairman of the board of directors of the Company from July 17, 2014
(2)
Mr. Matthew Rhoden, Chief Executive Officer of the Company from January 4, 2016
(3)
Mr. Todd Hazlewood, Chief Financial Officer of the Company from July 17, 2014
(4)
Mr. Adrian Towning was the Chief Financial Officer of the Company from September 21, 2013 to July 2, 2014.
(5)
Mr. Chadd McKeen was the Chief Executive Officer of the Company from July 17, 2014 to October 9, 2014.
(6)
Mr. Ryan Hamouth was the Chief Operating Officer of the Company from July 17, 2014 to September 22, 2014.
(7)
Mr. Richard Specht was the Secretory of the Company from September 1, 2013 to November 21, 2014.
(8)
Mr. David Duroure, was the Chief Executive Officer and director of the Company from November 13, 2014 to December 5, 2014
Outstanding Equity Awards as of December 31, 2015
There were no outstanding equity awards as of December 31, 2015 for each of our named executive officers.
Equity Compensation Plans
We do not currently have any equity compensation plans at this time.
Compensation of Directors
The following table provides information regarding compensation during our fiscal years ended December 31, 2015 and 2014 earned by directors who are not executive officers. Our directors who are executive officers do not receive additional compensation for their service as directors and their compensation is disclosed in the "Summary Compensation" Table above.
Director Compensation
_________
(1) Mr. Bacardi was appointed as a director of the Company on December 13, 2013.
Employment Contracts
On January 4, 2016, the Company executed an Executive Agreement with Matt Rhoden (the "Executive") and Rene Hamouth (the Principal Shareholder"). The agreement provides for the employment of the Executive as Chief Executive Officer of the Company for a period of 5 years, unless sooner terminated by the Board of Directors. The agreement also provides for the issuance to the Executive of the number of shares of the Company common stock equal to the number held by the Principal Shareholder (17,339,889). The agreement also provides for the Executive and Principal Shareholder to vote together on all matters presented to the shareholders for vote and for each to grant the other a right of first refusal on shares owned by each during the term of the agreement.
There are no other employment contracts or related arrangements with our executive officers or directors.
ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The following table sets forth certain information concerning the number of shares of our common stock owned beneficially as of June 10, 2016 by: (i) each person (including any group) known to us to own more than five percent (5%) of any class of our voting securities, (ii) our directors, and or (iii) our officers. Unless otherwise indicated, the stockholder listed possesses sole voting and investment power with respect to the shares shown.
_____________
(1)
A beneficial owner of a security includes any person who, directly or indirectly, through any contract, arrangement, understanding, relationship, or otherwise has or shares: (i) voting power, which includes the power to vote, or to direct the voting of shares; and (ii) investment power, which includes the power to dispose or direct the disposition of shares. Certain shares may be deemed to be beneficially owned by more than one person (if, for example, persons share the power to vote or the power to dispose of the shares). In addition, shares are deemed to be beneficially owned by a person if the person has the right to acquire the shares (for example, upon exercise of an option) within 60 days of the date as of which the information is provided. In computing the percentage ownership of any person, the amount of shares outstanding is deemed to include the amount of shares beneficially owned by such person (and only such person) by reason of these acquisition rights. As a result, the percentage of outstanding shares of any person as shown in this table does not necessarily reflect the person's actual ownership or voting power with respect to the number of shares of common stock actually outstanding on March 31, 2016.
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
On February 21, 2014, the Company issued a total of 200,000 shares of its common stock (100,000 shares to Facundo L. Bacardi, director of the Company from December 13, 2013, and 100,000 shares to Adrian Towning, chief financial officer of the Company from September 21, 2013 to July 2, 2014) for services. The Company valued the common stock at $0.44 per share and recognized stock-based compensation expense of $88,000 in the three months ended March 31, 2014.
On July 31, 2014, the Company issued a total of 1,500,000 shares of its common stock (1,100,000 shares to Chadd McKeen, chief executive officer and director of the Company from July 17, 2014 to October 9, 2014; 100,000 shares to Alysha McKeen; 200,000 shares to Paolo Galido, chief information officer and director of the Company since July 17, 2014; and 100,000 shares to Todd Hazlewood, chief financial officer and director of the Company since July 17, 2014) in connection with the acquisition of OtherSideFarms ("OSF"), an entity engaged in the research of marijuana. At the July 17, 2014 closing date, OSF had no tangible assets, no employees, and no revenue producing operations. In October 2014, the Company terminated its involvement with OSF. The $660,000 estimated fair value of the 1,500,000 shares of Company common stock has been charged to "Stock-based costs relating to terminated acquisitions" in the statement of operations for the three months ended September 30, 2014.
On August 1, 2014, the Company issued 1,000,000 shares of its common stock to Ryan Hamouth, chief operating officer and director of the Company from July 17, 2014 to September 22, 2014, for services. The $440,000 estimated fair value of the 1,000,000 shares of Company common stock has been charged to "Stock-based compensation" in the statement of operations for the three months ended September 30, 2014.
On March 2, 2015, the Company issued 500,000 shares of its common stock to David Duroure, chief executive officer and director of the Company from November 13, 2014 to December 5, 2014, in connection with the November 13, 2014 acquisition of Strategic Plans Pharma LLC ("SPP"), an entity which planned to provide educational programs for military veterans. In December 2014, the Company terminated its involvement with SPP. The $220,000 estimated fair value of the 500,000 shares of Company common stock has been charged to "Stock-based costs relating to terminated acquisitions" in the statement of operations for the three months ended December 31, 2014.
On August 2, 2015, the 19,600,000 shares of the Company's common stock issued to Harpreet Sangha on November 19, 2013 were returned to the Company's transfer agent and cancelled due to the resignation of Harpreet Sangha as Chairman of the Board and as a director on May 4, 2014.
On January 4, 2016, the Company executed an Executive Agreement with Matt Rhoden (the "Executive") and Rene Hamouth (the Principal Shareholder"). The agreement provides for the employment of the Executive as Chief Executive Officer of the Company for a period of 5 years, unless sooner terminated by the Board of Directors. The agreement also provides for the issuance to the Executive of the number of shares of the Company common stock equal to the number held by the Principal Shareholder (17,339,889). The agreement also provides for the Executive and Principal Shareholder to vote together on all matters presented to the shareholders for vote and for each to grant the other a right of first refusal on shares owned by each during the term of the agreement.
We do not consider any of our directors as being independent under item 407 (a) of Regulation S-K.
ITEM 14.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
Aggregate fees for professional services rendered to us by our auditors during our last two fiscal years are set forth below.
Audit Fees
Audit fees are the aggregate fees billed for professional services rendered by our independent auditors for the audit of our annual financial statements, the review of the financial statements included in each of our quarterly reports and services provided in connection with statutory and regulatory filings or engagements.
Audit Related Fees
Audit related fees are the aggregate fees billed by our independent auditors for assurance and related services that are reasonably related to the performance of the audit or review of our financial statements and are not described in the preceding category.
Tax Fees
Tax fees are fees billed by our independent auditors for tax compliance, tax advice and tax planning.
All Other Fees
All other fees include fees billed by our independent auditors for products or services other than as described in the immediately preceding three categories.
Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services of Independent Auditors
Our entire board of directors acts as our audit committee, and has assumed responsibility for the pre-approval of audit and permitted non-audit services to be performed by our company's independent auditor. Our Board will, on an annual basis, consider and, if appropriate, approve the provision of audit and non-audit services by our auditors. Thereafter, our Board will, as necessary, consider and, if appropriate, approve the provision of additional audit and non-audit services by our auditors which are not encompassed by our Board's annual pre-approval and are not prohibited by law.
PART IV
ITEM 15.
ITEM 15. EXHIBITS
Notes
(1)
Incorporated by reference from our Registration Statement on Form S-1, filed with the SEC on September 5, 2008.
(2)
Incorporated by reference from our Current Report on Form 8-K, filed with the SEC on March 3, 2010.
(3)
Incorporated by reference from our Current Report on Form 8-K, filed with the SEC on December 17, 2010.
(4)
Incorporated by reference from our Current Report on Form 8-K, filed with the SEC on March 2, 2011.
(5)
Incorporated by reference from our Current Report on Form 8-K, filed with the SEC on July 20, 2011.
(6)
Incorporated by reference from our Current Report on Form 8-K, filed with the SEC on February 9, 2012.
(7)
Incorporating by referencefrom our 10-K, filed with the SEC on April 16, 2012.
(8)
Filed herewith
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.
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/ Rene Hamouth
Chairman of the Board,
June 28, 2016
Rene Hamouth
President, Secretary and a director
/s/ Matthew Rhoden
Matthew Rhoden
Chief Executive Officer
June 28, 2016