Item 1. Business Factors
History
Tautachrome, Inc. (formerly Roadships Holdings, Inc.) was formed in Delaware on June 5, 2006 as Caddystats, Inc. (Tautachrome, Inc. and hereinafter be collectively referred to as "Tautachrome", the "Company", "we' or "us").
The Company adopted the accounting acquirer's year end, December 31.
Our Business
Tautachrome operates in the internet applications space, a space uniquely able to embrace fast growing and novel business. The iPhone, Google, Facebook, Amazon, Twitter, Android, Uber and numerous other examples are reminders of the ability of the internet applications space to surprise us with the arrival of wholly new business universes seemingly from out of nowhere.
Tautachrome is currently pursuing three avenues of business activity:
1. KlickZie technology-based business development and monetization, our high focus flagship activity to revolutionize smartphone-based picture and video interaction on the web
2.
Smartphone app development and digital design, our activity to develop and monetize important in-house apps and to generate digital design revenue, an activity carried out by our wholly owned subsidiary Polybia Studios, Pty Ltd of Mermaid Beach, Queensland Australia
3.
Acquisition of revenue generating smartphone apps, an activity carried out by our new Appquisitions Division in the hands of our Chief Advancement Officer, Michael Nugent.
1. KlickZie technology-based business activity
Tautachrome's patent pending KlickZie technology addresses two major new needs of the internet age. The first is the need for a way to trust the pictures and videos you see on the web. Right now the trillions of pictures and frames of video on the web are so easily and so often falsified that you can't trust any of it. There is a giant need for a universally available, downloadable system that turns the everyday pictures and videos we take from our smartphones into something that is completely trustable to any third party seeing it. With such a system two kinds of imagery will suddenly appear on the web: On the one hand imagery whose trustworthiness everybody can be absolutely certain of, and on the other hand all the rest of the imagery which nobody has any idea of its trust worthiness. The KlickZie system aims to satisfy this fundamental need for universal trustability.
Solving the need for trustability also solves a more subtle need that opens the door to an enormous new opportunity. This is the need for people to be able to use pictures and videos on the web to readily and safely interact with each other via the imagery itself. it is frequently the case that when you run across interesting imagery on the web you won't know anything about it, including who the author is, who else may have seen it, or what others may think or know about it. By allowing people to interact with interesting or important pictures or videos by using the imagery itself as the portal of communication, the system can add the viewpoints and the information offerings of interacting people to the richness of the pictures and videos. This can be carried by the system into the future along with the imagery, as an evolving tapestry of interaction and imagery.
How KlickZie technology works: The KlickZie Activation Platform Consumers will download KlickZie's free camera upgrade software into their mobile device (iPhone, Android or other smartphone) which thereafter activates the pictures and videos taken by their device using proprietary KlickZie technology. Behind the scenes, the powerful and secure KlickZie software will capture the imagery and all available metadata related to the imaging event, and mark the imagery and its metadata with advanced, highly undetectable KlickZie watermarking technology.
KlickZie Activation KlickZie activation adds a new world of usefulness to ordinary pictures and videos. People who come across an activated picture can communicate with the author of the picture, or with amenable others who have seen the picture or with the data stored in the picture by merely clicking or touching the picture ("touch-to-comm"). The picture itself makes the communication happen. It does not matter where or how you come across an activated picture, you can engage it, interact with it, or share it, just by touching or clicking it.
What happens to an activated picture from its creation onward gets invisibly added to the picture's data and can be tracked into the future. Activated pictures can answer many questions. For example, in a group photo you could ask: Have any of the people in my contacts list interacted with this picture? Are any of them engaging it right now? Who else besides my contacts have already engaged this picture in some way? Who took it? Where? When?
KlickZie's activated pictures and videos will also possess the power to be completely trustable in the sense that any third party can be absolutely confident of the authenticity of the imagery because KlickZie pictures and videos will be secured in the KlickZie cloud at their creation where they remain until their creator or owner deletes them.
The upshot is that activation allows effective touch to comm with the authors and viewers of smartphone pictures and videos from every source, and activated pictures and videos can be completely trusted imagery.
Competition
With regard to the internet applications in general, competition is intense. For example, according to Statista by mid-2015 there were more than three million different smartphone applications available to users. In spaces that are this crowded the principal matter of competition is about capturing user mind space, which for a given product consists of elements such as degree of product exposure to users, degree of product apparent desirability, pleasure of product usage, and persisting necessity for the product in a user's life. These elements of competition are well known to our competitors which include the internet giants Google, Apple, Facebook and Amazon, all of whom have financial resources and operating staffs substantially larger than those of the Company, and all of whom can focus on the optimization of their products towards the same consumer and business arenas upon which we intend to focus.
With regard to KlickZie's technology for marking, storing and tracking digital imagery, there are many firms who mark, store and track digital imagery. Among these are Digimarc, BatchPhoto, and hirdlight who market such processes for purposes of protecting intellectual property. Although to our knowledge no firm is turning the smartphone into a generally trustable imager or advanced image-based communicator as envisioned here, which requires substantially more talent and development activity than required for marking, storing and tracking digital imagery, there is nothing stopping any firm, particularly the internet giants, from entering into similar activity.
Employees
Roadships Holdings, Inc. has 3 employees. (Polybia Studios Pty Ltd). Other services are currently provided through independent contractors.
Item 1A.
Item 1A. Risk Factors
We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934, as amended (the "Exchange Act") and are not required to provide the information required under this item.
Item 1B.
Item 1B. Unresolved Staff Comments
Not applicable.
Item 2.
Item 2. Properties
Our principal business and corporate address is 1846 E Innovation Park Drive, Oro Valley, Arizona 85755 (Telephone: 520 288 1908). The space is being provided by management on a rent free basis. We have no intention of finding, in the near future, another office space to rent during the emerging growth stage of the Company.
We do not currently have any investments or interests in any real estate, nor do we have investments or an interest in any real estate mortgages or securities of persons engaged in real estate activities.
Item 3.
Item 3. Legal Proceedings
None.
Item 4.
Item 4. Mine Safety Disclosures
Not applicable.
PART II - OTHER INFORMATION
Item 5.
Item 5. Market for Common Equity and Related Stockholder Matters
Market Information
Our shares trade on the OTCQB under the symbol "RDSH". The following table sets forth the high and low closing bid prices of our common stock for the last two calendar years, as reported by OTC Markets Group Inc. and represents inter dealer quotations, without retail mark-up, mark-down or commission and may not be reflective of actual transactions:
At December 31, 2015, there were 2,987,633,430 shares of our common stock issued and outstanding.
Holders
On June 30, 2016, the Company had approximately 564 stockholders of record. The number of record holders was determined from the records of our transfer agent and does not include beneficial owners of shares of common stock whose shares are held in the names of various security brokers, dealers, and registered clearing agencies.
Dividends
We have not declared or paid cash dividends on our common stock since inception and do not anticipate paying such dividends in the foreseeable future. The payment of dividends may be made at the discretion of the Board of Directors and will depend upon, among other factors, our operations, capital requirements, and overall financial condition.
Securities Authorized for Issuance under Equity Compensation Plans
None.
Item 6.
Item 6. Selected Financial Data
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information required under this item.
Item 7.
Item 7. Management's Discussion and Analysis or Plan of Operation
The following discussion and analysis of our plan of operation should be read in conjunction with the financial statements and the related notes. This discussion contains forward-looking statements based upon current expectations that involve risks and uncertainties, such as our plans, objectives, expectations and intentions. Our actual results and the timing of certain events could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including those set forth under "Description of Business" and elsewhere in this annual report.
Overview
Critical Accounting Policies, Estimates and New Accounting Pronouncements
Management's discussion and analysis of its financial condition and plan of operations is based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires that we make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. At each balance sheet date, management evaluates its estimates. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions. The estimates and critical accounting policies that are most important in fully understanding and evaluating our financial condition and results of operations include those stated in our financial statements and those listed below:
Going Concern
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As shown in the accompanying financial statements, we had negative cash flows from operations of $366,403 and $23,249 for the years ended December 31, 2015 and 2014, respectively, recurring losses, and negative working capital at December 31, 2015 and 2014. These conditions raise substantial doubt as to our ability to continue as a going concern. The financial statements do not include any adjustments that might be necessary if we are unable to continue as a going concern.
The Company may raise additional capital through the sale of its equity securities, through an offering of debt securities, or through borrowings from financial institutions or related parties. Management believes that actions presently being taken to obtain additional funding may provide the opportunity for the Company to continue as a going concern. There is no guarantee the Company will be successful in achieving these objectives.
Results of Operations - Comparison of Years Ended December 31, 2015 Versus 2014
Net Loss
Net loss for the years ended December 31, 2015 and 2014 was $995,385 and $234,337, respectively with components of those discussed below.
Revenues
There were no revenues earned during the years ended both December 31, 2015 and 2014.
General and Administrative Expenses
Our general and administrative expenses were $524,892 for the year ended December 31, 2015 versus $232,417 for the same period in 2014. The principal reason for the increase is the increase in activity surrounding the development of the KlickZie technology.
Depreciation Expense
Depreciation expense for the year ended December 31, 2015 was $807 versus $0 during the same period in 2014. We had certain capital items begin depreciated during the early part of the year which were subsequently fully reserved.
Interest Expense
Interest expense was $451,804 for the year ended December 31, 2015 versus $1,920 for the same period in 2014. The increase is due to higher debt levels and the inclusion of beneficial conversion features as described in Notes 5 and 7 to the Financial Statements .
Foreign Exchange Effect and Net Comprehensive Loss
The foreign exchange effect is the effect of translating Australian Dollar balances and activities into US Dollars. Items in the Consolidated Balance Sheets in Australian Dollars are translated to US Dollars at 1.37285 USD/AUD whereas the balances in the Statement of Operations are translated at 1.32018 USD/AUD. This results in a valuation of equity in the Balance Sheet line item "Other Comprehensive Income" (it is the only item affecting that Balance Sheet item).
The Consolidated Balance Sheet amount for this item at December 31, 2014 is zero because our predecessor, Click Evidence, Inc. (since renamed to Tautachrome, Inc.) had no foreign operations. For the year ended December 31, 2015, that item amounts to a net comprehensive loss of $81,302.
Change in Fair Value of Derivatives
Certain of our debt instruments contain embedded derivatives at December 31, 2015 which we did not have during the year ended December 31, 2014. As discussed in Note 7 to the Financial Statements, these instruments are carried at the fair values at the balance sheet date, causing a revaluation of those carrying values. This item is the net result of the revaluation.
Liquidity and Capital Resources
Our financial statements have been prepared on a going concern basis that contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business.
At December 31, 2015, we had $15,428 in cash and $740,283 in current liabilities resulting in negative working capital of $724,855. At December 31, 2014, we had $23,705 in cash and $28,516 in current liabilities resulting in negative working capital of $4,811 for an increase in negative working capital of $720,044.
Currently, we are not able to maintain our existing operations through the existing cash balances and internally generated cash flows. Moreover, we have determined that our existing capital structure is not adequate to fund our planned growth. We intend to finance our growth by issuing additional common stock and through loans from our shareholders. There can be no assurance that we will be successful in procuring the financing we are seeking. Future cash flows are subject to a number of variables, including technology development costs, technology product rollout and support expense, the procurement of vessels, and the demand for our services. There can be no assurance that we will obtain the capital we need to achieve our goals.
Plan of Operations
Tautachrome operates in the internet applications space, a space uniquely able to embrace fast growing and novel business. The iPhone, Google, Facebook, Amazon, Twitter, Android, Uber and numerous other examples are reminders of the ability of the internet applications space to surprise us with the arrival of wholly new business universes seemingly from out of nowhere.
Tautachrome is currently pursuing three avenues of business activity:
1. KlickZie technology-based business development and monetization, our high focus flagship activity to revolutionize smartphone-based picture and video interaction on the web
2. Smartphone app development and digital design, our activity to develop and monetize important in-house apps and to generate digital design revenue, an activity carried out by our wholly owned subsidiary Polybia Studios, Pty Ltd of Mermaid Beach, Queensland Australia
3. Acquisition of revenue generating smartphone apps, an activity carried out by our new Appquisitions Division in the hands of our Chief Advancement Officer, Michael Nugent.
1. KlickZie technology-based business activity
Tautachrome's patent pending KlickZie technology addresses two major new needs of the internet age.
The first is the need for a way to trust the pictures and videos you see on the web. Right now the trillions of pictures and frames of video on the web are so easily and so often falsified that you can't trust any of it.
There is a giant need for a universally available, downloadable system that turns the everyday pictures and videos we take from our smartphones into something that is completely trustable to any third party seeing it. With such a system two kinds of imagery will suddenly appear on the web: On the one hand imagery whose trustworthiness everybody can be absolutely certain of, and on the other hand all the rest of the imagery which nobody has any idea of its trust worthiness. The KlickZie system aims to satisfy this fundamental need for universal trustability.
Solving the need for trustability also solves a more subtle need that opens the door to an enormous new opportunity. This is the need for people to be able to use pictures and videos on the web to readily and safely interact with each other via the imagery itself. it is frequently the case that when you run across interesting imagery on the web you won't know anything about it, including who the author is, who else may have seen it, or what others may think or know about it. By allowing people to interact with interesting or important pictures or videos by using the imagery itself as the portal of communication, the system can add the viewpoints and the information offerings of interacting people to the richness of the pictures and videos. This can be carried by the system into the future along with the imagery, as an evolving tapestry of interaction and imagery.
How KlickZie technology works: The KlickZie Activation Platform Consumers will download KlickZie's free camera upgrade software into their mobile device (iPhone, Android or other smartphone) which thereafter activates the pictures and videos taken by their device using proprietary KlickZie technology. Behind the scenes, the powerful and secure KlickZie software will capture the imagery and all available metadata related to the imaging event, and mark the imagery and its metadata with advanced, highly undetectable KlickZie watermarking technology.
KlickZie Activation KlickZie activation adds a new world of usefulness to ordinary pictures and videos. People who come across an activated picture can communicate with the author of the picture, or with amenable others who have seen the picture or with the data stored in the picture by merely clicking or touching the picture ("touch-to-comm"). The picture itself makes the communication happen. It does not matter where or how you come across an activated picture, you can engage it, interact with it, or share it, just by touching or clicking it.
What happens to an activated picture from its creation onward gets invisibly added to the picture's data and can be tracked into the future. Activated pictures can answer many questions. For example, in a group photo you could ask: Have any of the people in my contacts list interacted with this picture? Are any of them engaging it right now? Who else besides my contacts have already engaged this picture in some way? Who took it? Where? When?
KlickZie's activated pictures and videos will also possess the power to be completely trustable in the sense that any third party can be absolutely confident of the authenticity of the imagery because KlickZie pictures and videos will be secured in the KlickZie cloud at their creation where they remain until their creator or owner deletes them.
The upshot is that activation allows effective touch to comm with the authors and viewers of smartphone pictures and videos from every source, and activated pictures and videos can be completely trusted imagery.
KlickZie Product Rollout. Rolling out KlickZie requires hiring activity to round out the Click Technical Team. Additional required technical staff include: cloud architects, database engineers, image processing engineers, full stack software engineers, steganography software developers, app development software engineers, and smartphone code defense software engineers.
·
Phase 1: Build the minimal testable KlickZie system -including the smartphone imaging engine and the service cloud (Rev 1 KlickZie system), identifying and fixing functionality deficiencies and user experience and interface hiccups, building a loyal base of early adopters and defining Rev 2.
·
Phase 2: Build and release Rev 2 into a limited audience to optimize user experience and user interfaces, to define, build, test and finalize viral growth methodology, to finalize the smartphone imaging engine, to test/finalize the cloud subsystem for global scale up, to build a seed population of 200,000 contented users, and to plan global rollout.
·
Phase 3: Roll out KlickZie system globally, culture by culture and language by language, adding support staff and services as rollout moves forward.
Monetizing. As presently conceived, the KlickZie product aims at revenues from four primary sources:
·
Advertising Using pictures and videos as portals of communication allows the presentation of these communications in a framework of the Company's choice, enabling advertisers to place paid ads within this framework (as is done by Google.)
·
User premium service fees KlickZie is intended to be free to consumers. Since KlickZie is handling user imagery and user imagery-based communications, opportunities for users to gain extra KlickZie service are intended to be provided for a fee-based premium user membership.
·
App Developer Revenue As conceived, the KlickZie imaging engine is a powerful tool for generating trustable imagery. The KlickZie cloud is intended to allow developers access to this powerful engine along with KlickZie-provided developer tools enabling them to develop apps of their own invention, access being granted under a revenue sharing arrangement.
·
Enterprise Revenue Because as conceived the KlickZie imaging engine is a powerful tool for generating trustable imagery, it is able to support the needs of business and industrial enterprises for which trustable imagery from employees, customers or partners is mission critical. Are plans are to license our engine to enterprises on a license fee basis.
Funding The KlickZie product rollout requires substantial funding. We plan on, and are now, seeking funds to finance KlickZie product rollout. Financing may be accomplished by incurring debt, by equity sale or through other means. There can be no assurances given that our funding efforts will be successful.
First KlickZie revenues. Our Plan of Operations is prepared for first revenues from enterprise users coming on line within the first year after the receipt of funding sufficient to round out the KlickZie team. Preparations for other KlickZie revenue are geared for the two year and out timeframe.
2. Smartphone app development and digital design business activity
This activity will be conducted by Polybia Studios, a wholly owned enterprise that has been fully active on its own since late in 2014. Recent work by Polybia includes:
nDevelopment of the internal software systems, database servers and branding for the SafeDate App, a mobile security application used by dating women.
nDevelopment of the app and branding for PEOBI, a new service for the exchange of business information.
nDevelopment of the websites and branding for companies such as Novagen Ingenium, Renegade Engines, and Ronna Burton.
In addition, Polybia will play an important role in the development of the KlickZie Platform by providing the embedded software development for KlickZie's advanced image capture, marking and securitization of code for smartphones, tablets, PCs, and other state of the art social sharing platforms. Polybia will also lead the company's graphic, branding and web design optimization for the mobile user.
Polybia is located in Mermaid Beach, Queensland, Australia. Polybia's management team consists of recent internet technology graduates of Bond University in Queensland, Australia. For more about Polybia please visit www.polybiastudios.com.
3. Acquisition of revenue generating smartphone apps business activity
Tautachrome's Appquisitions Division was created as a vehicle to acquire revenue-generating smartphone apps. In the hands of our Chief Advancement Officer, Michael Nugent, the new Appquisitions Division is expected to create revenue that is independent of our other activities. PhotoSweep, an app that lets users select photos from their smartphone photo albums and have them printed and sent to addresses of their choosing, is the first app to be acquired by our Appquisitions Division. The app is compatible with both Apple and Android devices. PhotoSweep makes the process of handing physical prints easy and convenient, and by its nature creates repeat customers. PhotoSweep's world headquarters are currently located in Biggera Waters, Queensland Australia. For more about PhotoSweep please visit www.photosweep.com.
Item 7A.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
A smaller reporting company is not required to provide the information required by this item.
Item 8.
Item 8. Financial Statements and Supplemental Data
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors
Tautachrome, Inc.
We have audited the accompanying consolidated balance sheets of Tautachrome, Inc. (the "Company") as of December 31, 2015 and 2014 and the related consolidated statements of operations, changes in stockholders' deficit, and cash flows for the years ended December 31, 2015 and 2014. 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 audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Tautachrome, Inc. and consolidated subsidiaries as of December 31, 2015 and 2014, and the results of its operations, and cash flows for the periods described above in conformity with accounting principles generally accepted in the United States of America.
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 3 to the consolidated financial statements, the Company suffered a net loss from operations and has a net capital deficiency, which raises substantial doubt about its ability to continue as a going concern. Management's plans regarding those matters also are described in Note 3. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ M&K CPAS, PLLC
Houston, Texas
www.mkacpas.com
June 30, 2016
TAUTACRHOME, INC.
AND CONSOLIDATED SUBSIDIARIES
Consolidated Balance Sheets
The accompanying notes are an integral part of these financial statements.
TAUTACHROME, INC.
AND CONSOLIDATED SUBSIDIARIES
Consolidated Statements of Operations
The accompanying notes are an integral part of these financial statements.
TAUTACHROME, INC.
AND CONSOLIDATED SUBSIDIARIES
Consolidated Statement of Changes in Stockholders' Equity (Deficit)
From December 31, 2013 to December 31, 2015
The accompanying notes are an integral part of these financial statements.
TAUTACHROME, INC.
AND CONSOLIDATED SUBSIDIARIES
Consolidated Statements of Cash Flows
The accompanying notes are an integral part of these financial statements.
TAUTACHROME, INC.
AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements
Note 1 - Organization and Nature of Business
History
Tautachrome, Inc. (formerly Roadships Holdings, Inc.) was formed in Delaware on June 5, 2006 as Caddystats, Inc. (Tautachrome, Inc. and hereinafter be collectively referred to as "Tautachrome", the "Company", "we' or "us").
The Company adopted the accounting acquirer's year end, December 31.
Our Business
The Division operates in the internet applications space, a space uniquely able to embrace fast growing and novel business. The iPhone, Google, Facebook, Amazon, Twitter, Android, Uber and numerous other examples are reminders of the ability of the internet applications space to surprise us with the arrival -seemingly from out of nowhere- of wholly new business universes.
Click is developing a system branded "KlickZie" aimed at turning smartphones, including iPhones, Android phones and other smartphones, into trustable imagers and advanced communicators. Trustable imagers means that the pictures and videos can be trusted to be the original, untampered, un-Photoshopped pictures and videos made by the smartphone. Advanced communicators means that the pictures and videos can be used as living, trusted portals to communicate with others.
The KlickZie system concept consists of downloadable software able to securitize the imaging process in the smartphone, together with an advanced cloud system to authenticate KlickZie pictures and videos and to make possible imagery based communication among people who happen upon KlickZie pictures and videos.
Note 2 - Basis of Presentation and Summary of Significant Accounting Policies
Basis of Presentation
The Company's financial statements are presented in accordance with accounting principles generally accepted (GAAP) in the United States. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the periods presented have been reflected herein.
Principles of Consolidation
Our consolidated financial statements include Roadships Holdings, Inc. and its wholly owned subsidiaries. All significant inter-company accounts and transactions have been eliminated in consolidation.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expense during the reporting period. Actual amounts could differ significantly from these estimates.
Cash and Cash Equivalents
The Company considers all highly liquid investments with an initial maturity of 3 months or less to be cash equivalents. The Company maintains its deposits with high quality financial institutions and, accordingly, believes its credit risk exposure associated with cash is remote. There were no cash equivalents as of December 31, 2015 and 2014.
Property, Plant and Equipment
We record our property plant and equipment at historical cost. The estimated useful lives of these assets range from three to seven years and are depreciated using the straight-line method over the asset's useful life.
Foreign Currency Risk
We currently have two subsidiaries operating in Australia. At December 31, 2015 and 2014, we had $3,648 and $500 Australian Dollars, respectively ($2,657 and $407 US Dollars, respectively) deposited into Australian banks.
Earnings Per Share
Basic earnings per common share is computed by dividing net earnings or loss (the numerator) by the weighted average number of common shares outstanding during each period (the denominator). Diluted earnings per common share is similar to the computation for basic earnings per share, except that the denominator is increased by the dilutive effect of stock options outstanding and unvested restricted shares and share units, computed using the treasury stock method. There are currently no common stock equivalents.
Fair Value of Financial Instruments
We adopted the Financial Accounting Standards Board's (FASB) Accounting Codification Standard No. 820 ("ASC 820), Fair Value Measurements and Disclosures. ASC 820 defines fair value, establishes a framework for measuring fair value and expands disclosure of fair value measurements. ASC 820 applies under other accounting pronouncements that require or permit fair value measurements and accordingly, does not require any new fair value measurements. ASC 820 clarifies that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, ASC 820 established a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:
Level 1 - Observable inputs such as quoted prices in active markets;
Level 2 - Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and
Level 3 - Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.
The following table presents assets and liabilities that were measured and recognized at fair value as of December 31, 2015 on a recurring basis:
The following table presents assets and liabilities that were measured and recognized at fair value as of December 31, 2014 on a recurring basis:
Income Taxes
We recognize deferred tax assets and liabilities based on differences between the financial reporting and tax bases of assets and liabilities using the enacted tax rates that are expected to be in effect when the differences are expected to be recovered. We provide a valuation allowance for deferred tax assets for which we do not consider realization of such assets to be more likely than not.
See Note 7 for our reconciliation of income tax expense and deferred income taxes as of and for the years ended December 31, 2015 and 2014.
Recent Accounting Pronouncements
On November 2014, The Financial Accounting Standards Board (FASB) issued Accounting Standard Update No. 2014-16-Derivatives and Hedging (Topic 815): Determining Whether the Host Contract in a Hybrid Financial Instrument Issued in the Form of a Share Is More Akin to Debt or to Equity (a consensus of the FASB Emerging Issues Task Force). The amendments in this Update do not change the current criteria in GAAP for determining when separation of certain embedded derivative features in a hybrid financial instrument is required. That is, an entity will continue to evaluate whether the economic characteristics and risks of the embedded derivative feature are clearly and closely related to those of the host contract, among other relevant criteria. The amendments clarify how current GAAP should be interpreted in evaluating the economic characteristics and risks of a host contract in a hybrid financial instrument that is issued in the form of a share. The effects of initially adopting the amendments in this Update should be applied on a modified retrospective basis to existing hybrid financial instruments issued in the form of a share as of the beginning of the fiscal year for which the amendments are effective. Retrospective application is permitted to all relevant prior periods.
On November 2014, The Financial Accounting Standards Board (FASB) issued Accounting Standard Update No. 2014-17-Business Combinations (Topic 805): Pushdown Accounting (a consensus of the FASB Emerging Issues Task Force). The amendments in this Update provide an acquired entity with an option to apply pushdown accounting in its separate financial statements upon occurrence of an event in which an acquirer obtains control of the acquired entity. The amendments in this Update are effective on November 18, 2014. After the effective date, an acquired entity can make an election to apply the guidance to future change-in-control events or to its most recent change-in-control event. However, if the financial statements for the period in which the most recent change-in-control event occurred already have been issued or made available to be issued, the application of this guidance would be a change in accounting principle.
On August 2014, The Financial Accounting Standards Board (FASB) issued Accounting Standard Update No. 2014-15, Presentation of Financial Statements - Going Concerns (Subtopic 205-40): Disclosures of Uncertainties about an Entity's Ability to Continue as a Going Concern. The amendments require management to assess an entity's ability to continue as a going concern by incorporating and expanding upon certain principles that are currently in U.S. auditing standards. Specifically, the amendments (1) provide a definition of the term substantial doubt, (2) require an evaluation every reporting period including interim periods, (3) provide principles for considering the mitigating effect of management's plans, (4) require certain disclosures when substantial doubt is alleviated as a result of consideration of management's plans, (5) require an express statement and other disclosures when substantial doubt is not alleviated, and (6) require an assessment for a period of one year after the date that the financial statements are issued (or available to be issued). The amendments in this Update are effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. Early application is permitted.
In June 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2014-10 - Development Stage Entities. The amendments in this update remove the definition of a development stage entity from the Master Glossary of the ASC thereby removing the financial reporting distinction between development stage entities and other reporting entities from U.S. GAAP. In addition, the amendments eliminate the requirements for development stage entities to (1) present inception-to-date information in the statements of income, cash flows, and shareholder equity, (2) label the financial statements as those of a development stage entity, (3) disclose a description of the development stage activities in which the entity is engaged, and (4) disclose in the first year in which the entity is no longer a development stage entity that in prior years it had been in the development stage. The amendments in this update are applied retrospectively. The adoption of ASU 2014-10 removed the development stage entity financial reporting requirements from the Company.
In June 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2014-12, Compensation - Stock Compensation (Topic 718): Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period. The new guidance requires that share-based compensation that require a specific performance target to be achieved in order for employees to become eligible to vest in the awards and that could be achieved after an employee completes the requisite service period be treated as a performance condition. As such, the performance target should not be reflected in estimating the grant-date fair value of the award. Compensation costs should be recognized in the period in which it becomes probable that the performance target will be achieved and should represent the compensation cost attributable to the period(s) for which the requisite service has already been rendered. If the performance target becomes probable of being achieved before the end of the requisite service period, the remaining unrecognized compensation cost should be recognized prospectively over the remaining requisite service period. The total amount of compensation cost recognized during and after the requisite service period should reflect the number of awards that are expected to vest and should be adjusted to reflect those awards that ultimately vest. The requisite service period ends when the employee can cease rendering service and still be eligible to vest in the award if the performance target is achieved. This new guidance is effective for fiscal years and interim periods within those years beginning after December 15, 2015. Early adoption is permitted. Entities may apply the amendments in this Update either (a) prospectively to all awards granted or modified after the effective date or (b) retrospectively to all awards with performance targets that are outstanding as of the beginning of the earliest annual period presented in the financial statements and to all new or modified awards thereafter. The adoption of ASU 2014-12 is not expected to have a material impact on our financial position or results of operations.
In June 2014, the FASB issued ASU No. 2014-10: Development Stage Entities (Topic 915): Elimination of Certain Financial Reporting Requirements, Including an Amendment to Variable Interest Entities Guidance in Topic 810, Consolidation , to improve financial reporting by reducing the cost and complexity associated with the incremental reporting requirements of development stage entities. The amendments in this update remove all incremental financial reporting requirements from U.S. GAAP for development stage entities, thereby improving financial reporting by eliminating the cost and complexity associated with providing that information. The amendments in this Update also eliminate an exception provided to development stage entities in Topic 810, Consolidation, for determining whether an entity is a variable interest entity on the basis of the amount of investment equity that is at risk. The amendments to eliminate that exception simplify U.S. GAAP by reducing avoidable complexity in existing accounting literature and improve the relevance of information provided to financial statement users by requiring the application of the same consolidation guidance by all reporting entities. The elimination of the exception may change the consolidation analysis, consolidation decision, and disclosure requirements for a reporting entity that has an interest in an entity in the development stage. The amendments related to the elimination of inception-to-date information and the other remaining disclosure requirements of Topic 915 should be applied retrospectively except for the clarification to Topic 275, which shall be applied prospectively. For public companies, those amendments are effective for annual reporting periods beginning after December 15, 2014, and interim periods therein. Early adoption is permitted. The adoption of ASU 2014-10 is not expected to have a material impact on our financial position or results of operations.
The adoption of these standards is not expected to have a material impact on our financial position or results of operations.
Note 3 - Going Concern
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As shown in the accompanying financial statements, we had negative cash flows from operations of $366,403 and $23,249 for the years ended December 31, 2015 and 2014, respectively, recurring losses, and negative working capital at December 31, 2015 and 2014. These conditions raise substantial doubt as to our ability to continue as a going concern. The financial statements do not include any adjustments that might be necessary if we are unable to continue as a going concern.
The Company may raise additional capital through the sale of its equity securities, through an offering of debt securities, or through borrowings from financial institutions or related parties. Management believes that actions presently being taken to obtain additional funding may provide the opportunity for the Company to continue as a going concern. There is no guarantee the Company will be successful in achieving these objectives.
Note 4 - Related Party Transactions
For the years ended December 31, 2015 and 2014, we had the following transactions with the Twenty Second Trust (the "Trust"), the trustee of whom is Tamara Nugent, the wife of our major shareholder and former Chief Executive Officer, Micheal Nugent:
·
We received $5,408 and $68,023, respectively, in cash loans to pay operating expenses and repaid $162,918 and $11,844, respectively, in principal.
·
We accrued $4,329 and $1,819, respectively, in interest payable to the Trust and paid $1,571 and $1,796, respectively, in interest payments.
·
On April 20, 2015, the Registrant and Tamara Nugent, as trustee for Twenty Second Trust, entered into a Common Stock Repurchase Agreement whereby the Trust agreed to sell 1,796,571,210 shares of the our common stock to the Company in exchange for the sum of $17,966 in the form a promissory note.
According to our agreement with Mr. Nugent, we accrue interest on all unpaid amounts at 5%. Principal and interest are callable at any time. If principal and interest are called and not repaid, the loan is considered in default after which interest is accrued at 10%.
The outstanding balance at December 31, 2015 is $80,108 and $6,637, respectively, for principal and interest to the Twenty Second Trust, which includes the $98,281 in the following paragraph and the related interest payable.
On December 9, 2014, we redeemed 39,312 shares of Series B Convertible Preferred Stock issued in 2013 to our then Chief Executive Officer, by issuing a promissory note in the amount of $98,281. The promissory note is due December 31, 2015 and bears interest at 5% (see Note 5). Through December 31, 2015, we have accrued $4,920 in interest and have paid no interest or principal payments.
On May 5, 2013 (and on August 8, 2013 with an enlargement amendment) the Company entered into a no interest demand-loan agreement with our current Chairman, Jon N Leonard ("Jon") under which the Company may borrow such money from Jon as Jon in his sole discretion is willing to loan. Under this agreement and its enlargement amendment (an amendment enlarging the amount of money that can be borrowed) the Company borrowed $28,000 from Jon between May 30, 2013 and October 31, 2013, and repaid Jon $3,500 of the $28,000 in cash between December 11, 2013 and December 31, 2013, leaving an unpaid balance on this note of $24,500 at December 31, 2013. On August 28, 2014, the Company repaid in cash an additional $1,000 on the note, and on January 5, 2015, an additional principal payment was made in the amount of $1,500. A loan of $160 was added to this loan during the year ended December 31, 2015 for expenses paid by Dr. Leonard on the company's behalf. The outstanding loan amount at December 31, 2015 is $22,160.
The terms of the note provide that at the Company's option, the Company may make repayments in stock, at a fixed share price of $1.00 per share. Also, because this loan is a no interest loan an imputed interest expense of $1,767 and $1,920 was recorded as additional paid-in capital for the years ended December 31, 2015 and 2014, respectively. The Company evaluated Dr. Leonard's note for the existence of a beneficial conversion feature and determined that none existed.
On September 18, 2015, we entered into an agreement with Novagen Ingenium Inc, a Nevada corporation ("Novagen") under which we agreed to sell to Novagen all of the transportation assets of Roadships which had, at the time of the exchange, carrying values of zero, for 2,000,000 shares of Novagen common stock. Shares of Novagen's common stock are quoted under the symbol "NOVZ" on the OTC Pink operated by OTC Markets Group, Inc. Novagen's controlling shareholder is Micheal Nugent who is on our Board of Directors and is a major shareholder. Since the shares represent a transaction with a related party, we recorded the value of these shares at zero.
On August 9, 2015, we issued a $5,000 convertible promissory note to the brother of our Board Chairman and Chief Executive Officer in return for cash. The terms of this note are provided in Note 7, subheading "Convertible Notes Payable".
Note 5 - Capital Structure
Common Stock
At December 31, 2014, we had 1,184,906,041 common shares issued and outstanding from a total of four billion authorized.
On April 20, 2015, the Registrant and Tamara Nugent, as trustee for Twenty Second Trust, entered into a Common Stock Repurchase Agreement whereby the Trust agreed to sell 1,796,571,210 shares of the our common stock to the Company in exchange for the sum of $17,966 in the form a promissory note.
During the year ended December 31, 2015, we issued 6,156,179 shares for services to several consultants according to our agreements with them. We valued these shares at the pre-merger valuation which was based on private equity raises done in 2013 and 2014 ($0.012 per share) and recorded an increase in Capital Stock and Additional Paid in Capital of $73,601. Included in these shares were shares promised and accrued for before December 31, 2014. We therefore reduced Common Stock Payable by $26,667 to zero.
On May 21, 2015, we issued 1,796,571,210 common shares to the shareholders of Click Evidence, Inc. in exchange for all the issued and outstanding shares of that Company (see Note 6), effecting the merger between Click and Roadships.
Series A Convertible Preferred Stock - The Series A Preferred Stock is convertible into the number of shares of Common Stock which equals 4 times the sum of: i) the total number of shares of Common Stock which are issued and outstanding at the time of conversion, plus ii) the total number of shares of Series B Preferred Stocks which are issued and outstanding at the time of conversion.
The Series A Preferred Stock voting rights are equal to the number of shares of Common Stock which equals 4 times the sum of: i) the total number of shares of Common Stock which are issued and outstanding, plus ii) the total number of shares of Series B Preferred Stocks which are issued and outstanding.
Series B Convertible Preferred Stock - Each share of Series B Preferred Stock is convertible at par value $0.0001 per share (the "Series B Preferred"), at any time, and/or from time to time, into the number of shares of the Corporation's common stock, par value $0.0001 per share (the "Common Stock") equal to the price of the Series B Preferred Stock ($2.50), divided by the par value of the Series B Preferred (par value of $0.0001per share), subject to adjustment as may be determined by the Board of Directors from time to time (the "Conversion Rate").
Based on the $2.50 price per share of Series B Preferred Stock, and a par value of $0.0001 per share for Series B Preferred each share of Series B Preferred Stock is convertible into 250,000 shares of Common Stock.
Each share of Series B Preferred Stock has 10 votes for any election or other vote placed before the shareholders of the Common stock.
The Preferred A stock has a stated value of $.0001 and no stated dividend rate and is non-participatory. The Series A and Series B has liquidation preference over common stock. The Voting Rights for each share of Series A is equal to 1 vote per share (equal to 4 times the number of common and Preferred B shares outstanding) and Series B Preferred Stock have 10 votes per shares.
The Holder has the right to convert the Preferred A and B to common shares of the Company with the Series A convertible to 4 times the number of common and Preferred B shares outstanding and Series B convertible to 250,000 common shares per Preferred B share. The Preferred Series A and Series B represents voting control based on management's interpretation of the Company bylaws and Certificate of Designation.
On March 12, 2013, the Company issued 1 share of Series A Convertible Preferred Stock and 39,312 shares of Series B Convertible Preferred Stock to our Chief Executive Officer, Micheal Nugent, in exchange for a reduction of debt in the amount of $98,281. The value assigned to the preferred shares was derived from a model generated by an independent valuation expert that specializes in valuing equity instruments with no quoted markets. The Company recorded increases to Preferred Stock and Additional Paid in Capital collectively of $1,598,110, a reduction in debt of $98,281 and a loss on conversion of $1,499,829.
On December 9, 2014, we redeemed the 39,312 shares of Series B Convertible Preferred Stock issued in 2013 to our Chief Executive Officer, by issuing a promissory note in the amount of $98,281. The promissory note is due December 31, 2015 and bears interest at 5%. We valued the shares at their fair values on the date of their conversion to this promissory note and valued the shares at $2,914,843. Because the transaction was with a related party, we recorded the removal of the Series B shares by recording a liability in the amount of $98,281, and reducing the par value of the shares and Additional Paid in Capital by $4 and $98,277, respectively, recording no gain on the conversion.
Imputed Interest
Several of our loans made in our Australian subsidiary were made without any nominal interest. As such, we imputed interest at 8% to these loans, crediting Additional Paid in Capital and charging Interest Expense. For the year ended December 31, 2015 and 2014, these amounted to $7,501 and $1,920, respectively.
Beneficial Conversion Features of Convertible Promissory Notes
During the year ended December 31, 2015, we borrowed $425,788 from 87 accredited investors in Australia (see Note 6) which contained features allowing the holder to convert the principal and accumulated interest into common stock. We evaluated these notes for beneficial conversion features and calculated a value of $405,954, all of which has been immediately expensed as interest expense as the notes are due on demand.
Short-term convertible notes payable
During the year ended December 31, 2015, we borrowed $425,788 from 87 accredited investors in Australia. Of this amount, $336,215 was acquired after the reverse merger (see Note 6). The remainder was prior to the reverse merger, was included as part of that transaction and as such, is not included in the financing section of the Statement of Cash Flows.
These promissory notes can be converted into shares of our common stock at the rate of $0.01 per share (the aggregate of which shares convertible is 56,213,300). These notes are callable by the makers at any time and accrue interest at 5%. For the year ended December 31, 2015, we accrued $4,511 of interest on these notes and made no interest payments. We evaluated these notes for beneficial conversion features and calculated a value of $405,954, all of which has been immediately expensed as interest expense as the notes are due on demand.
Options Awards
On July 2, 2012, we granted 10 million options to purchase our common stock to each of our Chief Executive and Chief Financial Officers (20 million total) of which 5 million each vest immediately (10 million total).
In addition to the 10 million options vesting in 2012, 10 million options vested as follows:
·
5 million options to our Chief Financial Officer vested on April 19, 2013.
·
5 million options to our Chief Executive Officer vested on July 2, 2013.
All 20 million of these options expired during the year ended December 31, 2014.
Note 6 - Business Combinations
Acquisition of Click Evidence, Inc.
On May 21, 2015, we acquired all the issued and outstanding shares of Click Evidence, Inc. ("Click"), an emerging growth company existing under the laws of the State of Arizona that has developed and owns a patent pending trustable imaging technology for smartphones. Under the terms of the Acquisition, we issued 1,796,571,209 shares of our common stock from treasury in exchange for 14,239,705 shares of Click common stock. As a result of the Acquisition, Click has become a wholly-owned subsidiary of the Registrant.
The Roadships shares were issued by the Registrant at a deemed price of $0.0012 per share to 16 Click shareholders (the "Click Shareholders") on the basis of 83.644 Roadships shares for each of the issued and then outstanding Click Shares. The number of Roadships shares issued for the Click Shares was determined by negotiation between the parties to the Acquisition and was approved by our board of directors as being fair and in the best interest of the Registrant.
As a result of the issuance of the Roadships shares, Dr. Jon N. Leonard, the President, Chief Executive Officer and a director of Click, has acquired sole voting and investment control over 1,387,829,545 shares of Roadships' common stock, representing 46.4% voting control of the Registrant. At the time of the Acquisition, Dr. Leonard directly owned 10,000,000 Click Shares and had sole voting and investment control over a further 1,000,000 Click Shares.
We deemed the transaction a reverse merger and recorded no goodwill.
Assets and liabilities of Click Evidence are as follows:
Upon merging the two companies, we closed all historical operating results prior to the reverse merger date of May 21, 2015 of Roadships and consolidated subsidiaries to Additional Paid in Capital. Operating results and cash flows and historical equity presented in this report and subsequent reports will be that of Click Evidence, Inc.
A summary of pro-forma financial information for the years ended December 31, 2014 and 2013 are as follows:
Sale of Roadships Holdings' Assets
On September 18, 2015, we entered into an agreement with Novagen Ingenium Inc, a Nevada corporation ("Novagen") under which we agreed to sell to Novagen all of the transportation assets of Roadships which had, at the time of the exchange, carrying values of zero, for 2,000,000 shares of Novagen common stock. Shares of Novagen's common stock are quoted under the symbol "NOVZ" on the OTC Pink operated by OTC Markets Group, Inc. Novagen's controlling shareholder is Micheal Nugent who is on our Board of Directors and is a major shareholder. Since the shares represent a transaction with a related party, we recorded the value of these shares at zero.
The description of the terms and conditions of the Share Exchange Agreement set forth herein does not purport to be complete and is qualified in its entirety by reference to the terms of the Share Exchange Agreement, which is filed as Exhibit 10.1 to this Current Report.
The sale of these assets to Novagen was completed on September 18, 2015. As a result, Novagen has acquired all of the Transport Assets and we have exited the transport and shipping business. Management intends to focus all the resources of the registrant on the development and commercialization of its smartphone imaging technology.
Note 7 - Debt
Our debt in certain categories went from $23,500 at December 31, 2014 to $632,697 at December 31, 2015 as follows:
See Note 4 for a discussion of our related-party debts, including the first two entries in the above table.
Short-term convertible notes payable
During the year ended December 31, 2015, we borrowed $425,788 from 87 accredited investors in Australia. Of this amount, $336,215 was acquired after the reverse merger (see Note 6). The remainder was prior to the reverse merger, was included as part of that transaction and as such, is not included in the financing section of the Statement of Cash Flows.
These promissory notes can be converted into shares of our common stock at the rate of $0.01 per share (the aggregate of which shares convertible is 56,213,300). These notes are callable by the makers at any time and accrue interest at 5%. For the year ended December 31, 2015, we accrued $4,511 of interest on these notes and made no interest payments. We evaluated these notes for beneficial conversion features and calculated a value of $405,954, all of which has been immediately expensed as interest expense as the notes are due on demand.
Aggregate totals for these short-term convertible notes payable are:
Long-term convertible notes payable
During the year ended December 31, 2015, we borrowed $110,000 from eight accredited investors in the United States. These notes bear interest at 5% and are due eighteen months from the date of the note (all of which mature during the first or second quarter of 2017). Each note is convertible into a sum of shares which varies depending on the note date. The aggregate sum of the shares into which these notes are convertible is 16,478,937. We evaluated these notes for embedded derivates and determined that they contained such derivatives as set forth in the Statement of Financial Accounting Standard ASC 820-10-35-37 Fair Value in Financial Instruments ( herein referenced as "ASC 820"); Statement of Financial Accounting Standard ASC 815 Accounting for Derivative Instruments and Hedging Activities (herein referenced as "ASC 815"); and ASC 815-40 (formerly Emerging Issues Task Force ("EITF") Issue No. 00-19 and EITF 07-05).
Aggregate totals for these eight long-term convertible notes payable are:
One of the eight accredited investors included in the above paragraph is the brother of our Board Chairman and Chief Executive Officer, Dr. Jon Leonard. This $5,000 related-party convertible promissory note is dated August 9, 2015, matures on February 26, 2017, pays interest at 5%, and may convert into 1,020,408 common shares. The initial derivative recorded on this instrument was $226 with a value at December 31, 2015 of $2,334. The initial discount recorded on this instrument was $226, of which $414 has been amortized to interest expense.
Derivative liability
The above-referenced eight convertible promissory notes issued during the year ended December 31, 2015 were analyzed in accordance with EITF 07-05 and ASC 815. EITF 07-5, which is effective for fiscal years beginning after December 15, 2009, and interim periods within those fiscal years. The objective of EITF 07-5 is to provide guidance for determining whether an equity-linked financial instrument is indexed to an entity's own stock. This determination is needed for a scope exception under Paragraph 11(a) of ASC 815 which would enable a derivative instrument to be accounted for under the accrual method. The classification of a non-derivative instrument that falls within the scope of EITF 00-19 - Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company's Own Stock also hinges on whether the instrument is indexed to an entity's own stock. A non-derivative instrument that is not indexed to an entity's own stock cannot be classified as equity and must be accounted for as a liability.
Derivative financial instruments should be recorded as liabilities in the consolidated balance sheet and measured at fair value. For purposes of this engagement and report, we utilized fair value as the basis for formulating our opinion which has been defined by the Financial Accounting Standards Board ("FASB") as "the amount for which an asset (or liability) could be exchanged in a current transaction between knowledgeable, unrelated willing parties when neither party is acting under compulsion". The FASB has provided guidance that its definition of fair value is consistent with the definition of fair market value in IRS Rev. Rule 59-60.
In valuing the derivative liabilities, w made the following assumptions:
·
The underlying stock price was used as the fair value of the common stock $0.02 - as of 12/31/15;
·
The stock price projection was modeled such that it follows a geometric Brownian motion with constant drift and a constant volatility;
·
The stock projections are based on the Company historical annual volatilities using the term remaining for each Note and Valuation date and ranged from 311-338%.
·
An event of default would occur 0% of the time, increasing .50% per month to a maximum of 5.0%;
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Capital raising events would occur quarterly at $150,000 per quarter through 2017 with potential dilutive resets for the Notes;
·
Discount rates were based on risk free rates in effect based on the remaining term and date of each valuation and instrument.
·
The Holder would redeem based on availability of alternative financing, 0% of the time increasing 0% monthly to a maximum of 0%;
·
The Holder would convert the note starting after 12 months to maturity (18 months from issuance) assuming the company was not in default subject to trading volume limits.
We recorded the initial derivative as both a derivative liability and a debt discount (or initial reduction in carrying value of the debt). We then amortized the debt discounts using the Effective Interest Method which recognizes the cost of borrowing at a constant interest rate throughout the contractual term of the obligation. The effective interest rates on these seven instruments range from 5.0% to 10.6%.
At each reporting date, we determine the fair market value for each derivative associated with each of the eight above instruments. At December 31, 2015, we determined the fair value of these derivatives were $23,812. We therefore included the difference in the Statement of Operations as "Change in Fair Value of Derivatives".
Short-term notes payable
During the year ended December 31, 2015, we inherited three short-term notes upon our May 21, 2015 reverse merger with Roadships Holdings, Inc. whose aggregate value at December 31, 2015 is $16,025.
Changes in outstanding derivative liabilities are as follows:
Note 8 - Income Taxes
Deferred income taxes reflect the tax consequences on future years of differences between the tax bases:
In assessing the realizability of future tax assets, management considers whether it is more likely than not that some portion or all of the future tax assets will not be realized. The ultimate realization of future tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of future tax liabilities, projected future taxable income and tax planning strategies in making this assessment. Management has provided for a valuation allowance on all of its losses as there is no assurance that future tax benefits will be realized.
Our tax loss carry-forwards will begin to expire in 2022.
Note 9 - Subsequent Events
On January 8, 2016, we entered into a material definitive agreement to acquire 100% of the member interest in Photosweep, LLC, an Arizona limited liability company. Photosweep is the developer and operator of a software application for mobile devices that allows each user to order prints of digital photographs on the user's mobile device to be delivered at such date and location in the United States that the user may specify. Total consideration paid by the Registrant for the Acquisition consists of $39,000 and 13 million shares of the Registrant's common stock. We closed on the transaction on January 15, 2016.
We have evaluated subsequent events through the date of this report.
Item 9.
Item 9. Changes In and Disagreements With Accountants on Accounting and Financial Disclosure
None.
Item 9A.
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
We carried out an evaluation, under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, of the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)). Based upon that evaluation, our principal executive officer and principal financial officer concluded that, as of the end of the period covered in this report, our disclosure controls and procedures were not effective to ensure that information required to be disclosed in reports filed under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the required time periods and is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.
Our management, including our principal executive officer and principal financial officer, does not expect that our disclosure controls and procedures or our internal controls will prevent all error or fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs. Due to the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. To address the material weaknesses, we performed additional analysis and other post-closing procedures in an effort to ensure our consolidated financial statements included in this annual report have been prepared in accordance with generally accepted accounting principles. Accordingly, management believes that the financial statements included in this report fairly present in all material respects our financial condition, results of operations and cash flows for the periods presented.
Management's Report on Internal Control over Financial Reporting.
Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) under the Securities Exchange Act, as amended. Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2015. In making this assessment, our management used the 2013 criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO") in Internal Control-Integrated Framework. 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 of the company's annual or interim financial statements will not be prevented or detected on a timely basis. We have identified the following material weaknesses.
1. As of December 31, 2015, we did not maintain effective controls over the control environment. Specifically we have not developed and effectively communicated to our employees its accounting policies and procedures. This has resulted in inconsistent practices. Further, the Board of Directors does not currently have any independent members and no director qualifies as an audit committee financial expert as defined in Item 407(d)(5)(ii) of Regulation S-B. Since these entity level programs have a pervasive effect across the organization, management has determined that these circumstances constitute e a material weakness.
2. As of December 31, 2015, we did not maintain effective controls over financial statement disclosure. Specifically, controls were not designed and in place to ensure that all disclosures required were originally addressed in our financial statements. Accordingly, management has determined that this control deficiency constitutes a material weakness.
Because of these material weaknesses, management has concluded that the Company did not maintain effective internal control over financial reporting as of December 31, 2015, based on the criteria established in "Internal Control-Integrated Framework" issued by the COSO.
Change In Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting that occurred during our last fiscal year that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Attestation Report of the Registered Public Accounting Firm
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 temporary rules of the SEC that permit us to provide only management's report in this annual report.
Item 9B.
Item 9B. Other Information
None
PART III
Item 10.
Item 10. Directors, Executive Officers, Promoters and Control Persons and Corporate Governance; Compliance with Section 16(a) Of The Exchange Act
As of May 26, 2016, the directors and executive officers and their positions, are as follows:
Michael Nugent
Micheal P. Nugent has held senior executive positions and directorships with public and private companies in the United States and Australia since 1995. He is a certified diesel fitter in Australia. Mr. Nugent's technical and corporate experience is expected to assist the Company with its efforts to implement profitable operations.
In addition to his positions with the registrant, during the past five years, Mr. Nugent has held the following positions:
Robert McClelland
Robert McClelland is a Director and company Secretary of Roadships Freight Pty Ltd. Roadships Freight represents the transport arm of Roadships Holdings, Inc. in Australia. Mr. McClelland also serves as a Director of Cycclone Magnetic Engines Inc. He is also a Director of Fire From Ice Films Pty Ltd. Robert spent 27 years in the Automotive parts Industry and some 6 years in the finance sector.
Patrick Greene
Mr. Green is a Director of Roadships Freight Pty Ltd, Roadships Freight represents the transport arm of Roadships Holdings Inc in Australia. Mr. Greene completed his discipline in the automotive and marine industries in 1988, he also taught automotive trade students at a technical college (TAFE) in the 90's. He spent 20 years in his industry as an employee and business operator. He is a Director and company Secretary of Nugent Engine Technologies Pty Ltd.
Dr. Jon N. Leonard
Dr. Jon N. Leonard has been the Executive Chairman and Chief Executive Officer at Click Evidence, Inc. since September 2012. From September 2002 to May 2012, Dr. Leonard was variously employed by Raytheon Missile Systems Company as Senior Director of Programs, Advance Programs, and as Director, Counter Terrorism Technology. He has been a Director of Novagen Ingenium Inc. since March 2015. Dr. Leonard holds a Ph.D. in Mathematics from the University of Arizona, a M.Sc. in Aerospace Engineering from U.C.L.A. and a B.A. in Physics from the University of Arizona.
Matthew Staker
In 2012, Mr. Staker co-founded Click Evidence, Inc. ("Click") with Dr. Jon N. Leonard, and has since served as its Chief Engineer and Executive Vice President in addition to being a member of its board of directors.
From April 2006 until December 2014, Mr. Staker was the Director of Technology and Solutions Architecture at Security First Corp. in Rancho Santa Margarita, California, which develops and licenses software-defined data protection solutions that provide deep data security. He was awarded two patents in digital information security as a result of his work at Security First Corp.
Since 2015, Mr. Staker has been a technical executive for a leading avionics company, overseeing the development of data acquisition units on commercial aircraft.
Mr. Staker received an M.S. in Computer Science in 1987 from the University of Southern California, and has a B.S. in Computer Science from the University of Utah.
Family Relationships:
There is no family relationship among any of our executive officers and directors.
Involvement in Certain Legal Proceedings
Except as noted herein or below, during the last ten years none of our directors or officers have:
1. had any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time;
2.
been convicted in a criminal proceeding or subject to a pending criminal proceeding;
3.
been subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities; or
4.
been found by a court of competent jurisdiction in a civil action, the Commission or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated.
Board of Directors and Committees
At December 31, 2015, our Board of Directors presently consisted of five members: Michael Nugent, Robert McClelland, Patrick Greene, Dr. Jon Leonard and Matthew Staker. Our Bylaws generally provide for majority approval of directors in order to adopt resolutions, and provide that the Board of Directors may be expanded by Board action. All executive officer compensation, including payroll expenditures, salaries, stock options, stock incentives, and bonuses, must be approved by the unanimous consent of the Board of Directors. The entire Board of Directors acts as the Audit Committee and the Compensation Committee.
On compensation matters, the Board considers and recommends payroll expenditures, salaries, stock options, stock incentive and bonus proposals for our employees. Acting in its audit committee function, the Board reviews, with our independent accountants, our annual financial statements prior to publication, and reviews the work of, and approves non-audit services performed by, such independent accountants. The Board appoints the independent public accountants for the ensuing year. The Board also reviews the effectiveness of the financial and accounting functions and the organization, operation and management of our Company.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 and the rules there under require our officers and directors, and persons who beneficially own more than ten percent of our common stock to file reports of ownership and changes in ownership with the Securities and Exchange Commission and to furnish us with copies.
Based on our reviews of the copies of the Section 16(a) forms received by it, or written representations from certain reporting persons, we believe that, during the last fiscal year, none of our directors or executive officers satisfied their Section 16(a) filing requirements. Such persons are in the process, with the assistance of counsel, to file all required and missing reports.
Procedure for Nominating Directors
We have not made any material changes to the procedures by which security holders may recommend nominees to our board of directors.
The board does not have a written policy or charter regarding how director candidates are evaluated or nominated for the board. Additionally, the board has not created particular qualifications or minimum standards that candidates for the board must meet. Instead, the board considers how a candidate could contribute to the Company's business and meet the needs of the Company and the board.
Item 11.
Item 11. Executive Compensation
Summary Compensation
As a "smaller reporting company" as defined in Item 10(f)(1) of Regulation S-K, we have elected to follow scaled disclosure requirements for smaller reporting companies with respect to the disclosures required by Item 402 of Regulation S-K. Under the scaled disclosure requirements, the Company is not required to provide a Compensation Discussion and Analysis, Compensation Committee Report and certain other tabular and narrative disclosures relating to executive compensation.
The following table shows the compensation paid or accrued during the fiscal years ended December 31, 2015 and 2014, to our Chief Executive Officer, our former Chief Financial Officer (retired since January, 2014), our Executive Vice President and our Corporate Secretary.
SUMMARY COMPENSATION TABLE
Narrative to Summary Compensation Table
Employment Agreements of Named Executive Officers
The Company has no compensation agreements with any of the Named Officers.
Long-term Incentive Plans
We do not have any long-term incentive plans, pension plans or any similar compensatory plans for any of our directors or executive officers. Nor do we currently have any intention to initiate any such plans in the near future.
Outstanding Equity Awards at Fiscal Year End
There are no outstanding equity awards at December 31, 2015.
Retirement Benefits
We do not have any material terms or plans that provide for the payment of retirement benefits, or benefits that will be paid primarily following retirement, including but not limited to tax-qualified defined benefit plans, supplemental executive retirement plans, tax-qualified defined contribution plans and nonqualified defined contribution plans.
Nonqualified Deferred Compensation
We do not have any nonqualified defined contribution plans or other deferred compensation plans.
Potential Payments Upon Termination or Change of Control
We do not, as of December 31, 2015, have any material terms, contracts, agreements, plans or arrangements, written or unwritten, that provides for payment(s) to a CEO at, following, or in connection with the resignation, retirement or termination of a CEO, or a change in control of the company or a change in the CEO's responsibilities following a change in control, with respect to each CEO.
Director Compensation
The following table sets forth a summary of the compensation earned by our directors and/or paid to certain of our directors pursuant to certain agreements we have with them in 2014.
Director Compensation Table (2014)
Our board of directors is comprised of Michael Nugent, Robert McClelland and Patrick Greene who also serve as officers of the Company. None of our directors has a compensation arrangement with the Company, except those agreements entered into in their capacity as officers, and have not been compensated since the company's inception in 2008.
Item 12.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The following table sets forth information as to the record ownership of our common stock by our (i) directors and executive officers, (ii) all of the officers and directors as a group and (iii) each person who owns more than 5% or more of our common stock. The persons named in this table possess the sole voting and investment power with respect to the shares of common stock shown unless otherwise indicated. In general, beneficial ownership includes those shares that a person has the power to vote, sell, or otherwise dispose. Beneficial ownership also includes that number of shares, which an individual has the right to acquire within 60 days (such as stock options) of the date this table was prepared. Two or more persons may be considered the beneficial owner of the same shares. The inclusion in this section of any shares deemed beneficially owned does not constitute an admission by that person of beneficial ownership of those shares. All ownership of securities is direct ownership unless otherwise indicated.
_____________
(1) Applicable percentage owned is based on 2,987,633,430 shares outstanding at December 31, 2015.
(2) Includes shares owned by legal entities controlled by our officers and directors. Also includes shares owned by individuals related to our officers and directors.
Item 13.
Item 13. Certain Relationships and Related Transactions, and Director Independence
For the years ended December 31, 2015 and 2014, certain related parties made cash payments to the Company and the Company made cash payments to the related parties (see Note 4 to the financial statements).
On December 9, 2014, we redeemed the 39,312 shares of Series B Convertible Preferred Stock issued in 2013 to our Chief Executive Officer, by issuing a promissory note in the amount of $98,281 (see Note 4 to the financial statements).
Director Independence
During the year ended December 31, 2015, Dr. Jon Leonard, Michael Nugent, Matthew Staker, Robert McClelland and Patrick Greene served as our directors.
As our common stock is currently traded on the OTC Bulletin Board, we are not subject to the rules of any national securities exchange which require that a majority of a listed company's directors and specified committees of the board of directors meet independence standards prescribed by such rules.
Item 14.
Item 14. Principal Accountant Fees and Services
Audit and Review Fees. We paid M&K, CPAS, PLLC for audit and review fees of $16,200 for 2015 and $12,800 for 2014.
Tax Fees. We have not paid any money for tax related services.
All Other Fees. We have not paid any money for audit related fees.
Audit Committee pre-approval policies and procedures. The entire Board of Directors, which acts as our audit committee, approved the engagement of M&K, CPAS, PLLC.
Item 15.
Item 15. Exhibits, Financial Statement Schedules, Signatures
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Tautachrome, Inc.
Date: July 5, 2016
By:/s/ Jon N. Leonard
Jon N. Leonard
Chairman and Chief Executive Officer
Chief Financial Officer
In accordance with the Exchange Act , this report has been duly signed by the following persons on behalf of the Company and in the capacities and on the dates indicated.
/s/ Dr. Jon Leonard
Dr. Jon Leonard
Date: July 5, 2016
Chairman, Chief Executive Officer and Chief Financial Officer
/s/ Patrick Greene
Patrick Greene
Date: July 5, 2016
Director and Executive Vice President
/s/ Robert McClelland
Robert McClelland
Date: July 5, 2016
Director and Corporate Secretary
/s/ Micheal Nugent
Micheal Nugent
Date: July 5, 2016
Director
/s/ Matthew Staker
Matthew Staker
Date: July 5, 2016
Director