ITEM 1. BUSINESS
Our Corporate History
The Company was originally formed on November 1, 2005 when Bio-Solutions International, Inc. (“Bio-Solutions”) entered into an Agreement and Plan of Merger with OmniMed Acquisition Corp., a Nevada corporation and a wholly-owned subsidiary of Bio-Solutions, OmniMed International, Inc. (“OmniMed”) and the shareholders of OmniMed. Pursuant to the agreement, Bio-Solutions acquired all of the outstanding equity stock from the OmniMed shareholders. As a result, the OmniMed shareholders assumed control of Bio-Solutions and changed the name of the Company to OmniMed International, Inc., effective November 21, 2006. On January 17, 2006, OmniMed changed its name to MedeFile International, Inc. The Company’s business following the closing of this acquisition was the sale of an Internet-enabled Personal Health Record (iPHR) system for gathering, digitizing, maintaining, accessing and sharing an individual’s medical records, and in connection therewith, providing a professional service specializing in HIPAA compliant retrieval, reproduction and release of information. Under this service, Company personnel go onsite to physicians’ office weekly to reproduce the records requested by third parties.
On October 25, 2017, the Company the Company changed its name to Tech Town Holdings Inc, effective November 2, 2017.
The name change to Tech Town Holdings, Inc. was intended to reflect a new business strategy centered on identifying and fostering new or early stage business opportunities being aggressively fueled by digital reinvention and innovation. To that end, our business-building platform was segmented into six focused categories, for which we planned to advance numerous technology development projects:
●Digital News Aggregation
●Digital Entertainment and Gaming
●Digital Health and Wellness
●CannaTech
●Mobile App Design and Development
However, following closer scrutiny of the new business opportunities we were exploring in late 2017, coupled with our evaluation of market trends and growth dynamics in their respective categories, we determined that a more prudent strategy was to narrow our focus, working instead on capitalizing on global growth opportunities in a single industry category. At this time, we continue to evaluate prevailing opportunities for our Company and anticipate determining a focused course of action in mid-2018. In January 2018, the Company’s name was changed to Hash Labs Inc We also continue to provide a professional service specializing in HIPAA compliant retrieval, reproduction and release of information which is the primary source of revenue for the Company.
Plan of Operations
As of the date of this annual report, our Company has not entered into any definitive agreement with any party regarding any specific business opportunities for our Company. In our efforts to analyze business opportunities, we will consider the following factors:
●Potential for growth, indicated by new technology, anticipated market expansion or new products;
●Competitive position as compared to other firms of similar size and experience within the industry segment as well as within the industry as a whole;
●Strength and diversity of management, either in place or scheduled for recruitment;
●Capital requirements and anticipated availability of required funds, to be provided by the Company or from operations, through the sale of additional securities, through joint ventures or similar arrangements or from other sources;
●The extent to which the business opportunity can be advanced;
●The accessibility of required management expertise, personnel, raw materials, services, professional assistance and other required items; and
●Other relevant factors.
We will need to raise funds for our operating and investing cash needs. We have no committed sources of capital and there is no assurance we will be able to raise capital on terms acceptable to us, or at all. During the next 12 months we anticipate incurring costs related to developing our new business, filing of Exchange Act reports and other costs associated with being a public company. Although we believe we will be able to meet these costs through funds to be loaned by or invested in us by our stockholders or other investors, we can provide no assurance such funds will be available to us.
Employees
As of May 10, 2018, we have two full-time employees.
ITEM 1A.
ITEM 1A. RISK FACTORS
An investment in the Company’s common stock involves a high degree of risk. In determining whether to purchase the Company’s common stock, an investor should carefully consider all of the material risks described below, together with the other information contained in this report before making a decision to purchase the Company’s securities. An investor should only purchase the Company’s securities if he or she can afford to suffer the loss of his or her entire investment.
RISKS RELATED TO OUR BUSINESS
We have a history of operating losses, and we may not achieve or maintain profitability in the future.
We incurred a net loss of $1,316,356, for the year ended December 31, 2017. As of December 31, 2017, we have an accumulated deficit of $30,251,465 and a stockholders’ deficit of $923,385. We may never achieve profitability or generate significant revenues.
We will need to raise additional capital.
We have a working capital deficit of $925,364 as of December 31, 2017. We will need to raise additional capital to maintain and expand operations. In recent years we have been funded primarily through advances by our largest stockholder. We do not have any committed sources of capital and there is no assurance additional capital will be available on terms acceptable to us, or at all. Any equity financings could result in dilution to our then-existing stockholders. Sources of debt financing may result in higher interest expense. If we are unable to raise sufficient additional capital, we will need to curtail or cease operations.
Our independent registered auditors have expressed substantial doubt about our ability to continue as a going concern.
The financial statements included in this report have been prepared assuming that the Company will continue as a going concern. The Company has suffered recurring losses from operations and has a net capital deficiency. These conditions raise operating and liquidity concerns and substantial doubt about the Company's ability to continue as a going concern.
We may engage in future acquisitions, which may be expensive and time consuming and from which we may not realize anticipated benefits.
We may acquire additional businesses, technologies and products if we determine that these additional businesses, technologies and products complement our existing business or otherwise serve our strategic goals. If we do undertake transactions of this sort, the process of integrating an acquired business, technology or product may result in operating difficulties and expenditures and may absorb significant management attention which would otherwise be available for ongoing development of our business. Moreover, we may never realize the anticipated benefits of any acquisition. Future acquisitions could result in potentially dilutive issuances of our securities, the incurrence of debt and contingent liabilities and amortization expenses related to intangible assets, which could adversely affect our results of operations and financial condition.
RISKS RELATED TO OUR COMMON STOCK
There is a minimal market for our common stock which may make it more difficult for shareholders to dispose of their shares.
Our common stock is quoted on the OTC Pink under the symbol “HLAB”. However, this is an unorganized, inter-dealer, over-the-counter market which provides significantly less liquidity than the NASDAQ Capital Market or other national securities exchange, and there is minimal trading in our common stock. These factors may have an adverse impact on the trading and price of our common stock.
Because our common stock is not registered under the Exchange Act, we will not be subject to the federal proxy rules and our directors, executive offices and 10% beneficial holders will not be subject to Section 16 of the Exchange Act. In addition, our reporting obligations under Section 15(d) of the Exchange Act may be suspended automatically if we have fewer than 300 shareholders of record on the first day of our fiscal year.
Our common stock is not registered under the Securities Exchange Act of 1934, as amended, (the “Exchange Act”), and we do not intend to register our common stock under the Exchange Act for the foreseeable future (provided that, we will register our common stock under the Exchange Act if we have, after the last day of our fiscal year, more than 500 shareholders of record who are not accredited investors (or more than 2,000 persons in total) and $10 million in assets, in accordance with Section 12(g) of the Exchange Act). As a result, although we are required to file annual, quarterly, and current reports pursuant to Section 15(d) of the Exchange Act, as long as our common stock is not registered under the Exchange Act, we are not subject to Section 14 of the Exchange Act, which, among other things, prohibits companies that have securities registered under the Exchange Act from soliciting proxies or consents from shareholders without furnishing to shareholders and filing with the Securities and Exchange Commission (“SEC”) a proxy statement and form of proxy complying with the proxy rules. In addition, so long as our common stock is not registered under the Exchange Act, our directors and executive officers and beneficial holders of 10% or more of our outstanding common stock will not be subject to Section 16 of the Exchange Act. Section 16(a) of the Exchange Act requires executive officers and directors, and persons who beneficially own more than 10% of a registered class of equity securities to file with the SEC initial statements of beneficial ownership, reports of changes in ownership and annual reports concerning their ownership of common shares and other equity securities, on Forms 3, 4 and 5 respectively. Such information about our directors, executive officers, and beneficial holders will only be available through periodic reports we file under the Exchange Act or registration statements we file under the Securities Act. Furthermore, so long as our common stock is not registered under the Exchange Act, our obligation to file reports under Section 15(d) of the Exchange Act will be automatically suspended if, on the first day of any fiscal year (other than a fiscal year in which a registration statement under the Securities Act has gone effective), we have fewer than 300 shareholders of record. This suspension is automatic and does not require any filing with the SEC. In such an event, we may cease providing periodic reports and current or periodic information, including operational and financial information, may not be available with respect to our results of operations.
Our common stock is subject to the "Penny Stock" rules of the SEC and the trading market in our securities is limited, which makes transactions in our stock cumbersome and may reduce the value of an investment in our stock.
The Securities and Exchange Commission has adopted Rule 15g-9 which establishes the definition of a "penny stock," for the purposes relevant to us, as any equity security that has a market price of less than $5.00 per share, subject to certain exceptions. For any transaction involving a penny stock, unless exempt, the rules require:
●that a broker or dealer approve a person's account for transactions in penny stocks; and
●the broker or dealer receive from the investor a written agreement to the transaction, setting forth the identity and quantity of the penny stock to be purchased.
In order to approve a person's account for transactions in penny stocks, the broker or dealer must:
●obtain financial information and investment experience objectives of the person; and
●make a reasonable determination that the transactions in penny stocks are suitable for that person and the person has sufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks.
The broker or dealer must also deliver, prior to any transaction in a penny stock, a disclosure schedule prescribed by the Commission relating to the penny stock market, which, in highlight form:
●sets forth the basis on which the broker or dealer made the suitability determination; and
●that the broker or dealer received a signed, written agreement from the investor prior to the transaction.
Generally, brokers may be less willing to execute transactions in securities subject to the "penny stock" rules. This may make it more difficult for investors to dispose of our common stock and cause a decline in the market value of our stock.
We do not expect to pay dividends.
We have not paid cash dividends on our common stock and do not expect to do so for the foreseeable future. As a result, any return on our shares will be depend on an increase in the market price of our shares, which may not occur.
The rights of the holders of common stock may be impaired by the potential issuance of preferred stock.
Our board of directors has the right, without stockholder approval, to issue preferred stock with voting, dividend, conversion, liquidation or other rights which could adversely affect the voting power and equity interest of the holders of common stock, which could be issued with the right to more than one vote per share, and could be utilized as a method of discouraging, delaying or preventing a change of control. The possible negative impact on takeover attempts could adversely affect the price of our common stock.
ITEM 1B.
ITEM 1B. UNRESOLVED STAFF COMMENTS
Not applicable.
ITEM 2.
ITEM 2. PROPERTIES
We maintain our principal office at 301 Yamato Road, Suite 1240, Boca Raton, Florida 33431. We believe that our existing facilities are suitable and adequate to meet our current business requirements. Our monthly rent is $59.
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS
We are not currently party to any material legal proceedings.
ITEM 4.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
PART II
ITEM 5.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Our common stock is quoted under the symbol “HLAB” on the OTC Pink tier of the OTC Markets. There is minimal trading activity in our common stock.
The following table sets forth, for the period indicated, the quarterly high and low per share bid prices per share of our common stock for each quarter during our last two fiscal years as reported on Nasdaq.com.
Because these are over-the-counter market quotations, these quotations reflect inter-dealer prices, without retail mark-up, markdown or commissions and may not represent actual transactions. There is currently no public trading market for our preferred stock.
As of May 10, 2018, we had approximately 1,076 holders of record of our common stock.
Dividend Policy
The Company has never declared or paid any cash dividends on its common stock and does not expect to pay and any cash dividends for the foreseeable future.
Recent Sales of Unregistered Securities
None
Purchases by Issuer and Its Affiliates
None.
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA
This item is not required for smaller reporting companies.
ITEM 7.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion highlights the principal factors that have affected our financial condition and results of operations as well as our liquidity and capital resources for the periods described. This discussion should be read in conjunction with our Consolidated Financial Statements and the related notes included in Item 8 of this Form 10-K. This discussion contains forward-looking statements. Please see the explanatory note concerning “Forward-Looking Statements” in Part I of this Annual Report on Form 10-K and Item 1A. Risk Factors for a discussion of the uncertainties, risks and assumptions associated with these forward-looking statements.
Results of Operations
YEAR ENDED DECEMBER 31, 2017 COMPARED TO YEAR ENDED DECEMBER 31, 2016
Revenues
Revenues for the year ended December 31, 2017 totaled $42,030 compared to revenues of $33,125 during the year ended December 31, 2016. We generate revenues from professional service specializing in HIPAA compliant retrieval, reproduction and release of information. Under this service, Company personnel go onsite to physicians’ office weekly to reproduce the records requested by third parties.
Selling, General and Administrative Expenses
Selling, general and administrative expenses for the year ended December 31, 2017 totaled $479,019, an increase of $30,107 or approximately 6.7% compared to selling, general and administrative expenses of $448,912 for the year ended December 31, 2016. The increase was due mainly to increased payroll, legal expense and consulting fees.
Impairment of Asset
Impairment of Dino Might program for the year ended December 31, 2017 was $818,472.
Amortization Expenses
Amortization expense for the year ended December 31, 2017 totaled $5,614 compared to $0 for the year ended December 31, 2016. During the first quarter of 2017, the Company purchased website and domain names for a total of $17,845. At December 31, 2017, the Domains Names were written off in the amount of $12,231.
Interest Expense
Interest expense on convertible debentures for the years ended December 31, 2017 and 2016 was $1,768 and $11,606 respectively. The Company entered into two secured convertible debentures during the third quarter of 2013. The notes have a 10% annual interest rate.
Interest expense on promissory notes for the years ended December 31, 2017 and 2016, was $34,443 and $12,817 respectively. During the year ended December 31, 2017, the Company entered into several promissory notes with an annual interest rate of 7%, with terms varying from four months to one year.
Other Expense
Loss on change in fair value of derivate liabilities for the year ended December 31, 2017 was $6,839 compared to a gain of $6,500 for the year ended December 31, 2016.
Net Loss
For the reasons stated above, our net loss for the year ended December 31, 2017 was $1,316,356, or $8.70 per share, an increase of $892,646, compared to net loss of $423,710, or $2.95 per share, during the year ended December 31, 2016.
FINANCIAL CONDITION
Liquidity and Capital Resources
As of December 31, 2017, we had cash of $730, compared to cash of $13,118 as of December 31, 2016. Net cash used in operating activities for the year ended December 31, 2017 was $275,488. Our current liabilities as of December 31, 2017 totaled $929,032; and consisted of $235,589 for accounts payable and accrued liabilities, convertible debenture of $19,055, overdraft of $1,577, note payable - related party of $653,405, and derivative liability of $19,406. We have negative working capital of $925,364 as of December 31, 2017.
The accompanying financial statements have been prepared contemplating a continuation of the Company as a going concern. The Company reported a net loss of $1,316,356 for the year ended December 31, 2017 and had an accumulated deficit of $30,251,465 as of December 31, 2017. We may not succeed in generating any cash flows in the future from anticipated new business activities.
We have no committed sources of capital. We have funded our operations in recent years primarily through loans from our principal stockholder. We will need to raise additional capital to continue and expand our operations. We may not be able to obtain additional capital on acceptable terms, or at all.
Critical Accounting Policies and Estimates
In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606) which amended the existing accounting standards for revenue recognition. ASU 2014-09 establishes principles for recognizing revenue upon the transfer of promised goods or services to customers, in an amount that reflects the expected consideration received in exchange for those goods or services. In July 2015, the FASB deferred the effective date for annual reporting periods beginning after December 15, 2017 (including interim reporting periods within those periods). The amendments may be applied retrospectively to each prior period (full retrospective) or retrospectively with the cumulative effect recognized as of the date of initial application (full retrospective). The Company will adopt ASU 2014-09 in the first quarter of 2018 and apply the full retrospective approach. Because the Company's primary source of revenues is from providing a professional service specializing in HIPAA compliant retrieval, reproduction and release of information, the Company does not expect the impact on its consolidated financial statements to be material.
The preparation of our consolidated financial statements in conformity with accounting principles generally accepted in the United States requires us to make estimates and judgments that affect our reported assets, liabilities, revenues, and expenses, and the disclosure of contingent assets and liabilities.
We base our estimates and judgments on historical experience and on various other assumptions we believe to be reasonable under the circumstances. Future events, however, may differ markedly from our current expectations and assumptions. While there are a number of significant accounting policies affecting our consolidated financial statements, we believe the following critical accounting policies involve the most complex, difficult and subjective estimates and judgments:
Revenue Recognition
Historically, the Company has generated revenue from licensing the right to utilize its proprietary software for the storage and distribution of healthcare information to individuals and affinity groups. For revenue from product sales, the Company recognizes revenue on four basic criteria which must be met before revenue can be recognized: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred; (3) the selling price is fixed and determinable; and (4) collectability is reasonably assured. Determination of criteria (3) and (4) are based on management’s judgments regarding the fixed nature of the selling prices of the products delivered and the collectability of those amounts. Provisions for discounts and rebates to customers, estimated returns and allowances, and other adjustments are provided for in the same period the related sales are recorded. The Company defers any revenue for which the product has not been delivered or is subject to refund until such time that the Company and the customer jointly determine that the product has been delivered or no refund will be required.
Stock-Based Compensation
The Company accounts for all compensation related to stock, options or warrants using a fair value-based method whereby compensation cost is measured at the grant date based on the value of the award and is recognized over the service period, which is usually the vesting period. The Company uses the Black-Scholes pricing model to calculate the fair value of options and warrants issued to both employees and non-employees. Stock issued for compensation is valued using the market price of the stock on the date of the related agreement.
Impairment of long-lived assets
The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the asset’s carrying amount may not be recoverable. The Company conducts its long-lived asset impairment analyses in accordance with ASC 360-10-15, “Impairment or Disposal of Long-Lived Assets.” ASC 360-10-15 requires the Company to group assets and liabilities at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities and evaluate the asset group against the sum of the undiscounted future cash flows. If the undiscounted cash flows do not indicate the carrying amount of the asset is recoverable, an impairment charge is measured as the amount by which the carrying amount of the asset group exceeds its fair value based on discounted cash flow analysis or appraisals.
Inflation
Our opinion is that inflation has not had, and is not expected to have, a material effect on our operations.
Climate Change
Our opinion is that neither climate change, nor governmental regulations related to climate change, have had, or are expected to have, any material effect on our operations.
Off-Balance Sheet Arrangements
At December 31, 2017, we did not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenue or expenses, results of operations, liquidity, capital expenditures or capital resources.
New Accounting Pronouncements
In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606) which amended the existing accounting standards for revenue recognition. ASU 2014-09 establishes principles for recognizing revenue upon the transfer of promised goods or services to customers, in an amount that reflects the expected consideration received in exchange for those goods or services. In July 2015, the FASB deferred the effective date for annual reporting periods beginning after December 15, 2017 (including interim reporting periods within those periods). The amendments may be applied retrospectively to each prior period (full retrospective) or retrospectively with the cumulative effect recognized as of the date of initial application (full retrospective). The Company will adopt ASU 2014-09 in the first quarter of 2018 and apply the full retrospective approach. Because the Company's primary source of revenues is from providing a professional service specializing in HIPAA compliant retrieval, reproduction and release of information, the Company does not expect the impact on its consolidated financial statements to be material.
ITEM 7A.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As a “Smaller Reporting Company,” we are not required to provide the information required by this Item.
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and Board of Directors of
Hash Labs, Inc. (formerly Tech Town Holdings, Inc. and Medefile International, Inc.)
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Hash Labs, Inc. and its subsidiary (formerly Tech Town Holdings, Inc. and Medefile International, Inc.) (collectively, the “Company”) as of December 31, 2017 and 2016, and the related consolidated statements of operations, changes in stockholders’ deficit, and cash flows for the years then ended, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2017 and 2016, and the results of their operations and their cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.
Going Concern Matter
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has suffered recurring losses from operations and has a net capital deficiency that raises substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ MaloneBailey, LLP
www.malonebailey.com
We have served as the Company’s auditor since 2016.
Houston, Texas
May 10, 2018
Hash Labs, Inc.
(formerly Tech Town Holdings, Inc.)
(formerly Medefile International, Inc.)
Consolidated Balance Sheets
The accompanying notes are an integral part of these consolidated financial statements.
Hash Labs, Inc.
(formerly Tech Town Holdings, Inc.)
(formerly Medefile International, Inc.)
Consolidated Statements of Operations
The accompanying notes are an integral part of these consolidated financial statements.
Hash Labs, Inc.
(formerly Tech Town Holdings, Inc.)
(formerly Medefile International, Inc.)
Consolidated Statements of Changes in Stockholder’s Deficit
For the Years Ended December 31, 2017 and 2016
The accompanying notes are an integral part of these consolidated financial statements.
Hash Labs, Inc.
(formerly Tech Town Holdings, Inc.)
(formerly Medefile International, Inc.)
Consolidated Statements of Cash Flows
The accompanying notes are an integral part of these consolidated financial statements.
Hash Labs, Inc.
(formerly Tech Town Holdings, Inc.)
(formerly Medefile International, Inc.)
Notes to the Consolidated Financial Statements
NOTE 1 - BUSINESS, GOING CONCERN AND SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The consolidated financial statements present the balance sheets, statements of operations, changes in stockholder’s deficit and cash flows of the Company. The consolidated financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States of America.
Principle of Consolidation
The accompanying financial statements present on a consolidated basis the accounts of the Company and its wholly owned subsidiary. All significant intercompany accounts and transactions have been eliminated in consolidation.
Nature of Business Operations
Our Company was originally formed on November 1, 2005 when Bio-Solutions International, Inc. entered into an Agreement and Plan of Merger (with OmniMed Acquisition Corp., a Nevada corporation and a wholly-owned subsidiary of Bio-Solutions, OmniMed International, Inc. (“OmniMed”) and the shareholders of OmniMed. Pursuant to the Agreement, Bio-Solutions acquired all of the outstanding equity stock from the OmniMed shareholders. As a result, the OmniMed shareholders assumed control of Bio-Solutions and changed the name of the Company to OmniMed International, Inc., effective November 21, 2006. On January 17, 2006, OmniMed changed its name to MedeFile International, Inc. The Company’s business following the closing of this acquisition was the sale of an Internet-enabled Personal Health Record (iPHR) system for gathering, digitizing, maintaining, accessing and sharing an individual’s medical records, and in connection therewith, providing a professional service specializing in HIPAA compliant retrieval, reproduction and release of information. Under this service, Company personnel go onsite to physicians’ office weekly to reproduce the records requested by third parties.
In October 2017, the name of the Company was changed to Tech Town Holdings, Inc. to reflect a new business strategy centered on identifying and fostering new or early stage business opportunities being aggressively fueled by digital reinvention and innovation. To that end, our business-building platform was segmented into six focused categories, for which we planned to advance numerous technology development projects:
●Digital News Aggregation
●Digital Entertainment and Gaming
●Digital Health and Wellness
●Cryptocurrencies and Blockchain Technologies
●CannaTech
●Mobile App Design and Development
However, following closer scrutiny of the new business opportunities we were exploring in late 2017, coupled with our evaluation of market trends and growth dynamics in their respective categories, we determined that a more prudent strategy was to narrow our focus, working instead on capitalizing on global growth opportunities in a single industry category. At this time, we continue to evaluate prevailing opportunities for our Company and anticipate determining a focused course of action in mid-2018. In January 2018, the Company’s name was changed to Hash Labs Inc. We also continue to provide a professional service specializing in HIPAA compliant retrieval, reproduction and release of information
Going Concern
The accompanying financial statements have been prepared contemplating a continuation of the Company as a going concern. However, the Company has reported a net loss of for the year ended December 31, 2017 and has negative working capital as of December 31, 2017.
The accompanying financial statements have been prepared assuming the Company will continue as a going concern. The operating losses and working capital deficit raise substantial doubt about the Company’s ability to continue as a going concern. The Company’s ability to obtain additional financing depends on the success of its growth strategy and its future performance, each of which is subject to general economic, financial, competitive, legislative, regulatory and other factors beyond the Company’s control.
We will need additional investments in order to continue operations. Additional investments are being sought, but we cannot guarantee that we will be able to obtain such investments. Financing transactions may include the issuance of equity or debt securities, obtaining credit facilities, or other financing mechanisms.
Further, if we issue additional equity or debt securities, stockholders may experience additional dilution or the new equity securities may have rights, preferences or privileges senior to those of existing holders of our common stock. If additional financing is not available or is not available on acceptable terms, we will have to curtail or cease our operations. 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. These financial statements do not include any adjustments that might arise from this uncertainty.
Cash and Cash Equivalents
For purposes of these financial statements, cash and cash equivalents includes highly liquid debt instruments with maturity of less than three months.
Concentrations of Credit Risk
Financial instruments and related items, which potentially subject the Company to concentrations of credit risk, consist primarily of cash and cash equivalents. The Company places its cash and temporary cash investments with high credit quality institutions. At times, such investments may be in excess of the FDIC insurance limit. Currently our operating account is not above the FDIC limit.
Advertising
The Company follows the policy of charging the costs of advertising to expense as incurred. The Company incurred no advertising costs for the years ended December 31, 2017 and 2016.
Income Taxes
The Company accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements. Under this method, deferred tax assets and liabilities are determined based on the differences between the financial statements and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date.
The Company records net deferred tax assets to the extent the Company believes these assets will more likely than not be realized. In making such determination, the Company considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax planning strategies and recent financial operations. A valuation allowance is established against deferred tax assets that do not meet the criteria for recognition. In the event the Company were to determine that it would be able to realize deferred income tax assets in the future in excess of their net recorded amount, the Company would make an adjustment to the valuation allowance which would reduce the provision for income taxes.
The Company follows the accounting guidance which provides that a tax benefit from an uncertain tax position may be recognized when it is more likely than not that the position will be sustained upon examination, including resolutions of any related appeals or litigation processes, based on the technical merits. Income tax positions must meet a more-likely-than-not recognition threshold at the effective date to be recognized initially and in subsequent periods. Also included is guidance on measurement, recognition, classification, interest and penalties, accounting in interim periods, disclosure and transition.
Property and Equipment
Property and equipment are stated at cost. When retired or otherwise disposed, the related carrying value and accumulated depreciation are removed from the respective accounts and the net difference less any amount realized from disposition, is reflected in earnings. Minor additions and renewals are expensed in the year incurred. Major additions and renewals are capitalized and depreciated over their estimated useful lives being 3 years up to 10 years.
Revenue Recognition
The Company generates revenue from licensing the right to utilize its proprietary software for the storage and distribution of healthcare information to individuals and affinity groups. For revenue from product sales, the Company recognizes revenue on four basic criteria which must be met before revenue can be recognized: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred; (3) the selling price is fixed and determinable; and (4) collectability is reasonably assured. Determination of criteria (3) and (4) are based on management’s judgments regarding the fixed nature of the selling prices of the products delivered and the collectability of those amounts. Provisions for discounts and rebates to customers, estimated returns and allowances, and other adjustments are provided for in the same period the related sales are recorded.
Fair Value of Financial Instruments
Cash and Equivalents, Deposits In-Transit, Receivables, Prepaid and Other Current Assets, Accounts Payable, Accrued Salaries and Wages and Other Current Liabilities
The carrying amounts of these items approximated fair value.
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. To increase the comparability of fair value measures, Financial Accounting Standards Board (“FASB”) ASC Topic 820-10-35 establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurement) and the lowest priority to unobservable inputs (level 3 measurements).
Level 1-Valuations based on quoted prices for identical assets and liabilities in active markets.
Level 2-Valuations based on observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data.
Level 3-Valuations based on unobservable inputs reflecting our own assumptions, consistent with reasonably available assumptions made by other market participants. These valuations require significant judgment.
The application of the three levels of the fair value hierarchy under Topic 820-10-35 to our assets and liabilities as of December 31, 2017 and December 31, 2016 are described below:
Derivative liability as of December 31, 20178 was $19,406, compared to $12,567 as of December 31, 2016.
Impairment of Long Lived Assets
In accordance with Accounting Standards Codification (“ASC”) 360-10, Accounting for the Impairment or Disposal of Long-Lived Assets, long-lived assets to be held and used are analyzed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. ASC 360-10 relates to assets that can be amortized and the life can be determinable. The Company reviews property and equipment and other long-lived assets for impairment annually, or whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability is measured by comparison of the asset’s carrying amount to future undiscounted net cash flows the assets are expected to generate. Cash flow forecasts are based on trends of historical performance and management’s estimate of future performance, giving consideration to existing and anticipated competitive and economic conditions. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the projected discounted future cash flows arising from the assets or their fair values, whichever is more determinable. At December 31, 2017, the Company determined there was an impairment on the Domain Name assets. As a result an impairment was recorded in the amount of $12,231. Additionally, an impairment was recognized for the Dino Might program in the amount of $818,422. The impairment on both assets was due to limited to no cash flow expected to be generated.
Net Loss per Share
Basic and diluted loss per share amounts are computed based on net loss divided by the weighted average number of common shares outstanding. Convertible shares, if converted, totaling 4,563 common shares were not included in the computation of diluted loss per share because the assumed conversion and exercise would be anti-dilutive for the year ending December 31, 2017.
Management Estimates
The presentation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reported period. Actual results could differ from those estimates.
Stock Based Compensation
The Company accounts for employee compensation related to stock, options or warrants using a fair value-based method whereby compensation cost is measured at the grant date based on the value of the award and is recognized over the service period, which is usually the vesting period. The Company accounts for nonemployee compensation related to stock, options or warrants using a fair value-based method whereby compensation cost is measured at the earlier of a commitment date or completion of services based on the value of the award and is recognized over the service period. The Company uses the Black-Scholes pricing model to calculate the fair value of options and warrants issued to both employees and non-employees. Stock issued for compensation is valued using the market price of the stock on the measurement date.
Recent Accounting Pronouncements
In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606) which amended the existing accounting standards for revenue recognition. ASU 2014-09 establishes principles for recognizing revenue upon the transfer of promised goods or services to customers, in an amount that reflects the expected consideration received in exchange for those goods or services. In July 2015, the FASB deferred the effective date for annual reporting periods beginning after December 15, 2017 (including interim reporting periods within those periods). The amendments may be applied retrospectively to each prior period (full retrospective) or retrospectively with the cumulative effect recognized as of the date of initial application (full retrospective). The Company will adopt ASU 2014-09 in the first quarter of 2018 and apply the full retrospective approach. Because the Company’s primary source of revenues is from providing a professional service specializing in HIPAA compliant retrieval, reproduction and release of information, the Company does not expect the impact on its consolidated financial statements to be material.
2. NOTES PAYABLE - RELATED PARTY
During the year ended December 31, 2016, the Company entered into eight unsecured 7% Promissory Notes with a significant shareholder totaling $222,000. During the year ended December 31, 2017, the Company entered into seventeen additional unsecured 7% Promissory Notes totaling $215,500. The notes mature four to twelve months from issuance and total $437,500. As of December 31, 2017, $300,000 of the notes were in default.
The changes in these notes payable to related party consisted of the following during the years ended December 31, 2017 and 2016:
On July 15, 2016, the Company entered into an unsecured 7% Promissory Notes with a significant shareholder in the amount of $100,000. The note has a one-year term and was in default as of December 31, 2017.
The changes in these notes payable to related party consisted of the following during the years ended December 31, 2017 and 2016:
During the year ended December 31, 2017, the Company entered into five unsecured 7% Promissory Notes with a significant shareholder totaling $65,500. As of December 31, 2017, $65,500 was in default.
The changes in these notes payable to related party consisted of the following during the year ended December 31, 2017:
During the year ended December 31, 2017, the Company borrowed a total of $4,275 from the CEO of the Company; total expenses paid directly by the CEO of the Company was $3,200. During the year ended December 31, 2017, the Company repaid $4,330 to the CEO, and the amount due to the CEO was $3,145 as of December 31, 2017. The advance carries 0% interest rate and is to be paid when funds become available.
Other Related Party Transaction
Michael Delin, a director of the Company, provides accounting services to the Company through an entity he owns. During the years ended December 31, 2017 and December 31, 2016, the Company paid Mr. Delin $9,500 and $22,500 for such services.
3. CONVERTIBLE DEBENTURE - RELATED PARTY
The Company entered into two 10% Secured Convertible Debentures with a significant shareholder in the amount of $50,000 on November 4, 2013 and $60,000 on December 17, 2013. The debentures carry a one-year term and are convertible into common stock at conversion price equal to the lower of $400.00 or 80% of the previous day’s closing price. $40,000 of the note was converted and $70,000 was repaid as of December 31, 2015. Convertible accrued interest remained outstanding under this note of $19,055 and $17,287 as of December 31, 2017 and 2016, respectively.
The changes in these outstanding convertible notes payable to related party consisted of the following during the years ended December 31, 2017 and 2016:
4. DERIVATIVE LIABILITIES
In connection with certain securities purchase agreements entered into during the third quarter of 2011 and the second quarter of 2012, the Company granted warrants with ratchet provisions. The warrants expired four years from the date of grant. During the first two years of grant, if the Company were to issue any additional shares of common stock at a price per share less than the exercise price in effect, the exercise price would be adjusted to equal the average price per share received by the Company for the additional shares issued. After the first two years following the issuance date, if the Company were to issue any additional shares of common stock at a price per share less than the exercise price in effect, the exercise price would be adjusted using a formula based on the existing exercise price, the outstanding shares before and after the issuance of such shares, and the average price during the issuance of such shares. In addition to the exercise price adjustment, the number of shares upon exercise of the warrants was also subject to adjustment.
Upon grant, the Company assesses the fair value of the warrants using the Black Scholes pricing model and records a warrant liability for the value. The Company then assesses the fair value of the warrants quarterly based on the Black Scholes Model and increases or decreases the warrant liability to the new value, and records a corresponding gain or loss (see below for variables used in assessing the fair value).
Due to the ratchet provisions, the Company treats the warrants as a derivative liability in accordance with the provisions of ASC 815 “Derivatives and Hedging” (ASC 815). ASC 815 applies to any freestanding financial instruments or embedded features that have the characteristics of a derivative and to any freestanding financial instruments that potentially settle in an entity’s own common stock.
These warrants expired during 2016 resulting in a derivative gain of $1,271. The fair value of the derivative liability associated with these warrants was $1,271 as of December 31, 2015.
As noted above, the Company entered into two 10% Secured Convertible Debentures with a significant shareholder, one in the amount of $50,000 on November 4, 2013 and the other in the amount of $60,000 on December 17, 2013. The debentures carry a one-year term and are convertible into common stock at a conversion price equal to the lower of $400.00 or 80% of the previous day’s closing price.
The Company assesses the fair value of the convertible debenture using the Black Scholes pricing model and records a derivative liability for the value. The Company then assesses the fair value of the warrants quarterly based on the Black Scholes Model and increases or decreases the liability to the new value and records a corresponding gain or loss (see below for variables used in assessing the fair value).
Due to the variable conversion rates, the Company treats the convertible debenture as a derivative liability in accordance with the provisions of ASC 815 “Derivatives and Hedging” (ASC 815). ASC 815 applies to any freestanding financial instruments or embedded features that have the characteristics of a derivative and to any freestanding financial instruments that potentially settle in an entity’s own common stock. The fair value of the conversion options was determined using the Black-Scholes Option Pricing Model and the following significant assumptions during the years ended December 31, 2017 and 2016:
The change in fair value of the conversion option derivative liability consisted of the following during the years ended December 31, 2017 and 2016:
Change in fair market value of conversion option liability resulted in a loss of $6,839 for the year ended December 31, 2017 and a gain of $5,229 for the year ended December 31, 2016.
5. INTELLECTUAL PROPERTY
In January 2017, the Company purchased a website and two domain names including the intellectual property. In March 2017, the Company purchased two additional domain names. The Company has purchased a website and domain names for a total purchase price of $17,845. Amortization expense for the year ended December 31, 2017 totaled $5,614 compared to $0 for the year ended December 31, 2016. As of December 31, 2017, the domain names were written off in the amount of $12,231.
In September 2017, the Company entered into and closed an asset purchase agreement (the “Asset Purchase Agreement”) with The Vantage Group Ltd., a significant shareholder (“Vantage”). Pursuant to the Asset Purchase Agreement, the Company purchased from Vantage a software application referred to as Dino Might and related intellectual property. As consideration for the purchase, the Company issued to Vantage 7,000 shares of newly created Series C Preferred Stock, valued at $820,451, and granted to Vantage a revenue sharing interest in the Dino Might asset pursuant to which the Company agreed to pay to Vantage, for the Company’s 2017 fiscal year and the following nine years, 30% of the revenue generated by the Dino Might asset. The Company has recognized an impairment loss of $818,472, on the transaction based on the future discounted cash flows over the next three years.
Intellectual property is stated at cost. When retired or otherwise disposed, the related carrying value and accumulated amortization are removed from the respective accounts and the net difference less any amount realized from disposition, is reflected in earnings. Minor additions and renewals are expensed in the year incurred. The properties will be depreciated over their estimated useful lives being 3 years.
6. EQUITY
On September 29, 2017, the Company filed a Certificate of Designation of Series C Preferred Stock with the Secretary of State of Nevada (the “Series C Certificate of Designation”). The Company authorized 7,000 shares of preferred stock as Series C Preferred Stock. The Company issued 7,000 shares of Series C Preferred Stock. The Series C Preferred Stock is convertible into common stock at a conversion ratio determined by dividing the Series C Original Issue Price of $100 per share by the conversion price of $2.00 (such that each share of Series C Preferred Stock is convertible into 50 shares of common stock). The Series C Preferred Stock will vote on an as-converted basis with the common stock, and in the event any dividends are paid on the common stock, the Series C Preferred Stock will be entitled to dividends on an as-converted basis. If a Distribution Event (as defined in the Series C Certificate of Designation) occurs, the Company will pay to the holders of Series C Preferred Stock $30,000 for every $120,000 received from such Distribution Event, and the number of outstanding shares of Series C Preferred Stock will be reduced by an amount determined by dividing the amount of such payment by the Series C Original Issue Price. A Distribution Event is defined as the receipt by the Company of $120,000 in proceeds from a financing not involving any holder of Series C Preferred Stock, or any fiscal period in which the Company generated gross profits of $120,000 or more.
On September 29, 2017, the Company issued 7,000 shares of Series C Preferred Stock in connection with the Asset Purchase Agreement for the Dino Might asset. The value of the shares issued amount to $820,451. The valuation of the shares of Series C Preferred Stock was determined by an independent financial analyst.
On October 25, 2017, the Company filed a Certificate of Amendment to its Articles of Incorporation with the Secretary of State of Nevada, pursuant to which a one-for-200 reverse split of its common stock was effected and the Company changed its name to Tech Town Holdings Inc, effective November 2, 2017. All share and per share amounts herein retroactively reflect the split.
7. INCOME TAXES
Deferred income taxes are determined using the liability method for the temporary differences between the financial reporting basis and income tax basis of the Company’s assets and liabilities. Deferred income taxes are measured based on the tax rates expected to be in effect when the temporary differences are included in the Company’s tax return. Deferred tax assets and liabilities are recognized based on anticipated future tax consequences attributable to differences between financial statement carrying amounts of assets and liabilities and their respective tax bases. On December 22, 2017, H.R. 1, formally known as the Tax Cut and Jobs Act (the “Act”) was enacted into law. The Act provides for significant tax law changes and modifications with varying effective dates. The major change that affects the Company is reducing the corporate income tax rate from 35% to 21%.
The Company is subject to US taxes. Historically, the Company has had no net taxable income, and therefore has paid no income tax. All years since inception are open to IRS inspection.
As of December 31, 2017 and 2016, respectively, the Company had a net operating loss (NOL) carryforward of approximately $17,977,860 and $17,535,257. The NOL carryforward begins to expire in various years beginning 2017. Because management is unable to determine that it is more likely than not that the Company will realize the tax benefit related to the NOL carryforward, by having future taxable income, a full valuation allowance has been established at December 31, 2017 and 2016 to reduce the tax benefit asset value to zero.
The valuation allowance for deferred tax assets as of December 31, 2017 and 2016 was $3,775,351 and $6,137,340, respectively. In assessing the recovery of the deferred tax assets, management considers whether it is more likely than not that some or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income in the periods in which those temporary differences become deductible. Management considers the scheduled reversals of future deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. As a result, management determined it was more likely than not the deferred tax assets would not be realized as of December 31, 2017 and 2016 and recorded a full valuation allowance.
8. SUBSEQUENT EVENTS
On January 9, 2018, shareholders of the Company, owning an aggregate of 7,000 shares of Series C Preferred Stock and 35,164 shares of Common Stock, representing in the aggregate 77% of the total voting power of the Company’s shareholders, approved by written consent an amendment to the Company’s Articles of Incorporation, to change the name of the Company to Hash Labs Inc. Effective March 2, 2018, the Company filed a Certificate of Amendment to its Articles of Incorporation with the Secretary of State of Nevada, to change the name of the Company from Tech Town Holdings Inc. to Hash Labs Inc. The market effective date of the name change was March 6, 2018.
On April 3, 2018, the Company entered into an exchange agreement with Vantage. Pursuant to the exchange agreement, Vantage exchanged outstanding promissory notes of the Company in the aggregate principal amount of $518,225 (including accrued interest) held by Vantage for a new convertible promissory note of the Company in the principal amount of $518,225. The convertible note bears interest at the rate of 7% per year and is convertible into shares of common stock of the Company at a conversion price of $0.027. Vantage is the Company’s largest stockholder and is owned by Lyle Hauser.
On April 3, 2018, the Company entered into an exchange agreement with Lyle Hauser. Pursuant to the exchange agreement, Mr. Hauser exchanged outstanding promissory notes of the Company in the aggregate principal amount of $68,969 (including accrued interest) held by Mr. Hauser for a new convertible promissory note of the Company in the principal amount of $68,969. The convertible note bears interest at the rate of 7% per year and is convertible into shares of Common Stock of the Company at a conversion price of $0.0005.
On April 3, 2018, the Company issued an aggregate of 9,300,000 shares of common stock to Vantage upon the conversion of (i) $241,650 of Vantage’s convertible note and (ii) 7,000 shares of Series C Preferred Stock. In connection with the conversion, Vantage waived any dividends owed to Vantage as the holder of the Series C Preferred Stock.
On April 6, 2018, the Company issued an aggregate of 9,000,000 shares of common stock upon the conversion of a convertible note in the principal amount (including accrued interest) of $243,000 which was sold to a third party by Vantage.
During the first quarter 2018, the Company, entered into five Promissory Notes with Vantage Group in the amount of $41,000 at an interest rate of 7% and a term of one year.
On March 21, 2019, the Company, entered into a 7% Promissory Note (Vantage Note 2) with a term of one year in the amount of $15,000.
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 and Control Procedures
Management of the Company conducted an evaluation of the effectiveness of the Company’s disclosure controls and procedures (as such term is defined in Rule 13a-15(e) and Rule 15d-15(e) under the 1934 Act) pursuant to Rule 13a-15 under the 1934 Act as of the end of the period covered by this report. The Company’s disclosure controls and procedures are designed to ensure that information required to be disclosed by the Company in the reports it files or submits under the 1934 Act is recorded, processed, summarized and reported within the time periods specified in the Commission’s rules and forms and that such information is accumulated and communicated to management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
Based on this evaluation, management concluded that the design and operation of our disclosure controls and procedures are not effective due to the following material weaknesses:
● Since inception our chief executive officer also functions as our chief financial officer. As a result, our officers may not be able to identify errors and irregularities in the financial statements and reports.
● We were unable to maintain full segregation of duties within our financial operations due to our reliance on limited personnel in the finance function. While this control deficiency did not result in any audit adjustments to our financial statements, it could have resulted in a material misstatement that might have been prevented or detected by a segregation of duties.
● Documentation of all proper accounting procedures is not yet complete.
To the extent reasonably possible given our limited resources, we intend to take measures to cure the aforementioned weaknesses, including, but not limited to, the following:
● Increasing the capacity of our qualified financial personnel to ensure that accounting policies and procedures are consistent across the organization and that we have adequate control over financial statement disclosures.
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 Exchange Act). Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes of accounting principles generally accepted in the United States.
Our internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of America, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the financial statements
Our management conducted an evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2017 based on the criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013).
A material weakness is defined within the Public Company Accounting Oversight Board’s Auditing Standard No. 5 as 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.
In conducting his evaluation, our officer noted the following material weaknesses in our internal controls over financial reporting:
● While certain accounting procedures have been adopted, compliance with such procedures has been inconsistent.
● The Board of Directors has not established an Audit Committee. Accordingly, the entire Board, rather than an independent body, has reviewed our financial statements.
● Segregation procedures could be improved by strengthening cross approval of various functions, including cash disbursements and internal audit procedures where appropriate.
As a result of these deficiencies in our internal controls, our officer concluded that our internal control over financial reporting was not effective.
This Annual Report does not include an attestation report of the Company’s independent registered public accounting firm regarding internal control over financial reporting. The Company’s internal control over financial reporting was not subject to attestation by the Company’s independent registered public accounting firm pursuant to rules of the SEC that permit the Company to provide only management’s report in this annual report.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting, as defined in Rules 13a-15(t) and 15d-15(f) under the Exchange Act, during the fourth quarter of the fiscal year ended December 31, 2017 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
ITEM 9B.
ITEM 9B. OTHER INFORMATION
None.
PART III
ITEM 10.
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The following table and biographical summaries set forth information, including principal occupation and business experience about our directors and executive officers:
Niquana Noel - President, CEO and Chairwoman
Ms. Noel has served as our Company’s Chairwoman, President and CEO since January 2014. She originally joined the Company as operations manager in 2008 and was appointed as Chief Operating Officer and director of the Company in August 2013. Previously, Ms. Noel was the Executive Assistant to a Florida-based serial entrepreneur who had successful business interests ranging from the ownership and operation of cemeteries in Maryland, Virginia and Florida; to the ownership and operation of exotic, high performance car dealerships and auto accessory businesses. She studied Business Management at Florida International University. Ms. Noel’s executive operational qualifies her to serve on our board of directors.
Michael S. Delin - Director
After providing finance and accounting consulting services to the management team, Michael joined our Company’s Board of Directors in December 2008. As the sole proprietor and operator of an accounting and tax preparation service that he founded in 1998, Mr. Delin continues to provide outsourced CFO services for several public and private companies operating in a range of industries, including construction, technology and healthcare, among others. Michael is a graduate of the University of South Florida where he earned a Bachelor’s degree in Accounting. Mr. Delin’s accounting and financial experience qualifies him to serve on the board of directors.
Corporate Governance
Board of Directors' Term of Office
Directors are elected at our annual meeting of shareholders and serve for one year until the next annual meeting of shareholders or until their successors are elected and qualified.
Committees of our Board of Directors
We have not established any committees, including an Audit Committee, a Compensation Committee or a Nominating Committee, or any committees performing similar functions. The functions of those committees are currently undertaken by Board of Directors as a whole. Because we have only two directors, neither of which is independent, we believe that the creation of these committees, at this time, would be cumbersome and constitute more form over substance, particularly under circumstances where a substantial majority of our outstanding shares are controlled by one individual (who has approved the appointment of our directors) and at a time when our resources do not permit us to obtain officers’ and directors’ liability insurance. We do not have an audit committee financial expert because we do not have the resources to retain one.
Board Leadership Structure and Role in Risk Oversight
Although we have not adopted a formal policy on whether the Chairwoman and Chief Executive Officer positions should be separate or combined, we have traditionally determined that it is in the best interests of the Company and its shareholders to combine these roles. Ms. Niquana Noel has served as our Chairwoman and Chief Executive Officer since January 2014. We believe it is in the best interest of the Company to have the Chairwoman and Chief Executive Officer roles combined due to our small size and limited resources.
Our Board of Directors is primarily responsible for overseeing our risk management processes. The Board of Directors receives and reviews periodic reports from management, auditors, legal counsel, and others, as considered appropriate regarding our company’s assessment of risks. The Board of Directors focuses on the most significant risks facing our company and our company’s general risk management strategy, and also ensures that risks undertaken by our company are consistent with the Board’s appetite for risk. While the Board oversees our company, our company’s management is responsible for day-to-day risk management processes. We believe this division of responsibilities is the most effective approach for addressing the risks facing our company and that our Board leadership structure supports this approach.
Stockholder Nominees for Directors
We do not have a policy regarding the consideration of any director candidates which may be recommended by our stockholders, including the minimum qualifications for director candidates, nor has our Board of Directors established a process for identifying and evaluating director nominees. We have not adopted a policy regarding the handling of any potential recommendation of director candidates by our stockholders, including the procedures to be followed. Our Board has not considered nor has it adopted any of these policies as we have never received a recommendation from any stockholder for any candidate to serve on our Board of Directors. Given our relative size, early stage of development and lack of officers’ and directors’ insurance coverage, we do not anticipate that any of our stockholders will make such a recommendation in the near future. While there have been no nominations of additional directors proposed, in the event such a proposal is made, all members of our Board will participate in the consideration of director nominees. In considering a director nominee, it is likely that our Board will consider the professional and/or educational background of any nominee with a view towards how such candidate might bring a different viewpoint or experience to our Board.
Family Relationships
There are no family relationships among the officers and directors, nor are there any arrangements or understanding between any of the Directors or Officers of our Company or any other person pursuant to which any Officer or Director was or is to be selected as an officer or director.
Involvement in Certain Legal Proceedings
During the last ten years, none of our officers, directors, promoters or control persons have been involved in any legal proceedings as described in Item 401(f) of Regulation S-K.
Director Independence
Currently, none of our directors qualify as independent directors under listing standards of The NASDAQ Capital Market.
Compliance with Section 16(A) of the Exchange Act
Because we do not have a class of equity securities registered pursuant to Section 12 of the Exchange Act, we are not subject to Section 16(a) of the Exchange Act.
Code of Ethics
The Company has adopted a Code of Ethics for adherence by its Chief Executive Officer to ensure honest and ethical conduct; full, fair and proper disclosure of financial information in the Company's periodic reports filed pursuant to the Securities Exchange Act of 1934; and compliance with applicable laws, rules, and regulations. Any person may obtain a copy of our Code of Ethics, without charge, by mailing a request to the Company at the address appearing on the front page of this Annual Report on Form 10-K or by viewing it on our website found at www.tech-town.com
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION
The following table sets forth compensation information for services rendered by certain of our executive officers in all capacities during the last two completed fiscal years. The following information includes the dollar value of base salaries and certain other compensation, if any, whether paid or deferred. The executive officers of the company did not receive any stock award, option award, non-equity incentive plan compensation, or nonqualified deferred compensation earnings during the last two completed years.
Summary Compensation Table
(1) For the year ended December 31, 2017, all compensation for Niquana Noel has been accrued. There has been no payroll paid to Niquana Noel during 2017.
Compensation of Directors
The following table sets forth the compensation paid to members of our Board of Directors in fiscal 2017:
(1) Does not include $9,500 for accounting services performed for the fiscal year 2017 through a company solely owned by Michael Delin.
Employment Agreements
We are not party to any employment agreements.
Outstanding Equity Awards at 2017 Fiscal Year-End
The Company had no outstanding equity awards as of December 31, 2017.
Potential Payments upon Termination or Change in Control
We do not have any contract, agreement, plan or arrangement that provides for any payment to any of our Named Executive Officers at, following, or in connection with a termination of the employment of such Named Executive Officer, a change in control of the Company or a change in such Named Executive Officer's responsibilities.
ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The following table sets forth information as of April 17, 2018 based on information obtained from the persons named below or known to us, with respect to the beneficial ownership of our common stock by (i) each person (including groups) known to us to be the beneficial owner of more than five percent (5%) of our common stock, or (ii) each Director and Officer, and (iii) all directors and officers of the Company, as a group. Except as otherwise indicated, all stockholders have sole voting and investment power with respect to the shares listed as beneficially owned by them, subject to the rights of spouses under applicable community property laws.
* Less than 1%.
(1) Applicable percentage ownership is based on 18,451,227 shares of common stock outstanding as of April 17, 2018, together with securities exercisable or convertible into shares of common stock within 60 days of April 17, 2018 for each stockholder. Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission and generally includes voting or investment power with respect to securities. Shares of common stock that are currently exercisable or exercisable within 60 days of April 17, 2018 are deemed to be beneficially owned by the person holding such securities for the purpose of computing the percentage of ownership of such person, but are not treated as outstanding for the purpose of computing the percentage ownership of any other person.
(2) Includes 2,000,000 shares owned by The Vantage Group Ltd., which is owned by Mr. Hauser.
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
Certain Relationships and Related Transactions
We have been funded in the past two fiscal years and subsequently primarily through advances made by our primary stockholder, Lyle Hauser (directly and through The Vantage Group Ltd. (“Vantage”), an entity owned by Mr. Hauser). As of December 31, 2017, we had an aggregate in notes payable owed to Mr. Hauser and Vantage of $587,194 and a convertible debenture owed to Mr. Hauser and Vantage of $19,055.
On April 3, 2018, the Company entered into an exchange agreement with Vantage. Pursuant to the exchange agreement, Vantage exchanged outstanding promissory notes of the Company in the aggregate principal amount of $518,225 (including accrued interest) held by Vantage for a new convertible promissory note of the Company in the principal amount of $518,225. The convertible note bears interest at the rate of 7% per year and is convertible into shares of common stock of the Company at a conversion price of $0.027.
On April 3, 2018, the Company entered into an exchange agreement with Lyle Hauser. Pursuant to the exchange agreement, Mr. Hauser exchanged outstanding promissory notes of the Company in the aggregate principal amount of $68,969 (including accrued interest) held by Mr. Hauser for a new convertible promissory note of the Company in the principal amount of $68,969. The convertible note bears interest at the rate of 7% per year and is convertible into shares of common stock of the Company at a conversion price of $0.0005.
On April 3, 2018, the Company issued an aggregate of 9,300,000 shares of common stock to Vantage and Mr. Hauser upon the conversion of (i) $241,650 of Vantage’s convertible note and (ii) 7,000 shares of Series C Preferred Stock. In connection with the conversion, Vantage waived any dividends owed to Vantage as the holder of the Series C Preferred Stock.
On September 29, 2017, the Company entered into and closed an asset purchase agreement (the “Asset Purchase Agreement”) with Vantage. Pursuant to the Asset Purchase Agreement, the Company purchased from Vantage a software application referred to as Dino Might and related intellectual property (the “Dino Might Asset”). As consideration for the purchase, the Company issued to Vantage 7,000 shares of newly created Series C Preferred Stock and granted to Vantage a revenue sharing interest in the Dino Might Asset pursuant to which the Company agreed to pay to Vantage, for the Company’s 2017 fiscal year and the following nine years, 30% of the revenue generated by the Dino Might Asset.
Michael Delin, a director of the Company, provides accounting services to the Company through an entity he owns. During the years ended December 31, 2017 and December 31, 2016, we paid Mr. Delin $9,500 and $22,500 for such services.
Director Independence
Currently, none of our directors qualify as independent directors under listing standards of The NASDAQ Capital Market and Rule 10A-3 and Rule 10C-1 of the Exchange Act.
ITEM 14.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
Audit Fees
The following table shows the fees that were billed to the Company by its independent auditor for professional services rendered in 2017 and 2016
Audit fees. Audit fees represent fees for professional services performed by MaloneBailey, LLP for the audit of our annual financial statements and the review of our quarterly financial statements, as well as services that are normally provided in connection with statutory and regulatory filings or engagements.
Audit-related fees. Audit-related fees represent fees for assurance and related services performed by MaloneBailey that are reasonably related to the performance of the audit or review of our financial statements.
Tax Fees. MaloneBailey, LLP did not perform any tax compliance services for us during the years ended December 31, 2017 or 2016.
All other fees. MaloneBailey, LLP did not receive any other fees from us for the years ended December 31, 2017 or 2016.
PART IV
ITEM 15.
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
HASH LABS INC.
Dated: May 10, 2018 By: /s/ Niquana Noel
Niquana Noel
President and Chief Executive Officer (principal executive, financial and accounting officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
SIGNATURE
TITLE
DATE
/s/ Niquana Noel
President, Chief Executive Officer and Director
May 10, 2018
Niquana Noel
(Principal executive, financial and accounting officer)
/s/ Michael S. Delin
Director
May 10, 2018
Michael S. Delin