ALTITUDE INTERNATIONAL HOLDINGS, INC. - Quarter Report: 2019 March (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington D. C. 20549

FORM 10-Q

☒    Quarterly report pursuant to Section 13 or 15(d) of the Securities and Exchange Act of 1934

For the quarterly period ended March 31, 2019

☐    Transition report pursuant to Section 13 or 15(d) of the Exchange Act

For the transition period from _________ to _________.

ALTITUDE INTERNATIONAL, INC.

(Exact Name of Registrant as Specified in its Charter)

515 E. Las Olas Boulevard, Suite 120, Fort Lauderdale, FL  33301

 (Address of Principal Executive Offices)

(954) 256-5120

(Registrant’s Telephone Number, Including Area Code)

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).   YES   ☒    NO  ☐

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

(Check One):

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

Indicate by check mark whether the registrant is a shell company (as defined in Regulation 12b-2 of the Exchange Act):   YES   ☐    NO  ☒

Securities registered to Section 12(b) of the Act: None.

State the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:  28,796,017 shares issued, issuable, and outstanding as of May 15, 2019.

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION

ITEM  1 - CONDENSED FINANCIAL STATEMENTS

ALTITUDE INTERNATIONAL, INC. 

(UNAUDITED)

Contents

ALTITUDE INTERNATIONAL, INC.

and Subsidiary

Condensed Consolidated Balance Sheets

(unaudited)

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

ALTITUDE INTERNATIONAL, INC.

and Subsidiary

Condensed Consolidated Statement of Operations

For the three months ended March 31

(unaudited)

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

ALTITUDE INTERNATIONAL, INC.

and Subsidiary

Condensed Consolidated Statement of Changes in Stockholders' Equity

For the Period from May 18, 2017 (Date of Inception) to March 31, 2019

(unaudited)

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

ALTITUDE INTERNATIONAL, INC.

and Subsidiary

Condensed Consolidated Statement of Cash Flows

For the three months ended March 31,

(unaudited)

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

ALTITUDE INTERNATIONAL, INC.

And Subsidiary

Notes to the Condensed Consolidated Financial Statements

March 31, 2019

(unaudited)

NOTE 1 – NATURE OF OPERATIONS

Company Background

Altitude International, Inc. (the “Company,” “we,” “us,” “our,” or “Altitude-NY”), was incorporated in the State of New York on July 13, 1994 as “Titan Computer Services.”

On June 27, 2017, the Company successfully closed a Share Exchange transaction (“Share Exchange”) with the shareholders of Altitude International, Inc. (“Altitude”), a Wisconsin corporation. Altitude was incorporated on May 18, 2017 under the laws of the state of Wisconsin and has been operating as a wholly-owned subsidiary of Altitude-NY since the Share Exchange. Altitude operates through Northern, Central, and South America sales by way of its sole distribution agreement with Woodway Inc. to execute the current business plan of athletic training industry, specifically altitude training. Our objective is to be recognized as one of the upper tier specialty altitude training equipment providers in the Americas.

On February 13, 2018, the majority of the shareholders of the Company approved the amendment to the Articles of Incorporation to change the Company’s name from “Titan Computer Services, Inc.” to “Altitude International, Inc.” The purpose of the name change will help further our brand identity and will reflect the major focus of our business operations, the manufacturing and distribution of products in the athletic training industry, specifically altitude training.  The filing of the name change with the state of New York has not been completed as of the date of this report. Once processed by New York, the Company will apply for a name and symbol change with FINRA.

Amend the Bylaws to Permit a Simple Majority Vote and Allow for the Appointment of up to Seven

Article II Section 10 of the Company’s Bylaws stated, “Any action required or permitted to be taken by the Shareholders thereof may be taken without a meeting if all Shareholders entitled to vote thereon consent in writing to the adoption of a resolution authorizing the action except as otherwise permitted by the Certificate of Incorporation.”

The Bylaws were amended to allow for a simple majority vote as permitted by §615 of the New York Business Corporation Law. The amended section shall read, “Any action required or permitted to be taken by the Shareholders thereof may be taken without a meeting if a majority of the Shareholders entitled to vote thereon consent in writing to the adoption of a resolution authorizing the action.”

Article III Section 2 of the Company’s Bylaws provided that the number of Directors constituting the entire Board “shall not be less than one nor more than three, as may be fixed by resolution of the Board of Director.” The Bylaws were amended to allow for additional directors as proposed herein (up to four) and to allow for additional directors as the Company grows (up to seven). The amended section shall include the number “seven” instead of “three” as the maximum number of directors.

Nature of Operations

The product designs to be licensed from Sporting Edge UK, Ltd (“Sporting Edge UK”) are proven and cover a wide range of room sizes.  The only requirement is to change from metric to imperial sizes where necessary.

There are three unique elements to the Altitude product:

Altitude has leased space in the Woodway facility in Waukesha, Wisconsin to undertake the manufacture of systems.  The work will primarily consist of the assembly of components into the unique licensed designs.  Initial recruitment of technically-capable persons will be necessary, followed by short training blocks to pass on the required skills.  At least one person is likely to visit the UK to see systems in operation and obtain hands-on experience of the manufacturing requirement.  Woodway is an engineering-based company and provides the perfect environment to establish an operation which is in many ways similar to their own.  In addition, many aspects of infrastructure – goods handling, welfare facilities, etc. – can be accessed immediately without expense to Altitude.

Recapitalization of Altitude

On June 27, 2017, the Company entered into a share exchange transaction with Altitude which resulted in a change of control of the Company. Pursuant to the terms of the Share Exchange, the Company agreed to issue 6,102,000 shares of its common stock to all the individual shareholders of Altitude on a pro rata basis (one to one share exchange). In exchange for this stock issuance, the Company received 100% of the outstanding shares of Altitude. Following this Share Exchange, Altitude became a wholly-owned subsidiary of Titan. There was a cancellation of 14,700,000 shares of common stock of the Company that was held by the Company’s former majority stockholder as part of the share exchange agreement, which all had a net effect of a decrease of 8,598,000 shares in the Company’s outstanding shares. The business, assets and liabilities of the Company changed as a result of this reverse acquisition to Altitude’s business plan.

This share exchange transaction resulted in those shareholders obtaining a majority voting interest in –the Company and control of the Board of Directors of the Company. Generally accepted accounting principles require that the Company whose shareholders retain the majority interest and control in a combined business be treated as the acquirer for accounting purposes, resulting in a reverse acquisition with Altitude as the accounting acquirer and the Company as the acquired party. Accordingly, the share exchange transaction has been accounted for as a recapitalization of Altitude, whereby is deemed to be the continuing, surviving entity for accounting purposes but through reorganization, has deemed to have adopted the capital structure of Altitude - NY. The equity section of the accompanying condensed consolidated financial statements has been restated to reflect the recapitalization of the Company due to the reverse acquisition.

Accordingly, all references to common shares of Altitude’s common stock have been restated to reflect the equivalent number of the Company’s common shares. In other words, the 6,102,000 Altitude shares outstanding at the time of the share exchange are restated to 21,228,659 common shares (prior to the 500,000 common share capital raise mentioned below that was conducted after the share exchange agreement), as of June 27, 2017. Each share of Altitude is accordingly restated at a multiple of approximately 3.48 shares of the Company for the weighted average shares outstanding for the loss per share calculations in the accompanying condensed consolidated statement of operations.

The book value of the net assets that for accounting purposes, were deemed to have been acquired by Altitude from the Company, as of the date of acquisition (June 27, 2017) were $0, after the waiver of all debts from officers and third parties.

A condition to the closing of the Share Exchange Agreement was raising $100,000 in the Company. On June 27, 2017, the Company issued 500,000 shares of its common stock to an accredited investor pursuant to a Subscription Agreement for $100,000, or $0.20 per share which was kept at escrow account. During the recapitalization, the Company incurred legal fees of $12,500 which was paid through the attorney’s escrow account and recorded as transaction costs which were netted against the $100,000 proceeds.

Altitude International, Inc.

Altitude International, Inc. (“Altitude”) was incorporated on May 18, 2017 under the laws of the state of Wisconsin with 100,000,000 authorized common stock with $0.001 par value. On May 18, 2017, 6,102,000 shares of common stock at $0.001 (par) were issued as founder shares, valued at a total of $6,102 to 15 individuals, including Mr. Dave Vincent (“Vincent”) who is the majority equity interest shareholder and the director of the Company. These shares were issued for future potential services from these various individuals and as of the date of this issuance, no value was placed on these future potential services and were therefore recorded at par value as stock-based compensation to the founders.

On June 27, 2017, after the closing of certain Stock Purchase Agreements, in private sale transaction and the Share Exchange Agreement, a change of control of the Company occurred and the new operational focus of the Company commenced. See Notes 6 and 8.

Altitude will operate through Northern, Central, and South America sales by way of its sole distribution agreement with Woodway Inc. to execute the current business plan of athletic training industry, specifically altitude training. Our objective is to be recognized as one of the upper tier specialty altitude training equipment providers.

Changes in Management and the Board of Directors

On January 25, 2019, Robert Kanuth (“Kanuth”) was appointed as the Company’s new CEO and David Vincent resigned as CEO and was appointed as the Company’s Chief Technology Officer. On October 20, 2017, Greg Whyte was appointed to fill the vacancy as a director of the Company. On January 8, 2018, Joseph Frost was appointed to serve as the Chief Operating Officer and on February 13, 2018 Lesley Visser and Frost were elected to serve on the Board of Directors.

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of presentation

The Company follows the accrual basis of accounting in accordance with generally accepted accounting principles in the United States of America and has a year-end of December 31.

Management further acknowledges that it is solely responsible for adopting sound accounting practices, establishing and maintaining a system of internal accounting control and preventing and detecting fraud.  The Company’s system of internal accounting control is designed to assure, among other items, that 1) recorded transactions are valid; 2) valid transactions are recorded; and 3) transactions are recorded in the proper period in a timely manner to produce financial statements which present fairly the financial condition, results of operations and cash flows of the Company for the respective periods being presented.

The unaudited condensed financial statements of the Company for the three month periods ended March 31, 2019 and 2018 have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and pursuant to the requirements for reporting on Form 10-Q and Regulation S-K. Accordingly, they do not include all the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. However, such information reflects all adjustments (consisting solely of normal recurring adjustments), which are, in the opinion of management, necessary for the fair presentation of the financial position and the results of operations. Results shown for interim periods are not necessarily indicative of the results to be obtained for a full fiscal year. The balance sheet information as of December 31, 2018 was derived from the audited financial statements included in the Company's financial statements as of and for the year ended December 31, 2018 included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”) on March 29, 2019. These financial statements should be read in conjunction with that report.

Going Concern and Liquidity

We have incurred recurring losses since inception and expect to continue to incur losses as a result of legal and professional fees and our corporate general and administrative expenses. At March 31, 2019, we had $39,640 in cash. Our net losses incurred for the three months ended March 31, 2019 were $49,885 and working capital deficit was $250,507 at March 31, 2019. As a result, there is substantial doubt about our ability to continue as a going concern. In the event that we are unable to generate sufficient cash from our operating activities or raise additional funds, we may be required to delay, reduce or severely curtail our operations or otherwise impede our on-going business efforts, which could have a material adverse effect on our business, operating results, financial condition and long-term prospects. The Company expects to seek to obtain additional funding through increased revenues and future financings. There can be no assurance as to the availability or terms upon which such financing and capital might be available.

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary, Altitude. All significant intercompany balances and transactions have been eliminated in the consolidation. The consolidated financial statements included herein, presented in accordance with United States generally accepted accounting principles (“GAAP”) and stated in United States dollars, have been prepared by the Company, pursuant to the rules and regulations of the Securities and Exchange Commission.

Use of Estimates

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

Cash and Cash Equivalents

The Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents.

Property, Plant and Equipment

Property and equipment are stated at cost, net of accumulated depreciation. Expenditures that extend the life, increase the capacity, or improve the efficiency of property and equipment are capitalized, while expenditures for repairs and maintenance are expensed as incurred. Depreciation is recognized using the straight-line method over the following approximate useful lives:

Machinery and equipment  

3-5 Years

Intangible Assets

Costs incurred to file patent applications and acquired intangibles are capitalized when the Company believes that there is a high likelihood that the patent will be issued and there will be future economic benefit associated with the patent. These costs will be amortized on a straight-line basis over a 20 years life from the date of patent filing. All costs associated with abandoned patent applications are expensed. In addition, the Company will review the carrying value of patents for indicators of impairment on a periodic basis and if it determines that the carrying value is impaired, it values the patent at fair value. As of March 31, 2019, carrying value of patent was $11,212.

In accordance with the provisions of the applicable authoritative guidance, the Company’s long-lived assets and amortizable intangible assets are tested for impairment whenever events or changes in circumstances indicate that their carrying value may not be recoverable. The Company assesses the recoverability of such assets by determining whether their carrying value can be recovered through undiscounted future operating cash flows, including its estimates of revenue driven by assumed market segment share and estimated costs. If impairment is indicated, the Company measures the amount of such impairment by comparing the fair value to the carrying value. The amortization of the trademark was not significant for the period ended March 31, 2019.

Impairment of Long-Lived Assets

The Company’s long-lived assets and other assets (consisting of property and equipment) are reviewed for impairment in accordance with the guidance of the FASB ASC Topic 360-10, Property, Plant, and Equipment, and FASB ASC Topic 205, Presentation of Financial Statements.  Long lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the undiscounted future net cash flows expected to be generated by that asset. If the carrying amount of an asset exceeds its estimated future undiscounted cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the asset. For the three months ended March 31, 2019, the Company had not experienced impairment losses on its long-lived assets.

Revenue Recognition

Our sales are generated primarily from contracts with customers for the design, development, manufacture, and installation of simulated altitude athletic equipment. We provide our products under fixed-price contracts. Under fixed-price contracts, we agree to perform the specified work for a pre-determined price. To the extent our actual costs vary from the estimates upon which the price was negotiated, we will generate more or less profit or could incur a loss.

We account for a contract after it has been approved by all parties to the arrangement, the rights of the parties are identified, payment terms are identified, the contract has commercial substance and collectability of consideration is probable. 

We evaluate the products or services promised in each contract at inception to determine whether the contract should be accounted for as having one or more performance obligations. The products and services in our contracts are typically not distinct from one another due to their complex relationships, customization, and the significant contract management functions required to perform under the contract. Accordingly, our contracts are typically accounted for as one performance obligation.

We determine the transaction price for each contract based on the consideration we expect to receive for the products or services being provided under the contract.

We recognize revenue as performance obligations are satisfied and the customer obtains control of the products and services. In determining when performance obligations are satisfied, we consider factors such as contract terms, payment terms and whether there is an alternative future use of the product or service. Substantially all of our revenue is recognized over time as we perform under the contract because if our customer were to terminate the contract for reasons other than our non-performance, we would have the right to recover damages which would include, among other potential damages, the right to payment for our work performed to date plus a reasonable profit to deliver products or services that do not have an alternative use to us.

For performance obligations recognized over time, revenue is recognized based on the extent of progress towards completion of the performance obligation, generally using the percentage-of-completion cost-to-cost measure of progress for our contracts because it best depicts the transfer of control to the customer as we incur costs on our contracts. Under the percentage-of-completion cost-to-cost measure of progress, the extent of progress towards completion is measured based on the ratio of costs incurred to date to the total estimated costs to complete the performance obligation.

Advertising Costs

Advertising costs are expensed as incurred. Advertising costs for the three months ended March 31, 2019 were $13,875.

Stock-Based Compensation

The Company accounts for stock-based instruments issued to employees in accordance with ASC Topic 718. ASC Topic 718 requires companies to recognize in the statement of operations the grant-date fair value of stock options and other equity-based compensation issued to employees. The value of the portion of an award that is ultimately expected to vest is recognized as an expense over the requisite service periods using the straight-line attribution method. The Company accounts for non-employee share-based awards in accordance with the measurement and recognition provisions ASC Topic 505-50. The Company estimates the fair value of stock options at the grant date by using the Black-Scholes option-pricing model.

Fair Value of Financial Instruments

The book values of cash, prepaid expenses, and accounts payable approximate their respective fair values due to the short-term nature of these instruments. The fair value hierarchy under GAAP distinguishes between assumptions based on market data (observable inputs) and an entity’s own assumptions (unobservable inputs).

The hierarchy consists of three levels

Determining which category an asset or liability falls within the hierarchy requires significant judgment. We evaluate our hierarchy disclosures each quarter.

Earnings (Loss) Per Share

Basic earnings (loss) per share are computed by dividing the net income by the weighted-average number of shares of common stock and common stock equivalents (primarily outstanding options and warrants). Common stock equivalents represent the dilutive effect of the assumed exercise of the outstanding stock options and warrants, using the treasury stock method. The calculation of fully diluted earnings per share assumes the dilutive effect of the exercise of outstanding options and warrants at either the beginning of the respective period presented or the date of issuance, whichever is later.

Income Taxes

The Company accounts for income taxes in accordance with FASB ASC 740, “Income Taxes.”  Deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statements carrying amounts of existing assets and liabilities and loss carry-forwards and their respective tax bases.

Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income (loss) in the years in which those temporary differences are expected to be recovered or settled.

The effect of a change in tax rules on deferred tax assets and liabilities is recognized in operations in the year of change. A valuation allowance is recorded when it is “more likely-than-not” that a deferred tax asset will not be realized.

Tax benefits of uncertain tax positions are recognized only if it is more likely than not that the Company will be able to sustain a position taken on an income tax return. The Company has no liability for uncertain tax positions as of December 31, 2018. Interest and penalties in any, related to unrecognized tax benefits would be recognized as interest expense. The Company does not have any accrued interest or penalties associated with unrecognized tax benefits, nor was any significant interest expense recognized during the three months ended March 31, 2019.

On December 22, 2017, the United States Government passed new tax legislation that, among other provisions, will lower the corporate tax rate from 35% to 21%. In addition to applying the new lower corporate tax rate in 2018 and thereafter to any taxable income we may have, the legislation affects the way we can use and carry forward net operating losses previously accumulated and results in a revaluation of deferred tax assets recorded on our balance sheet. Given that the deferred tax assets are offset by a full valuation allowance, these changes will have no net impact on the Company’s financial position and net loss. However, if and when we become profitable, we will receive a reduced benefit from such deferred tax assets.

Contingencies

Certain conditions may exist as of the date the financial statements are issued, which may result in a loss to the Company, but which will only be resolved when one or more future events occur or fail to occur. The Company’s management and its legal counsel assess such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or unasserted claims that may result in such proceedings, the Company’s legal counsel evaluates the perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein.

If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company’s financial statements. If the assessment indicates that a potentially material loss contingency is not probable, but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, together with an estimate of the range of possible loss if determinable and material, would be disclosed.

Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the nature of the guarantee would be disclosed.

Effect of Recent Accounting Pronouncements

Going Concern

ASU 2014-15 – “Presentation of Financial Statements—Going Concern—Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern (“ASU 2014-15”).” In August 2014, FASB issued guidance that requires management to perform interim and annual assessments of an entity’s ability to continue as a going concern within one year of the date the financial statements are issued. An entity must provide certain disclosures if conditions or events raise substantial doubt about the entity’s ability to continue as a going concern. The updated accounting guidance was effective for the Company on March 31, 2019. We have implemented this new accounting standard and we will update our liquidity disclosures as necessary.

Recent Accounting Pronouncements

Recently-Issued Accounting Standards: Management does not believe that any recently issued, but not yet effective, accounting standards if currently adopted would have a material effect on the accompanying financial statements.

NOTE 3 – FIXED ASSETS  

The Company has fixed assets related to office equipment.  The depreciation of the equipment is over a three-year period.  As of March 31, 2019, and December 31, 2018, the Company had fixed assets, net of accumulated depreciation, of $4,358 and $5,229, respectively.  The fixed assets are as follows: 

Depreciation of the office equipment for the three months ended March 31, 2019 and 2018 were $871 and $871, respectively.

NOTE 4 – INTANGIBLE ASSETS - TRADEMARK

The Company has intangible assets related to a trademark.  The amortization of the intangible asset is over a twenty-year period.  As of March 31, 2019, and December 31, 2018, the Company had intangible assets, net of accumulated amortization, of $11,212 and $11,365, respectively.  The intangible assets are as follows:

Amortization expense of the trademark for the three months ended March 31, 2019 and 2018 were $153 and $153, respectively.

NOTE 5 – NOTES PAYABLE

On February 7, 2018, Vincent, the Company’s majority shareholder and director, loaned the Company $20,000 in the form of a promissory note. The note bears interest of 20% and has the term of one year, at which time all principal and interest will be paid in a balloon payment.  On January 10, 2019, this note and accrued interest was converted into common stock. 

On March 2, 2018, Frost, a director, loaned the Company $40,000 in the form of a promissory note. The note bears interest of 20% and has the term of one year, at which time all principal and interest will be paid in a balloon payment.  As of March 31, 2019, this note is in default and the accrued interest was $8,680, and the principal balance was $40,000. 

On June 21, 2018, Vincent formalized various advances to the Company in the amount of $40,000 in the form of a promissory note. The note bears interest of 20% and has the term of one year, at which time all principal and interest will be paid in a balloon payment.  On January 10, 2019, this note and accrued interest was converted into common stock. 

On July 30, 2018, Frost, a director, loaned the Company $10,000 in the form of a promissory note. The note bears interest of 20% and has the term of one year, at which time all principal and interest will be paid in a balloon payment.  As of March 31, 2019, the accrued interest was $1,326, and the principal balance was $10,000. 

On August 10, 2018, Frost, a director, loaned the Company $13,000 in the form of a promissory note. The note bears interest of 20% and has the term of six months, at which time all principal and interest will be paid in a balloon payment.  As of March 31, 2019, this note is in default and the accrued interest was $1,653, and the principal balance was $13,000. 

On November 5, 2018, Frost, a director, loaned the Company $500 in the form of a promissory note. The note bears interest of 8% and has the term of six months, at which time all principal and interest will be paid in a balloon payment.  As of March 31, 2019, the accrued interest was $16, and the principal balance was $500. 

On November 8, 2018, Vincent, a director, loaned the Company $5,000 in the form of a promissory note. The note bears interest of 8% and has the term of six months, at which time all principal and interest will be paid in a balloon payment.  On January 10, 2019, this note and accrued interest was converted into common stock. 

On December 24, 2018, Vincent, a director, loaned the Company $15,000 in the form of a promissory note. The note bears interest of 8% and has the term of six months, at which time all principal and interest will be paid in a balloon payment.  On January 10, 2019, this note and accrued interest was converted into common stock. 

On January 9, 2019, Kanuth, an officer and director, loaned the Company $13,736 in the form of a promissory note. The note bears interest of 8% and has the term of one year, at which time all principal and interest will be paid in a balloon payment. As of March 31, 2019, the principal was $13,736 and the accrued interest was $247.

On January 17, 2019, Kanuth, an officer and director, loaned the Company $8,156 in the form of a promissory note. The note bears interest of 8% and has the term of one year, at which time all principal and interest will be paid in a balloon payment. As of March 31, 2019, the principal was $8,156 and the accrued interest was $132.

On January 24, 2019, Kanuth, an officer and director, loaned the Company $11,000 in the form of a promissory note. The note bears interest of 8% and has the term of one year, at which time all principal and interest will be paid in a balloon payment. As of March 31, 2019, the principal was $11,000 and the accrued interest was $162.

On February 4, 2019, Kanuth, an officer and director, loaned the Company $13,197 in the form of a promissory note. The note bears interest of 8% and has the term of one year, at which time all principal and interest will be paid in a balloon payment. As of March 31, 2019, the principal was $13,197 and the accrued interest was $162.

On March 1, 2019, Kanuth, an officer and director, loaned the Company $10,000 in the form of a promissory note. The note bears interest of 8% and has the term of one year, at which time all principal and interest will be paid in a balloon payment. As of March 31, 2019, the principal was $10,000 and the accrued interest was $68.

On March 6, 2019, Kanuth, an officer and director, loaned the Company $3,033 in the form of a promissory note. The note bears interest of 8% and has the term of one year, at which time all principal and interest will be paid in a balloon payment. As of March 31, 2019, the principal was $3,033 and the accrued interest was $17.

On March 25, 2019, Kanuth, an officer and director, loaned the Company $13,692 in the form of a promissory note. The note bears interest of 8% and has the term of one year, at which time all principal and interest will be paid in a balloon payment. As of March 31, 2019, the principal was $13,692 and the accrued interest was $21.

NOTE 6 – COMMITMENTS AND CONTINGENCIES

The Company is subject, from time to time, to claims by third parties under various legal disputes. The defense of such claims, or any adverse outcome relating to any such claims, could have a material adverse effect on the Company’s liquidity, financial condition and cash flows. As of May __, 2019, the Company did not have any legal actions pending against it.

On June 27, 2017, Altitude entered a license agreement with Sporting Edge UK (see Note 1), Sporting Edge UK is the sole and exclusive owner of and has the right to license to licensee the ability to manufacture and sell rights to the full range of membrane-based systems for the production of reduced oxygen environments and associated services as well as the use of patents and trademarks held by Sporting Edge UK or Vincent.

On January 24, 2019, Altitude and Sporting Edge UK entered into a Revised Licensing Agreement that grants a license to Altitude to use Sporting Edge UK’s proprietary technology related to properly engineered, membrane-based designs for simulated altitude training equipment. The annual license fee under the revised agreement is $1.00 per year. The product line ranges from personal at home use machines to fully integrated environmental rooms and chambers. Altitude has the licensing rights to use all technology to manufacture the products and to sell them (directly or through distributors) in the following territories:

All amounts due under the 2017 license agreement were waived, as were all royalty fees.

NOTE 7 – RELATED PARTY TRANSACTIONS

As of December 31, 2018, and March 31, 2019, the balance due to our former CEO, David Vincent, was recorded under stockholder’s advance of $36,211 and $36,211, respectively, which is a verbal agreement, non-interest bearing, unsecured and payable on demand. On February 9, 2018, the Board of Directors changed the arrangement whereas the advance would begin accruing interest at the rate of 20%. The Company had accrued expenses to David Vincent, as of December 31, 2018 of $57,948 which were converted into common stock on January 10, 2019.

Altitude has an oral agreement with its Chairman of the Board and current CEO, Robert Kanuth, in which it will provide for reimbursement of private airline travel expenses incurred on behalf of the Company, for his use of an aircraft in which he has an interest in. These travel expenses totaled $123,750 for the period ended December 31, 2017 and is included in accrued expenses to related parties at December 31, 2018.  In January 2018, the Board of Directors issued a one-time bonus to Mr. Kanuth, in the amount of $7,525, to compensate for the significant payable and what would have been interest.  Additionally, the open balance accrued interest at the rate of 20% per annum and, as of December 31, 2018, the accrued interest was $24,750.  The past travel expenses, the bonus, and the accrued interest, totaling $157,197, were collectively converted into common stock as of January 10, 2019 (see Note 8). The remuneration package for the Chairman is currently under negotiation as are the terms and validity of a purported agreement between the Chairman and the Company’s CEO regarding shares to be transferred from the CEO to the Chairman upon sales milestones being reached.  The Company and its subsidiaries were not parties to the purported agreement, and their property is not the subject of the purported agreement. 

On January 2, 2018, the Company issued 1,000,000 shares of common stock to Frost, the Company’s Chief Operating Officer, under his employment agreement.  The common stock of the Company is thinly traded and had a value of $1.35 per share, therefore the Company recorded the transaction at $1,350,000.  See Note 8.

On February 4, 2019, Kanuth, an officer and director, loaned the Company $5,000. The loan is non-interest bearing and is payable on demand.

On December 31, 2018, the Company issued Kanuth, a Director, 1,000,000 shares of common stock for prior services rendered. The common stock of the Company is thinly traded and had a value of $0.07 per share, therefore the Company recorded the transaction at $70,000.  See Note 8.

On December 31, 2018, the Company issued Greg Whyte, a director, 40,000 shares of common stock for prior services rendered. The common stock of the Company is thinly traded and had a value of $0.07 per share, therefore the Company recorded the transaction at $2,800.  See Note 8.

On December 31, 2018, the Company issued Lesley Visser, a director, 250,000 shares of common stock for prior services rendered. The common stock of the Company is thinly traded and had a value of $0.07 per share, therefore the Company recorded the transaction at $17,500.  See Note 8.

Effective as of January 10, 2019, Vincent, a director, converted $156,918 of promissory notes, accounts payable and accrued interest into 2,241,686 shares of common stock. See Notes 5 and 8.

Effective as of January 10, 2019, Kanuth, an officer and director, converted $157,197 of promissory notes, accounts payable and accrued interest into 2,245,672 shares of common stock. See Notes 5 and 8.

NOTE 8 – STOCKHOLDERS’ EQUITY

Preferred Stock

On February 5, 2015, the Board of Directors of the Company authorized 5,000,000 shares of preferred stock with no par value.  Each share of the preferred stock is entitled to one vote and is convertible into one share of common stock.

As of March 31, 2019, and December 31, 2018, the Company has no preferred stock issued and outstanding. 

Common Stock

Altitude was incorporated on May 18, 2017 under the laws of the state of Wisconsin with 100,000,000 authorized common stock with $0.001 par value. The shareholders have one vote per share of common stock.

After the closing of certain Stock Purchase Agreements, in private sale transaction and the Share Exchange Agreement, the Company’s common stock had no par value and is registered in New York.

On June 12, 2017, Altitude issued 6,102,000 shares of its common stock at par value of $0.001 per share as founder shares for future potential services from 15 individuals, including Vincent, who is the largest equity interest shareholder and the director of the Company, with a total recorded at par value of $6,102.

On June 27, 2017, the Company entered into a share exchange transaction with Altitude and the shareholders of Altitude. Pursuant to the terms of the Share Exchange, the Company agreed to issue 6,102,000 shares of its common stock to the individual shareholders of Altitude on a pro rata basis in exchange for receive 100% of the shares of Altitude.  Following the Share Exchange, Altitude became a wholly-owned subsidiary of the Company.  See Note 1.

Prior to the Share Exchange Agreement, there were 22,828,659 shares of common stock of the Company issued and outstanding, 14,700,000 of which were cancelled on June 27, 2017. As consideration for the Share Exchange Agreement, the shareholders of Altitude received a total of 6,102,000 restricted shares of the Company, proportionate to their shareholdings in Altitude.

On June 27, 2017, the date of closing of the Share Exchange Agreement, the Company issued 500,000 shares of its common stock to an accredited investor pursuant to a Subscription Agreement for $100,000, or $0.20 per share. Total proceed received was $87,500 after paying transaction costs of $12,500. Immediately following the Share Exchange agreement, there were 21,728,659 shares of common stock issued and outstanding and no shares of preferred stock outstanding.

During 2018, the Company was contractually obligated to issue its legal counsel 12,500 shares of common stock per month for legal work.  The common stock of the Company is thinly traded and had values of $0.07 to $1.35 per share, therefore the Company recorded $113,875 of expense related to these transactions.

On January 2, 2018, the Company issued 1,000,000 shares of common stock to Frost, the Company’s Chief Operating Officer, under his employment agreement.  The common stock of the Company is thinly traded and had a value of $1.35 per share, therefore the Company recorded the transaction at $1,350,000.  See Note 7.

On December 31, 2018, the Company issued Kanuth, a Director, 1,000,000 shares of common stock for prior services rendered. The common stock of the Company is thinly traded and had a value of $0.07 per share, therefore the Company recorded the transaction at $70,000.  See Note 7.

On December 31, 2018, the Company issued Lesley Visser, a Director, 250,000 shares of common stock for prior services rendered. The common stock of the Company is thinly traded and had a value of $0.07 per share, therefore the Company recorded the transaction at $17,500.  See Note 7.

On December 31, 2018, the Company issued Greg Whyte, a Director, 40,000 shares of common stock for prior services rendered. The common stock of the Company is thinly traded and had a value of $0.07 per share, therefore the Company recorded the transaction at $2,800. See Note 7.

On December 31, 2018, the Company issued Harvey Galvin 15,000 shares of common stock for prior services rendered. The common stock of the Company is thinly traded and had a value of $0.07 per share, therefore the Company recorded the transaction at $1,050. 

On December 31, 2018, the Company issued Michael Horvath 25,000 shares of common stock for prior services rendered. The common stock of the Company is thinly traded and had a value of $0.07 per share, therefore the Company recorded the transaction at $1,750. 

On December 31, 2018, the Company issued Chris Visser 25,000 shares of common stock for prior services rendered. The common stock of the Company is thinly traded and had a value of $0.07 per share, therefore the Company recorded the transaction at $1,750. 

On January 1, 2019, the Company was contractually obligated to issue its legal counsel 12,500 shares of common stock for legal work for January 2019.  The common stock of the Company is thinly traded and had a value of $0.07 per share, therefore the Company recorded the transaction at $875. 

Effective as of January 10, 2019, Vincent, a director, converted $156,918 of promissory notes, accounts payable and accrued interest into 2,241,686 shares of common stock. See Notes 5 and 8.

Effective as of January 10, 2019, Kanuth, an officer and director, converted $157,197 of promissory notes, accounts payable and accrued interest into 2,245,672 shares of common stock. See Notes 5 and 8.

On February 1, 2019, the Company was contractually obligated to issue its legal counsel 12,500 shares of common stock for legal work for February 2019.  The common stock of the Company is thinly traded and had a value of $0.15 per share, therefore the Company recorded the transaction at $1,875. 

On March 1, 2019, the Company was contractually obligated to issue its legal counsel 12,500 shares of common stock for legal work for March 2019.  The common stock of the Company is thinly traded and had a value of $0.092 per share, therefore the Company recorded the transaction at $1,150. 

As of March 31, 2019, and December 31, 2018, the Company has 28,796,017 and 24,271,159 shares of no par common stock issued, issuable, and outstanding.

Stock Option Plan

On February 13, 2018, the Company’s shareholders and Board of Directors approved the 2017 Incentive Stock Plan.

On January 25, 2019, the Company issued 250,000 options to Vincent. The options vest at a rate of 25% every six months after the grant date and expire upon termination of employment. The exercise price is $0.077. The Black-Scholes calculation valued the options at $15,809, or $0.06 per share. As of March 31, 2019, $1,429 was amortized.

On January 25, 2019, the Company issued 250,000 options to Frost. The options vest at a rate of 25% every six months after the grant date and expire upon termination of employment. The exercise price is $0.077. The Black-Scholes calculation valued the options at $15,809, or $0.06 per share. As of March 31, 2019, $1,429 was amortized.

NOTE 9 – INCOME TAXES

As of March 31, 2019, and December 31, 2018, the Company has net operating loss carry forwards of $679,220 and $633,524. The carry forward expires through the year 2039. The Company’s net operating loss carry forwards may be subject to annual limitations, which could reduce or defer the utilization of the losses as a result of an ownership change as defined in Section 382 of the Internal Revenue Code.

The Company’s tax expense differs from the “expected” tax expense for Federal income tax purposes (computed by applying the United States Federal tax rate of 21% to loss before taxes for fiscal year 2019 and 2018), as follows:

The tax effects of the temporary differences between reportable financial statement income and taxable income are recognized as deferred tax assets and liabilities.

The tax years 2019 and 2018 remains to examination by federal agencies and other jurisdictions in which it operates.

The tax effect of significant components of the Company’s deferred tax assets and liabilities at March 31, 2019 and December 31, 2018, are as follows:

In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment.

Because of the historical earnings history of the Company, the net deferred tax assets for 2019 and 2018 were fully offset by a 100% valuation allowance. The valuation allowance for the remaining net deferred tax assets was $101,092 and $89,211 as of December 31, 2018 and 2017, respectively.

On December 22, 2017, the United States Government passed new tax legislation that, among other provisions, will lower the corporate tax rate from 34% to 21%. In addition to applying the new lower corporate tax rate in 2018 and thereafter to any taxable income we may have, the legislation affects the way we can use and carry forward net operating losses previously accumulated and results in a revaluation of deferred tax assets recorded on our balance sheet. Given that the deferred tax assets are offset by a full valuation allowance, these changes will have no net impact on the Company’s financial position and net loss.

NOTE 10 – DEFERRED REVENUE

The Company received a retainer of $29,602 in March 2019 and $7,125 for prepaid taxes in regard to a contract with one party for a contracted revenue of $118,409. Management has determined that as of March 31, 2019, approximately five percent (5%) of the contract had been realized therefore the Company recorded revenue of $5,920, leaving a deferred revenue of $23,681.

NOTE 1 1 – SUBSEQUENT EVENTS

On April 1, 2019, the Company was contractually obligated to issue its legal counsel 12,500 shares of common stock for legal work for April 2019.  The common stock of the Company is thinly traded and had a value of $0.07 per share, therefore the Company recorded the transaction at $875. 

On May 1, 2019, the Company was contractually obligated to issue its legal counsel 12,500 shares of common stock for legal work for May 2019.  The common stock of the Company is thinly traded and had a value of $0.061 per share, therefore the Company recorded the transaction at $763. 

ITEM 2 - MA NAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Results of Operations

For the three months ended March 31, 2019 compared to the three months ended March 31, 2018

Revenue

The Company had revenue of $114,498 for the three months ended March 31, 2019 compared to $0 for the comparable period in 2018. The Company recorded its first sale in the latter part of 2018.

Operating Expenses

The Company had operating expenses of $156,568 for the three months ended March 31, 2019 compared to $1,545,582 for the three months ended March 31, 2018. The decrease was primarily due to less stock-based compensation in 2019 compared to 2018 ($6,859 and $1,448,125, respectively).

Net Loss

The Company had a net loss of $49,885 for the three months ended March 31, 2019 compared to $1,561,608 for the three months ended March 31, 2018. 

Liquidity and Capital Resources

As of March 31, 2019, the Company had cash and cash equivalents of $39,640.  We do not have sufficient resources to effectuate our business. We expect to incur a minimum of $320,000 in expenses during the next twelve months of operations. We estimate that these expenses will be comprised primarily of general expenses including overhead, legal and accounting fees.

We used cash in operations of $40,608 for the three months ended March 31, 2019.  The negative cash flow from operating activities for the three months ended March 31, 2019 is attributable to the Company’s net loss from operations of $49,885.

We used cash in investing or financing activities of $0 for the three months ended March 31, 2019.

We had cash provided by financing activities of $77,814 for the three months ended March 31, 2019, consisting of loans from Kanuth.

We will have to raise funds to pay for our expenses. We may have to borrow money from shareholders or issue debt or equity or enter into a strategic arrangement with a third party. There can be no assurance that additional capital will be available to us. We currently have no arrangements or understandings with any person to obtain funds through bank loans, lines of credit or any other sources. Since we have no such arrangements or plans currently in effect, our inability to raise funds for our operations will have a severe negative impact on our ability to remain a viable company.

Plan of Operation

The Company will produce systems under license from Sporting Edge UK Ltd.  These systems include the control of simulated altitude as a minimum and often the simultaneous control of temperature and humidity, providing a full environmental capability.  Also included in the license are the Training Protocols that Sporting Edge has established to ensure that the optimum results are achieved by athletes using the altitude facilities.

The Company will lease space in the Woodway facility in Waukesha to undertake the manufacture of systems.  This will consist primarily of manufacturing space, but with a small office content.  The work will primarily consist of the assembly of components into the unique licensed designs.  Initial recruitment of technically capable persons will be necessary, followed by short training blocks to pass on the required skills.  At least one person is likely to visit the UK to see systems in operation and obtain hands-on experience of the manufacturing requirement.  Woodway is an engineering-based company and so is a perfect environment in which to establish an operation which is in many ways similar to their own.  In addition, many aspects of infrastructure – goods handling, welfare facilities, etc. – can be accessed immediately without expense to Altitude. 

The Company has two approaches to penetrating the market.  

A demonstration Altitude Room has been installed at the Woodway facility in Waukesha to allow effective demonstration of the physiological changes brought about be reduced oxygen air. 

Customer support and installation activities will be carried out in association with the existing network of Woodway Service Centers.  Once again, the cost and time of establishing such a network is avoided whilst ensuring that the vital support element is in place.

Commercial operations will center in Florida where a second demonstration facility will be located, working in association with an existing top end Fitness facility.

Off-balance Sheet Arrangements

We do 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, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.

Item 3.  Quantitative and Qualitative Disclosures about Market Risk.

Not required.

Item 4.  Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

The Securities and Exchange Commission defines the term “disclosure controls and procedures” to mean a company’s controls and other procedures of an issuer that are designed to ensure that information required to be disclosed in the reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Securities Exchange Act of 1934 is accumulated and communicated to the issuer’s management, including its chief executive and chief financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. The Company maintains such a system of controls and procedures in an effort to ensure that all information which it is required to disclose in the reports it files under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified under the SEC’s rules and forms and that information required to be disclosed is accumulated and communicated to the chief executive and interim chief financial officer to allow timely decisions regarding disclosure.

As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based on this evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that the Company’s disclosure controls and procedures are not effective as of such date. The Chief Executive Officer and Chief Financial Officer have determined that the Company continues to have the following deficiencies which represent a material weakness:

The additional hiring is contingent upon The Company’s efforts to obtain additional funding through equity or debt and the results of its operations. Management hopes to secure funds in the coming fiscal year but provides no assurances that it will be able to do so.

Limitations on the Effectiveness of Controls

The Company’s officers do not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent or detect all error and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. Further, the design of the control system must reflect that there are resource constraints and that the benefits must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of controls. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Projections of any evaluation of controls effectiveness to future periods are subject to risks. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures.

Changes in Internal Control Over Financial Reporting

During the fiscal quarter covered by this Quarterly Report, there has been no change in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II.  OTHER INFORMATION

Item 1. Legal Proceedings

The Company’s Chief Executive Officer and the Company’s Chairman of the Board of Directors are negotiating the terms and validity of a purported agreement between them as private individuals regarding shares to be transferred from the CEO to the Chairman upon sales milestones being reached.  The Company and its subsidiaries were not parties to the purported agreement, and their property is not the subject of the purported agreement. 

Item 1A. Risk Factors

Not required.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

During the quarter ending March 31, 2019, the Company did not issue any unregistered securities.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information

On March 23, 2019, the Company entered into a Proposal for Services (the “Agreement”) with Miami Dolphins Ltd. through which the Company agreed to manufacture, install and commission an Altitude International Altitude Chamber (the “Chamber”) at the Miami Dolphins Strength and Conditioning Facility in Davie, FL.

Item 6. Exhibits

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.