Evergreen Sustainable Enterprises, Inc. - Annual Report: 2014 (Form 10-K)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes ☐   No þ

 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act.  Yes ☐   No þ

 

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     þ          No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). 

Yes þ   No ☐

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.

 

www.HMTFrealty.com

www.HMTFmanagement.com

www.HMTFcannabisHoldings.com

 

Principal Services and their Markets

 

Home Treasure Finders is a licensed real estate brokerage. The Company’s mission is to generate revenue in three ways:

1. Real Estate Sales. We train our REALTORS to obtain listings. We buy and  sell properties to generate commissions.

2. Property Management. We generate a monthly management fees on each managed property under our services contract with the owner. We collect rents in person each month from tenants living in the properties we manage.  Our monthly management fees is deducted from rent. We pay the resulting net rent to property owners each month. We inspect each property monthly and issue a condition report to the owner. We help owners arrange for routine maintenance and repairs as needed.

3. Commercial Real Estate for Cannabis . We generate revenue by owning a leasing specialized real estate to licensed cannabis growers. As such, we are actively and aggressively involved with Colorado’s unique and fast growing cannabis  industry.

To generate revenue we begin by  purchasing  industrial zoned  real estate where we believe state and local law now permits, or  in the future permit may permit,  the legal cultivation of cannabis. We may own these properties for our own investment account and as such are solely at financial risk in connection with our investments.  In the event we utilize funds loaned to us by third party groups, they may in some circumstances share certain risks.

We conduct ongoing  and  rigorous due diligence to verify the legality of  all activities in which we directly engage. We may invest our funds to improve and/or  remodel properties to suit the needs of cannabis growers who hold a state license to cultivate cannabis.

We do not grow, distribute or sell cannabis. We not plan to obtain a license to do so, or in any way engage in such  activity, now, or  in the future. However, because we act as landlord to licensed tenant entities who do directly engage in the cultivation, distribution and sale of cannabis, we exercise appropriate and reasonable care to screen our tenants and verify that our tenants maintain proper licenses which require them operate in compliance with the state and local rules.

 

Marketing of our Services

 

Each  of our three divisions has a unique marketing plan developed by Corey Wiegand.

1.  Real Estate Sales. As an aid to listing an selling properties we insist that all our REALTORS attend 12 two hour training seminars, weekly sales meetings, and participate in on the job mentoring as personally taught by Corey Wiegand. We train our agents to prospect for listings, obtain listing contracts, and convert the IVR phone leads into “buy-side” contracts. The IVR leads are generated by our signs placed in front of listed properties. Our IVR or “integrated voice response” system is fully functional and incorporates call capture technology through which we provide our REALTORS with real time access to leads.

Our sign riders are attached  to normal real estate “for sale” signs located in front of a listed property. Our rider displays a 1-800-number and promises to provide listing specific information by a recorded message. As the caller listens to the property description, the caller’s phone number is captured and sent via e-mail and text message to a Home Treasure Finders buyer agent. Our business plan provides that our buyer agent will immediately call the potential buyer back and begin a dialog designed to convert the “cold lead” to a signed offer to purchase a property.

When our buyer agent closes the related sale, Home Treasure Finders is paid 25 % of the total commission. This occurs on any sale involving the potential buyer who was introduced to the buyer agent by Home Treasure Finders and closing within one year of the original lead date. This feature of our business plan enables us to generate revenue even if the buyer eventually decides to purchase a property other than the one displaying our IVR sign

We also provide three distinct videos for our listed properties featuring proprietary high definition “QuadCopter” military drone aerial video technology as seen at www.hmtfrealty.com/get-more .  Click on the embedded YouTube video on this page for a sample.

2.  Property Management. Home Treasure Finders, Inc. also operates a division that provides tenant finder leasing services, comprehensive property management services and financial and reporting and maintenance services to Denver area landowners and investors. Our services are unique because we collect rent in person each month and provide monthly property condition reports an help busy owners keep their property fully leased and in top condition.

3.  Commercial Real Estate for Cannabis. HMTF Cannabis Holdings, Inc. is an aggressive commercial real estate acquisition, rehabilitation, and leasing firm. We are licensed commercial REALTORS.  As  such, we enjoy  strong operational advantages in rapidly locating and helping to negotiate favorable financing  and leasing arrangements for  target properties.

We market primarily by word of mouth because the prime real estate that is usable for cannabis cultivation under state and local rulemaking is all within a short drive from our office. We also employ various web sites issue press releases and do specialized web based searches.

We operate in the most rapidly expanding segment of the Colorado commercial real estate market where our primary focus is the acquisition of  large free-standing buildings, land parcels and green houses.  We also build and retro-fit properties to meet the specific needs of well qualified tenants and investment groups.

We save our clients and investors time and money through our  personal contacts and the experience we have gained in making zoned investments for our own account.  We specialize in analysis of property cash flow. We prepare projections using our knowledge of comparable properties and various other techniques. We encourage clients to focus on acquiring prime properties under terms that make investment success most likely.

Competition

There are many real estate companies but none maintain operations to service all three of the diverse  market segments in which we specialize.

Each of our divisions faces significant competition.

 

1.  Real Estate Sales.  The Denver Area Real Estate market is appreciating and there is a high level of competition with other brokerage firms.  We distinguish ourselves by providing a high level of training and mentoring to our brokers, and by providing IVR property signs plus arial fly by  video marketing and virtual tours, rather than still photos. Our strategic partnership with Visionary Aircraft Corporation allows our agents to receive a discounted rate for all listing video footage. Our 12 week training and mentoring program outlines a proven system for agents to succeed in establishing themselves as area specialists by actively prospecting door-to-door for new listings. We believe our competition does not provide effective training to convert leads to sales.

2.  Property Management.  The Denver Metro population grew by more than 3% in 2013.  As a result there is a shortage of affordable low cost residential rentals.  As of March 20, 2014 all 55 of our residential units are fully occupied.  We distinguish ourselves from the competition by offering video advertising of each rental if it becomes vacant. We arrange  showings seven days per week.  We tailor our management services to meet the unique needs of each of our clients.

We market primarily by word of mouth because the prime real estate that is usable for cannabis cultivation under state and local rulemaking is all within a short drive from our office. We have few true competitors who bring our diverse skill, experience, work ethic and enthusiasm  to the bargaining table.

Home Treasure Finders now provides both  leads and specialized training at no cost to those buyer agents we hire. As part of the hiring process, REALTORS sign our  agreement to split gross commissions.

Intellectual Property

 

 

SEASONALITY

 

 

Marijuana remains illegal under Federal Law

Marijuana is a schedule-1controlled substance and is illegal under federal law. Even in those states in which the use of marijuana has been legalized, its use remains a violation of federal law. Since federal law criminalizing the use of marijuana preempts state laws that legalize its use, strict enforcement of federal law regarding marijuana would likely result in our inability to proceed with the cannabis properties portion of our business plan.

We have a limited operating history.

 

We may be unable to manage our growth or implement our expansion strategy.

 

 

The loss of our current executive officer or key management personnel or inability to attract and retain the necessary personnel could have a material adverse effect upon our business, financial condition or results of operations

 

Our success is heavily dependent on the continued active participation of our current executive officer and sole director listed under “Management.” Loss of the services of Corey Wiegand could have a material adverse effect upon our business, financial condition or results of operations. Further, our success and achievement of our growth plans depend on our ability to recruit, hire, train and retain other highly qualified technical, professional, clerical, administrative and managerial personnel. Competition for qualified buyer agents among companies in the real estate industry is intense, and the loss of any of such persons, or an inability to attract, retain and motivate any additional highly skilled realtors required for the expansion of our activities, could have a materially adverse effect on us. The inability on our part to attract and retain the necessary personnel, consultants and advisors could have a material adverse effect on our business, financial condition or results of operations. 

We are controlled by our current officer and director.

 

Corey Wiegand, our sole director, who is our sole executive officer, beneficially owns approximately 50.7% of our outstanding shares of Common Stock. Accordingly, our executive officer and director will have the ability to control the election of our Board of Directors and the outcome of issues submitted to our stockholders.

 

Since we have only one director who serves as our president, chief executive officer, chief financial officer and secretary, decisions which affect the company will be made by only one individual.  It is likely that conflicts of interest will arise in the day-to- day operations of our business.  Such conflicts, if not properly resolved, could have a material negative impact on our business.

 

In the past, the Company has issued shares for cash and services at prices which were solely determined by Corey Wiegand. At that time, Mr. Wiegand made a determination of both the value of services exchanged for our shares, and, as well, the price per share used as compensation.  Transactions of this nature were not made at arm’s length and were made without input from a knowledgeable and non-interested third party. Future transactions of a like nature could dilute the percentage ownership of the company owned by a given investor. While the company believes its past transactions were appropriate, and plans to act in good faith in the future, an investor in our shares will have no ability to alter such transactions as the may occur in the future and, further, will not be consulted by the company in advance of any such transactions. An investor who is unwilling to endure such potential dilution should not purchase our shares.

Recently, Mr. Wiegand contributed his property management entity known as CW Properties.

 

We have limited financial resources to take advantage of advertising opportunities as they may arise.

           

The inability to pay for press releases, investor road shows or other events intended to expose our shares to institutional investors, could adversely affect our ability to generate investor support for our common shares.

Our operating results will be subject to fluctuations and our stock price may decline significantly.

 

Our quarterly revenue and operating results from commissions, management fees and lease revenues, if any , will be difficult to predict from quarter to quarter. We derive relatively stable revenue from our property management operations. Nonetheless, it is possible that our net operating results in some quarters will fall below our expectations. Our quarterly operating results will be affected by a number of factors, including:

 

	•		trends in the median home values in Colorado;
	•		the availability, pricing and timeliness of web advertising campaigns;
	•		the impact of seasonal variations in demand and/or revenue recognition linked to construction cycles and weather conditions and the retail price of signs, sign riders, telephone services, and Mentor Sales Workshops;
	•		timing, availability and changes in government incentive programs;
	•		unplanned additional expenses;
	•		logistical costs;
	•		unpredictable volume and  timing of buyer’s agent sales;
	•		our ability to establish and expand listing agent relationships;
	•		the number of buyer agents that we are able to recruit, the ability to book facilities for planned sales training seminars;
	•		the timing of new technology announcements or introductions by our competitors and other developments in the competitive environment;
	•		increases or decreases in real estate appreciation rates due to changes in economic growth;
	•		travel costs and other factors causing the mentor training business to become more difficult; and
	•		changes in lending, inspection, appraisal and other factors that result in closing delays or cancellations.

 

Existing real estate laws, regulations and policies and changes to these regulations and policies may present technical, regulatory and economic barriers to potential buyers and consequently to the real estate referral business which may significantly reduce demand for our services.

 

The market for homes is influenced by U.S. federal, state and local government regulations and policies concerning the real estate industry, as well as policies promulgated by local real estate boards. These regulations and policies often relate to realtor compensation, and pricing. In the U.S. and in a number of other countries, these regulations and policies are being modified and may continue to be modified. Investment in the real estate could be deterred by these regulations and policies, which could result in a significant reduction in the potential demand for our services. For example, loss of favorable tax treatment, certain government buyer incentive programs, and or government subsidized or backed loan programs may result in loss of sales which would likely harm our financial performance. 

 

We anticipate that our mentor services and their perceived customer value will be subject to oversight and regulation in accordance with national and local ordinances relating to real estate sales laws. Any new government regulations could cause a significant reduction in demand for our mentor services.

 

The reduction or elimination of government and economic incentives could cause our revenue to decline.

   

Today, we believe consumer confidence is slowly recovering. However buyers are finding it very difficult to qualify for loans.  As a result, federal, state and local government bodies in many states have provided incentives in the form of rebates, tax credits and other incentives to buyers that are willing to purchase real estate. For example, an eight thousand dollar first time home buyer tax credit was offered and thereafter the credit offering expired.  Future government economic incentives, if any, could be reduced or eliminated altogether. Such home buyer incentives expire, decline over time, are limited in total funding or require renewal of authority. Reductions in, or eliminations or expirations of, governmental incentives could result in decreased demand for our services.

Changes in tax laws or fiscal policies may decrease the return on investment for customers of our business which could decrease demand for our services and harm our business.

 

We anticipate that a portion of our future revenues will be derived from commissions in connection with the sale of single family residences to individual homebuyers. In deciding whether to purchase or to rent, prospective customers may evaluate their projected return on investment. Such projections are based on current and proposed federal, state and local laws, particularly tax legislation. Changes to these laws, including amendments to existing tax laws or the introduction of new tax laws, tax court rulings as well as changes in administrative guidelines, ordinances and similar rules and regulations could result in different tax assessments and may adversely affect a homeowner’s projected return on investment, which could have a material adverse effect on our business and results of operations.

 

Problems with service quality or individual buyer agent performance may include agent error, agent negligence or problems within the mentoring services we plan to provide. The result would likely be fewer customers, reduced revenue, unexpected expenses and loss of market share.

 

In the future, should we become significantly reliant on abilities and skills of other agents at arm’s length, we may fall victim to unexpected agent errors or omissions.  If we deliver mentor services provided by third party agents our credibility and the market acceptance of our mentor services could be harmed. 

 

●	our failure to offer mentoring services that compete favorably against other services on the basis of cost, quality and performance;
●	our failure to offer mentoring services that compete favorably against conventional sales agents and realtors and alternative lead-generation technologies, such as text and e-mail spamming on the basis of cost, quality and performance.

 

If the services we intend to offer fail to gain market acceptance, we will be unable to achieve significant sales and market share.

 

If refinements in phone or web technology cause the services we intend to deliver to become uncompetitive or obsolete that could prevent us from achieving market share and sales. The real estate industry is rapidly evolving and highly competitive. A variety of competing lead generation technologies may be under development or available now that could result in lower buyer agent costs or higher conversion rates than those lead generation technologies selected by us. These development efforts may render obsolete the lead generation services we have selected to offer.

 

Existing telephone and web advertising regulations and changes to such regulations may present regulatory and economic barriers to the purchase of real estate lead generation services, which may significantly reduce demand for our services.

 

The market for lead generation services is heavily influenced by federal, state and local government regulations and policies concerning the tech based marketing industry, as well as internal policies and regulations promulgated by “national do not call lists.” These regulations and policies often relate to public privacy. In the United States these regulations and policies are being modified and may continue to be modified. We anticipate that our lead generation channels will be subject to oversight and regulation in accordance with national and local ordinances relating to privacy protection, and related matters.  Any new government regulations or utility policies pertaining to our lead generation services may result in significant additional expenses to us and as a result, could cause a significant reduction in sales referrals.

If our mentoring services are not suitable for widespread adoption, or a sufficient demand for trained buyer agents or leads does not develop, or takes longer to develop than we anticipate, we would be unable to achieve sales.

 

The market for residential real estate is rapidly evolving and its future is uncertain. If real estate proves unsuitable for widespread ownership or if demand for our mentoring services fails to develop sufficiently, we would be unable to achieve sales and market share. In addition, demand for real estate mentoring in the markets and geographic regions we target may not develop or may develop more slowly than we anticipate. Many factors will influence the widespread adoption of real estate mentoring including:

 

•	cost-effectiveness of hiring a mentor as compared with establishing a conventional buyer agency agreement;
•	performance and reliability of trained mentors as compared with conventional and established buyer agents;
•	success of alternative lead generation technologies such as web-casts, text messaging, email spamming;
•	fluctuations in economic and market conditions that impact the viability of real estate purchases;
•	increases or decreases in the costs associated with obtaining a residential home loan;
•	capital expenditures by customers, which tend to decrease when the domestic or foreign economies slow;
•	continued regulation of the real estate and lending industries; and
•	availability and effectiveness of government subsidies and incentives.

 

The reduction in home loan availability could prevent us from achieving sales and market share.

 

The reduction or elimination of government lending incentives may adversely affect the growth of this market or result in increased price competition, which could prevent us from achieving sales and market share.

 

Today, over 70% of home loans are insured by the federal housing administration (FHA loans). These loans are popular because they have lower down payment requirements and lower credit score requirements.  Should FHA raise their down payment or credit requirements the result could be reduced home purchases which would significantly harm our business.  

We face intense competition from other real estate brokerages and other real estate mentoring companies. If we fail to compete effectively, we may be unable to increase our market share and sales.

 

Most of our competitors are substantially larger than we are, have longer operating histories and have substantially greater financial, technical, marketing and other resources than we do. Our competitors' greater sizes in some cases provides them with competitive advantages with respect to marketing costs due to their ability to allocate fixed costs across a greater volume of marketing channels and purchase signs and services at lower prices. They also have far greater name recognition, an established network of past customers. In addition, many of our competitors have well-established relationships with current and potential home sellers. As a result, our competitors will be able to devote greater resources to the prospecting, relationship development, and promotion and may be able to respond more quickly to evolving industry standards and changing customer requirements than we can.

 

A substantial number of our issued shares are, or are being made available for sale on the open market. The resale of these securities might adversely affect our stock price.

 

The sale of a substantial number of shares of our common stock, or the market's anticipation of such sales, could make it more difficult for us to sell equity or equity-related securities in the future at a time and at a price that we might otherwise wish to effect sales.

 

Availability of these shares for sale in the public market could also impair our ability to raise capital by selling equity securities.

 

We are subject to corporate governance and internal control reporting requirements, and our costs related to compliance with, or our failure to comply with existing and future requirements, could adversely affect our business.

 

We face new corporate governance requirements under the Sarbanes-Oxley Act of 2002, as well as new rules and regulations subsequently adopted by the SEC and the Public Company Accounting Oversight Board. These laws, rules and regulations continue to evolve and may become increasingly stringent in the future. In particular, under new SEC rules we will be required to include management's report on internal controls as part of our annual report pursuant to Section 404 of the Sarbanes-Oxley Act. Furthermore, under the proposed rules, an attestation report on our internal controls from our independent registered public accounting firm will be required as part of our annual report. We are in the process of evaluating our control structure to help ensure that we will be able to comply with Section 404 of the Sarbanes-Oxley Act. The financial cost of compliance with these laws, rules and regulations is expected to be substantial. We cannot assure you that we will be able to fully comply with these laws, rules and regulations that address corporate governance, internal control reporting and similar matters. Failure to comply with these laws, rules and regulations could materially adversely affect our reputation, financial condition and the value of our securities.

Demand for our mentoring services is affected by general economic conditions.

 

The United States and international economies have recently experienced a period of reduced economic growth. A sustained economic recovery is uncertain. In particular, terrorist acts and similar events, continued turmoil in the Middle East or war in general could contribute to a slowdown of the market demand for real estate investments that require significant initial capital expenditures, including demand for fix and flips, rental properties, and new residential and commercial buildings. In addition, increases in interest rates may increase financing costs to customers, which in turn may decrease demand for real estate investment. If the economic recovery slows as a result of the recent economic, political and social turmoil, or if there are further terrorist attacks in the United States or elsewhere, we may experience decreases in the demand for our mentoring services.

Compliance with real estate law and local regulations can be expensive, and non-compliance with these regulations may result in adverse publicity and potentially significant monetary damages and fines for us

 

Our present and planned operations do not involve any irregular activities. Nonetheless, we are required to comply with all foreign, U.S. federal, state and local laws and regulations regarding licensing and insurance requirements. In addition, under some statutes and regulations, a government agency, or other parties, may seek recovery and response costs from an agent where warrantees have been made, even if the agent was not responsible for such a warrantee or is otherwise at fault. In the course of future business we may inadvertently refer business to an agent who does not comply with local laws and regulations.  Any failure by us to shift responsibility onto that agent, and thus restrict our liability in connection with the incident, could subject us to potentially significant monetary damages and fines or suspensions in our business operations. In addition, if more stringent laws and regulations are adopted in the future, the costs of compliance with these new laws and regulations could be substantial. If we fail to comply with present or future real estate laws and regulations we may be required to pay substantial fines, suspend, or cease operations.

      

There are restrictions on the transferability of the securities.

 

Until registered for resale, investors must bear the economic risk of an investment in the Shares for an indefinite period of time. Rule 144 promulgated under the Securities Act (“Rule 144”), which provides for an exemption from the registration requirements under the Securities Act under certain conditions, requires, among other conditions, a nine month holding period prior to the resale (in limited amounts) of securities acquired in a non-public offering without having to satisfy the registration requirements under the Securities Act There can be no assurance that we will fulfill any reporting requirements in the future under the Exchange Act or disseminate to the public any current financial or other information concerning us.

 

If the Company uses its stock in acquisitions of other entities there may be substantial dilution at the time of a transaction.

 

The offering price of the common stock we sold under our prospectus, and more recently as a private placement of restricted shares of our common stock, to raise working capital was arbitrarily set. The price did not bear any relationship to our assets, book value, earnings or net worth and it is not an indication of actual value. You may also suffer additional dilution in the future from the sale of additional shares of common stock or other securities or if the Company's shares are issued to purchase other assets or to raise additional working capital.

 

The laws which govern merger transactions provide that since our sole director and officer owns over 50% of our outstanding shares, we may enter into a share exchange, reverse merger or other similar transaction with a private company in an unrelated business without the prior approval of unaffiliated shareholders.

 

The various securities laws applicable to our company provide that our management may elect to enter and consummate a transaction to enter a new or additional businesses. In that event, our shareholders might receive only an information statement with certain disclosures as required by law and would likely not be in a position to approve or disapprove the transaction. Investors who are unwilling to accept the uncertainty of new management, a new business plan, likely dilution and all the numerous related uncertainties that may materialize in the event such a transaction is consummated should not purchase our shares.

 

There is presently a very limited market for our common stock.  Failure to maintain a trading market could negatively affect the value of our shares and make it difficult or impossible for you to sell your shares.

As of the date of this report, our common stock has been assigned a trading symbol, "HMTF." Our common shares are quoted on the OTCBB and OTCQB. While trading activity in our shares has recently accelerated, here can be no assurance as to the liquidity of any markets for our common stock, the ability of holders of our common stock to sell our common stock, or the prices at which holders may be able to sell our common stock.

 

Failure to maintain an active trading market could negatively affect the value of our shares and make it difficult for you to sell your shares or recover any part of your investment in our shares. The market price of our common stock may be highly volatile.  In addition to the uncertainties relating to our future operating performance and the profitability of our operations, factors such as variations in our interim financial results, or various, and as yet unpredictable factors, many of which are beyond our control, may have a negative effect on the market price of our common stock.

 

Our common stock is still presently subject to the “Penny Stock” rules of the SEC.

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 or with an exercise 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.

 

ITEM 2. DESCRIPTION OF PROPERTY

 

DESCRIPTION OF PROPERTY

 

ITEM 3. LEGAL PROCEEDINGS

 

There is no litigation or regulatory proceeding pending or threatened by or against us.

 

ITEM 4.  MINE SAFETY DISCLOSURE

Not applicable.

 

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

 

MARKET INFORMATION

 

 

 

The following table contains data from OTC Markets, Inc. and summarizes our past share price:

 

SHAREHOLDERS

 

 

DIVIDENDS

 

We have not declared or paid any cash dividends on our common stock nor do we anticipate paying any in the foreseeable future. Furthermore, we expect to retain any future earnings to finance our operations and expansion. The payment of cash dividends in the future will be at the discretion of our Board of Directors and will depend upon our earnings levels, capital requirements, any restrictive loan covenants and other factors the Board considers relevant.

 

WARRANTS OR OPTIONS

 

We have no outstanding warrant to purchase shares of our common stock.

 

EQUITY COMPENSATION PLANS

 

We currently have no equity compensation plans.

RECENT SALES OF UNREGISTERED SECURITIES; USE OF PROCEEDS FROM REGISTERED SECURITIES

 

Prior to our IPO, various shares were issued under Section 4(2) of the Securities Act of 1933, as amended, and/or Regulation D promulgated by the Securities and Exchange Commission. Subsequently, in accordance with the terms of Registration Statement on Form S-1, certain shares have been registered for resale and additional shares have been qualified for sale.

PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS

 

We made no purchases of our equity securities nor were any such purchases made by any purchaser affiliated with us.

 

OUR TRANSFER AGENT

 

We have retained Standard Registrar and Transfer Agency, Albuquerque, New Mexico, as transfer agent for our Common shares. Shareholders are responsible to contact Standard to update their address. This may be done by writing:

Standard Registrar and Transfer Agency

P.O. Box 14411

Albuquerque, NM 87191

Phone : 505-828-2839

Or by e-mail to:  mary@standardregistrarta.com

 

Standard is responsible for all record-keeping and administrative functions in connection with our common shares.

ITEM 6. SELECTED FINANCIAL DATA- NOT APPLICABLE

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

Forward-looking statements

The following discussion should be read in conjunction with the financial statements of Home Treasure Finders, Inc. (the “Company”), which are included elsewhere in this Form 10-K. This Annual Report on Form 10-K contains forward-looking information. Forward-looking information includes statements relating to future actions, future performance, costs and expenses, interest rates, outcome of contingencies, financial condition, results of operations, liquidity, business strategies, cost savings, objectives of management, and other such matters of the Company. The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for forward-looking information to encourage companies to provide prospective information about themselves without fear of litigation so long as that information is identified as forward-looking and is accompanied by meaningful cautionary statements identifying important factors that could cause actual results to differ materially from those projected in the information. Forward-looking information may be included in this Annual Report on Form 10-K or may be incorporated by reference from other documents filed with the Securities and Exchange Commission (the “SEC”) by the Company. You can find many of these statements by looking for words including, for example, “believes”, “expects”, “anticipates”, “estimates” or similar expressions in this Annual Report on Form 10-K or in documents incorporated by reference in this Annual Report on Form 10-K. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information or future events.

We have based the forward-looking statements relating to our operations on our management’s current expectations, estimates and projections about our Company and the industry in which we operate. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions that we cannot predict. In particular, we have based many of these forward-looking statements on assumptions about future events that may prove to be inaccurate. Accordingly, our actual results may differ materially from those contemplated by these forward-looking statements. Any differences could result from a variety of factors, including, but not limited to general economic and business conditions, competition, and other factors. 

 

Limited Operating History

 

There is limited historical financial information about our Company upon which to base an evaluation of our future performance.  We cannot guarantee that we will be successful in our mainstream real estate business and furthermore we have recently entered a new and untested industry which presently exists only in Colorado. We are subject to risks inherent in a small company, including limited capital resources, delays and cost overruns due to price and cost increases. There is no assurance that future financing will be available to our company on acceptable terms. Additional equity financing could result in dilution to existing shareholders.

 

Company Description and Overview

            

Home Treasure Finders, Inc. was formed on July 28, 2008. The founder, sole director and officer of our company is Corey Wiegand.

 

Our web site is a key aspect of our business. As of the date of this report, our site is 80% functional. You may view the site at www.hometreasurefinders.com

 

We are planning to complete our website to support three divisions:

1.	Real estate listing and sales
2.	Property Management
3.	Commercial Real Estate for legal cannabis cultivation

Real Estate listing and sales. The best-selling author of several widely acclaimed science books, Machio Kaku speaks to the role of “Buyer’s Agents” in his newly released “Physics of the Future; How science will shape human destiny and our daily lives by the year 2100”.

“For example, in the future, you will be able to buy a house on the Internet via your watch or contact lens. But no one is going to buy a house this way, since this is one of the most important financial transactions you will perform in your life. For important purchases like a home, you will want to talk to a human who can tell you where the good schools are, where crime rate is low, how the sewer system works, etc. For this, you want to talk to a skilled agent who adds value.”

 

We believe that Machio’s book offers credible insight into our business. Machio makes predictions based upon his background as a scientist and his familiarity with changes brought on by new technology, that is future changes in our society to be expected from devices now available or in the late stage of development. We believe that this particular quote is relevant to our business plan because Machio states in the quote that the home buyers (100 years in the future) will still want to talk with a local human sales professional, not just enter a purchase agreement over the internet, because of the need to be correctly informed about local issues. Machio believes this can only be done by a local buyer agent. Contact with a human, Machio believes is so important because an investment in a home is likely the largest investment decision made by the average person, and because many of the considerations faced by the buyer are local in nature. Advice concerning those decisions needs to be experienced, informed and locally based to be helpful. We believe we can train our buyer agents to perform locally much better than an internet based advisor. Thus, in Machio’s view, the role of buyer agents in the economy of the future is secure and will always be timely. We conclude that two of our three business activities, number one and number three, as discussed above, are unlikely to become outdated, which confirms to us, the longevity and wisdom of our business plan.

The Market for Real Estate Investment Mentoring

We believe that the present market for mentor services is small, sporadic, highly fragmented and we do not know of any commercial oversight group that has established any structure or standards. Our understanding of this market is incomplete and based solely on our limited observations, discussions with homeowners, realtors, lenders, homebuyers and home sellers and a very limited number of individuals engaged in real estate mentoring services. Further, we have not conducted any studies or surveys or by other means tried to quantify or predict the volume or quality of competing real estate mentor training that may have come on the market to date, or that in the future, may become available.

 

Present third party  listing agents/buyer agents/referrals

 

 

 Integrated Voice Response, Call Capture System, Signs and Website

 

 

Each time a home buyer sees a FOR SALE sign and the Home Treasure Finder’s IVR SIGN in front of it, the prospective buyer will have two options:

 

1.	They can elect to call the listing agent directly by calling the number, if any, displayed on the larger FOR SALE sign, or

 

2.	They may elect to call the 1-800 number displayed on our smaller IVR SIGN.

 

If they elect to call the third party listing agent directly, Home Treasure Finders will not acquire the lead.

Presently we operate our website, WWW.HMTFrealty.com  under a short term contract with a third party service. This arrangement provides us a functional generic IVR service for a monthly fee. Ultimately, we plan to integrate our IVR system into our website. This will aid us in tracking the incoming leads and potentially save us annually, thousands of dollars in monthly fees.

 

In either case, our IVR system seamlessly transfers the lead to Mr. Wiegand or a designated REALTOR buyer agent

 

As of the date of this report we are negotiating a supplier agreement to purchase additional signs. We believe additional signs can be purchased from a variety of sources without difficulty.  Our new sign inventory will be stored indoors at our business address, and as of the date of this report, we are planning to deploy our new signs on specific properties, as appropriate.        

 

Our future supply of listing agents and buyer’s agents

A key element of the Home Treasure Finders business plan is to recruit and train both listing agents and buyer’s agents. By marketing to new agents in online job forums, and placing small classified ads on sites like Craiglist.com, we have recruited and hired agents who would like to have access to more prospects.

From conversations with other real estate professionals, we believe that established lead marketing companies sell their lead generation services to agents for a monthly fee. We further believe that our competition is not licensed, and thus cannot be paid a real estate commission. We believe our competition does not provide training to convert leads to sales.

Home Treasure Finders intends to provide leads and training at no cost to those buyer agents who sign our agreement to split gross commission.

We have used the services of a part time consultant to locate and screen prospective agents. The consultant is compensated at the rate of $500 for each licensed REALTOR we hire. To date, this approach has been modestly successful.  We have a 2014 goal of hiring one REALTOR for each Denver Zip code. To achieve our goal we may retain a qualified “head hunter” who will be compensated at market rate.

 

PLAN OF OPERATIONS AND PROJECTIONS

 

 

Our Potential for Growth.

 

We have fully commenced real estate sales and property management operations and generated significant revenues. We are no longer considered a Development Stage Company.

   

Our operating expenses include significant legal, consulting, accounting and contributed services, all accounted for as expenses. As a consequence, our net losses for the years December 31, 2014 and 2013 total $139,884 and $4,790, respectively.

Financial Projection for Garfield Street Warehouse under presently performing leases:

 

Rent		$	144,000		Note 1
Less Interest			(58,243	)	Note 2
Less Insurance			(1,893	)	Note 3
Less Taxes			(7,612	)	Note 4
Less Depreciation			(21,153	)	Note 5
Income		$	46,451		Note 6

Notes

1.

Lease at 4420 and 4430 is $8,000/ month. Lease at 4440 is $4,000 per month, payable by 15th. Current

2.

Interest for 2015 computed from loan amortization table. Assumes $836,870 starting principle balance.

3.

Insurance. Policy purchased on 1/3/2015. Annual premium of $1,893 paid in full.

4.

Property Tax is $7,612 based upon 2013 mil levy.

5.

Depreciation is based upon 39 year straight line applied to combined value of building $803,100 plus architect and engineer documents valued at $11,000.

6.

Income per GAAP

We continue to evaluate the acquisition of additional cannabis zoned properties.

Results of Operations

 

Summary Statement of Operations

		Year Ended December 31, 2014				Year Ended December 31, 2013
Revenues, net		$	189,390			$	180,493
Gross profit (loss)			189,390				180,493
Selling, general and administrative expenses			244,510				135,455
Commission expense			47,351				31,067
Professional fees			29,485				18,452
Total operating expenses			321,346				184,974
Loss from operations			(131,956	)			(4,481	)
Other Income (expense)			(7,526	)			(309	)
Loss from operations before income taxes			(139,482	)			(4,790	)
Income tax provision			-				-
Net loss		$	(139,482	)		$	(4,790	)

1.	General and administrative expenses increased by $109,156, or 81%, to $244,510 for the year ended December 31, 2014 from $135,455 for the prior year ended December 31, 2013. This is attributable to the increase in salary expense, consulting expenses, contracted services and realtor expenses as well as other basic general and administrative expenses.
2.	Professional fees increased by $11,033 or 60% to 29,485 for the year ended December 31, 2014 from $18,452 for the prior year ended December 31, 2013. This is attributable to increased transaction frequency in our property management and sales divisions and the consequent increase in book keeping and related audit services.
3.	Revenue increased by $8,897 for the year ended December 31, 2014 from $180,493 for the year ended December 31, 2013.

ITEM 8. FINANCIAL STATEMENTS.

The financial statements and supplementary data required by this item are submitted on page 23of this report.

To the Board of Directors and Shareholders

Home Treasure Finders, Inc. and Subsidiaries

Broomfield, Colorado

 

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

 

 

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern.  As discussed in Note 4 to the consolidated financial statements, the Company has incurred losses since inception and has liabilities in excess of assets, raising substantial doubt about its ability to continue as a going concern.  Management's plans in regard to these matters are also described in Note 4.  The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

HJ & Associates, LLC

Salt Lake City, Utah

HOME TREASURER FINDERS, INC. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

December 31, 2014 and 2013

 

 

Home Treasurer Finders, Inc. (the "Company") was initially incorporated on July 28, 2008 in the State of Colorado.  The Company has two subsidiaries, Ambermax III, Inc. and HTMF Cannabis Holdings, Inc.   On January 28, 2008 Ambermax III, Inc. became our wholly subsidiary through a merger consummated as a share exchange. The purpose of the merger was to obtain $12,676 in cash held by Ambermax III, Inc.

 

The Company is in the business of operating a real estate business and operates in Colorado as a State Licensed "Employing Broker" number 1000021235 issued on February 13, 2012.

Effective April 1, 2013, all property management activities, revenues and expenses in connection with CW Properties, a property management company owned by the CEO, were transferred to a wholly owned subsidiary of Home Treasure Finders, Inc.  All net revenue earned by CW Properties has been booked as consolidated revenue of Home Treasure Finders, Inc.  

On March 3, 2014 the Company formed a wholly subsidiary, HMTF Cannabis Holdings, Inc. The purpose of the subsidiary is to purchase Colorado properties that qualify for legal cultivation of cannabis. The properties will then be improved and leased to licensed third party growers.

 

The Company generates income from its real estate holdings.  On September 15, 2014 the Company acquired a vacant warehouse property in Denver zoned for cannabis cultivation. On November 5 and December 1, 2014 the Company leased the warehouse to unrelated licensed growers. The Company's tenants have invested cash to improve their respective leaseholds per lease terms utilizing architectural and engineering documents we procured and provided.

 

b. Accounting Method

The Company's financial statements are prepared using the accrual method of accounting.  The Company has elected a December 31 year-end.

c.  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 assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates.

d.  Income Taxes

Deferred taxes are provided on a liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carryforwards and deferred tax liabilities are recognized for taxable temporary differences.  Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases.  Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized.  Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.

HOME TREASURER FINDERS, INC. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

December 31, 2014 and 2013

 

 

d.  Income Taxes (Continued)

Net deferred tax assets consist of the following components as of December 31, 2014 and 2013:

The income tax provision differs from the amount of income tax determined by applying the U.S. income tax rate to pretax income from continuing operations for the year ended December 31, 2014 and 2013 due to the following:

At December 31, 2014, the Company had net operating loss carryforwards of approximately $313,000 that may be offset against future taxable income as long as the "continuity of ownership" test is met.  No tax benefit has been reported in the December 31, 2014 financial statements since the potential tax benefit is offset by a valuation allowance of the same amount.

Due to the change in ownership provisions of the Tax Reform Act of 1986, net operating loss carryforwards for Federal income tax reporting purposes are subject to annual limitations.  Should a change in ownership occur, net operating loss carryforwards may be limited as to use in future years.

 

The Company has analyzed filing positions in all of the federal and state jurisdictions where it is required to file income tax returns, as well as all open tax years in these jurisdictions.  The Company has identified its federal tax return and its state tax return in Colorado as "major" tax jurisdictions, as defined.   All years are open to examination by the IRS.  No reserves for uncertain tax positions have been recorded.

 

The Company adopted changes issued by FASB which prescribed a recognition threshold and measurement attribute for financial statement recognition and measurement of an uncertain tax position taken or expected to be taken in a tax return. Under the guidance, an uncertain income tax position must be recognized at the largest amount that is more-likely-than-not to be sustained upon audit by the relevant taxing authority.

HOME TREASURER FINDERS, INC. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

December 31, 2014 and 2013

 

e.  Loss per Common Share

 

The Company reports net loss per share using a dual presentation of basic and diluted loss per share. Basic net loss per share excludes the impact of common stock equivalents.  Diluted net loss per share utilizes the average market price per share when applying the treasury stock method in determining common stock equivalents.  At December 31, 2014 and 2013 there were no variances between the basic and diluted loss per share as there were no potentially dilutive securities outstanding.

 

The computation of loss per common share is based on the weighted average number of shares outstanding for the years ended December 31, 2014 and 2013 as follows:

 

 

f.  Revenue Recognition

Revenue is recognized when services are provided and collection is reasonably assured.  Revenue is recognized in a real estate transaction when the closing occurs on the home sale and commissions are received.  For the property management activities, revenue is recognized when rent is received from the tenant.  For rental income, revenue is recognized when the services are provided, and collection is reasonably assured.

 

g.  Newly Adopted Accounting Pronouncements

The Company has reviewed all recently issued, but not yet adopted, accounting standards in order to determine their effects, if any, on its results of operation, financial position or cash flows.  Based on that review, the Company believes that none of these pronouncements will have a significant effect on its current or future earnings or operations.

h.  Principles of consolidations

The consolidated financial statements include the accounts of the Company and its subsidiaries.  All material intercompany accounts and transactions are eliminated in consolidation.

 

 

 NOTE 2 –PROPERTY AND EQUIPMENT

The Company's capital assets consist of warehouse units, computer equipment, office furniture and leasehold improvements for its offices.  The warehouse was purchased on September 15, 2014.  Depreciation and amortization is calculated using the straight-line method over the estimated useful life of the asset, ranging from 18 months to 39 years.  Expenditures for additions and improvements are capitalized, while repairs and maintenance costs are expensed as incurred.  The cost and related accumulated depreciation of any capital assets that are sold or otherwise disposed of are removed from the accounts and any gain or loss is recorded in the year of disposal.

Fixed assets and related depreciation for the year ended December 31, 2014 are as follows: 

 

 

Depreciation expense was $6,925 and amortization expense was $1,555 for the year ended December 31, 2014.

 NOTE 3 – LONG-TERM DEBT

On September 15, 2014,  the Company entered into a promissory note for $840,000 on the purchase three warehouse units known as 4420, 4430 and 4440 Garfield Street, Denver, Colorado. The Company is leasing each of the three separate units to licensed third party growers for cannabis cultivation.  The terms of the variable interest 25 year amortization note carried by the seller of the property call for payments to seller as follows:

 

 

 

 

 

The note to seller is secured by the three warehouse units.

HOME TREASURER FINDERS, INC. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

December 31, 2014 and 2013

 

NOTE 3 – LONG-TERM DEBT (continued)

As of December 31, 2014, the balance of the note was $837,922 and the annual maturities of the long-term debt were:

NOTE 4 -COMMON STOCK TRANSACTIONS

On March 13, 2014 the Company completed a private placement of restricted common shares priced at $0.10 per share.  This placement of our restricted common stock generated $119,600 to be utilized as general working capital. The shares were issued March 31, 2014.

On March 31, the Company also issued 83,650 shares of common stock valued at $0.10 per share to pay for services received.

On October 8, 2014, the Company issued 200,000 restricted shares of the Company's common stock at a price of $0.15 per share.  The cash received was utilized for general working capital and in connection with the Company's Garfield street warehouse.

NOTE 5 - RELATED PARTY TRANSACTIONS

 

Effective April 1, 2013 all property management activities, revenues and expenses in connection with CW Properties, a property management company owned by the CEO, were transferred to a wholly owned subsidiary of Home Treasure Finders, Inc.  All net revenue earned by CW Properties beginning April 1, 2013 has been booked as consolidated revenue of Home Treasure Finders, Inc.  

 On March 14, 2014 we formed an affiliate vehicle, JDONE, LLC which has been consolidated, through which we might make anonymous offers on properties suitable for cannabis cultivation. Subsequently, we transferred $100,000 from our company checking account into the bank account of JDONE and on July 2014 JDONE issued a $10,000 check to serve as down payment on the purchase of warehouse units to be used for cannabis cultivation.  The sale was closed on September 15, 2014 and the total purchase price was $850,000 with down payment of $10,000 with balance due of $840,000 carried by the seller.

During the year ended December 31, 2014, the related party payable had a net increase of $3,750.  The balance of the related party payable was $8,693 and $4,943 as of December 31, 2014 and 2013, respectively.  This payable is due on demand and has an interest rate of 8%.  Accrued interest on this payable was $2,025 at December 31, 2014.  Beginning in 2013, the Company began accruing salary of $5,500 per month to the CEO for his services.  Effective April 14, 2014, the base salary to be paid to the CEO increased to $6,000 per month.  The balance accrued at December 31, 2014 was $18,612.

HOME TREASURER FINDERS, INC. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

December 31, 2014 and 2013

 

 

NOTE 5 - RELATED PARTY TRANSACTIONS – (continued)

During the year ended December 31, 2013 a major stockholder deposited $5,000 in the Company's bank account to cover expenses.  There were also payments of $5,000 made to pay down the related party payable during the year ended December 31, 2013.  The balance of the related party payable was $4,943 as of December 31, 2013.  This payable is due on demand and has an interest rate of 8%.  Accrued interest on this payable was $1,246 at December 31, 2013.  Beginning in April 2013, the Company began accruing salary of $5,500 per month to the CEO for his services.  The balance accrued at December 31, 2013 was $14,612.

NOTE 6 – COMMITMENTS AND CONTINGENCIES

The Company leases its office space under a non-cancelable lease agreement accounted for as an operating lease.  We are leasing this facility for $13,160 for the first year term of the lease which ends on April 30, 2015.  At that time we shall have the option of extending the lease term.

Rent expense was $11,825 and $4,200 for the years ended December 31, 2014, and 2013, respectively.

Minimum rental payments under the non-cancelable operating leases are as follows:

NOTE 7 -  GOING CONCERN

The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.  As shown in the accompanying financial statements, the Company has not yet generated sufficient revenue to generate net income.  Additionally liabilities exceed assets by$22,644 at December 31, 2014.  These factors, among others, indicate that there is substantial doubt that the Company will be able to continue as a going concern for a reasonable period of time.

The financial statements do not include any adjustments relating to the recoverability and classification of assets and liabilities that might be necessary should the Company be unable to continue as a going concern.  The Company's continuation as a going concern is dependent upon its ability to generate sufficient cash flow to meet its obligations on a timely basis and ultimately to attain profitability.  The Company intends to seek additional funding through equity offerings to fund its business plan.  There is no assurance that the Company will be successful in raising additional funds. 

NOTE 8 - SUBSEQUENT EVENTS

 

The Company has evaluated all subsequent events through the date the financial statements were issued, per the requirements of ASC Topic 855, and has determined that there are no additional events to report.

- 34 -

We carried out an evaluation, under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, of the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)). Based upon that evaluation, our principal executive officer and principal financial officer concluded that, as of the end of the period covered in this report, our disclosure controls and procedures were not effective to ensure that information required to be disclosed in reports filed under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the required time periods and is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

Our management, including our principal executive officer and principal financial officer, does not expect that our disclosure controls and procedures or our internal controls will prevent all error or fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met.  Further, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs. Due to the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. To address the material weaknesses, we performed additional analysis and other postclosing procedures in an effort to ensure our consolidated financial statements included in this annual report have been prepared in accordance with generally accepted accounting principles. Accordingly, management believes that the financial statements included in this report fairly present in all material respects our financial condition, results of operations and cash flows for the periods presented.

 

Management's Report on Internal Control Over Financial Reporting

 

Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934, as amended. Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2014. In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO") in Internal Control-Integrated Framework. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. We have identified the following material weaknesses:

 

As of December 31, 2014, we did not maintain effective controls over the control environment. Specifically, a lack of segregation of duties, a lack of oversight of financial reporting and inadequate documentation of business transactions.  Since these entity level controls have a pervasive effect across the organization, management has determined that these circumstances constitute material weaknesses.

 

Because of these material weaknesses, management has concluded that we did not maintain effective internal control over financial reporting as of December 31, 2014, based on the criteria established in "Internal Control-Integrated Framework" issued by the COSO.

 

No Attestation Report by Independent Registered Accountant

 

The effectiveness of our internal control over financial reporting as of December 31, 2014, has not been audited by our independent registered public accounting firm by virtue of our exemption from such requirement as a smaller reporting company.

 

Section 16 (a) Beneficial Ownership Reporting Compliance

 

Corey Wiegand:  Failed to file his initial report on Form 3 in a timely fashion (1 report).  No other reports were required.

 

Bristlecone Associates LLC:  Failed to file its initial report on Form 3 in a timely fashion (1 report).  No other reports were required.

  

EXECUTIVE COMPENSATION

 

There were no executives who received annual and/or long-term compensation for more than $100,000 per year at the end of the last completed fiscal year.  Beginning January 2012 we agreed to pay Mr. Wiegand a salary of $2,500 per month plus an additional over-ride of 15% based on sales. However, during much of 2012, we experienced a cash shortage and were unable to pay salary to Mr. Wiegand as it became due.  Effective April 1, 2013 we increased Mr. Wiegand’s salary to $5,500 per month.  As of December 31, 2013 Mr. Wiegand is owed accrued salary totaling $14,612. As of the date of this report, we have not executed a written agreement with Mr. Wiegand in connection with executive compensation and may, from time to time, increase or otherwise change  Mr. Wiegand’s compensation package.

 

The Company has no agreement for employment. The Company entered and completed a written agreement for certain future financial printing services for which 140,000 shares of its common stock were issued on March 16, 2009. Going forward we will purchase these services for cash.

 

     Corey Wiegand has no relationship with any shareholder of the Company other than James Wiegand. 

 Other than as set forth above, none of the following parties has, during the last two years, had any material interest, direct or indirect, in any transaction with us or in any presently proposed transaction that has or will materially affect us:

 

      During the year ended December 31, 2014, James Wiegand, father of Corey Wiegand and a stockholder, deposited $11,250 in the Company's bank account to cover expenses.  $7,000 was paid back to him.

 During the year ended December 31, 2013, James Wiegand, father of Corey Wiegand and a stockholder, deposited $5,000 in the Company's bank account to cover expenses.  

During the fiscal year ended December 31, 2014, we incurred approximately $22,600 in fees to our principal independent accountants for professional services rendered in connection with the audit and reviews of our financial statements for fiscal years ended December 31, 2012.

During the fiscal year ended December 31, 2013, we incurred approximately $17,400 in fees to our principal independent accountants for professional services rendered in connection with the audit and reviews of our financial statements for fiscal years ended December 31, 2012.

 

Audit-Related Fees

Tax Fees

All Other Fees

The aggregate fees billed during the fiscal years ended December 31, 2014 and 2013 for products and services provided by our principal independent accountants (other than the services reported in Items 9(e)(1) through 9(e)(3) of Schedule 14A was $0 and $0, respectively.