GREENWAY TECHNOLOGIES INC - Annual Report: 2014 (Form 10-K)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
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þ
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the fiscal year ended: December 31, 2014
OR
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¨
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the transition period from ____ to ____
Commission file number: 000-55030
UMED HOLDINGS, INC.
(Exact name of Registrant as Specified in Its Charter)
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Texas
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90-0893594
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(State or Other Jurisdiction of
Incorporation or Organization)
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(IRS Employer
Identification No.)
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6628 Bryant Irvin Road, Suite 250
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Fort Worth, Texas
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76132
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(Address of principal executive offices)
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(Zip Code)
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Registrant's telephone number, including area code
817-346-6900
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Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $0.0001 par value, listed on the Over-The-Counter Bulletin Board.
(Title of Class)
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 Section 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 ¨
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 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. ¨ þ
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
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Large accelerated filer
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¨
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Accelerated filer
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¨
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Non-accelerated filer
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¨
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Smaller reporting company
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ¨ No þ
As of March 27, 2015, the aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant computed by reference to the price at which the common equity was last sold based on the closing price on that date was approximately $10,230,000. On March 27, 2015, the registrant had outstanding 146,493,878 shares of Common Stock, $0.001 par value per share.
Documents Incorporated by Reference
None
TABLE OF CONTENTS
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PAGE
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PART I
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Item 1.
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Business
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1
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Item 1A.
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Risk Factors
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3
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Item 2.
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Properties
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3
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Item 3.
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Legal Proceedings
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3
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PART II
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Item 5.
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Market For Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
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3
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Item 6.
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Selected Financial Data
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4
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Item 7.
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Management's Discussion and Analysis of Financial Condition and Results of Operations
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4
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Item 8.
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Financial Statements and Supplementary Data
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F-1
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Item 9.
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Changes In and Disagreements with Accountants On Accounting and Financial Disclosure
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11
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Item 9A
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Controls and Procedures
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12
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Item 9B.
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Other Information
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14
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PART III
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Item 10.
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Directors, Executive Officers and Corporate Governance
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14
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Item 11.
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Executive Compensation
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16
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Item 12.
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Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
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18
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Item 13.
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Certain Relationships and Related Transactions, and Director Independence
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18
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Item 14.
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Principal Accountant Fees and Services
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19
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PART IV
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Item 15.
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Exhibits and Financial Statement Schedules
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20
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SIGNATURES
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21
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Introduction
UMED Holdings, Inc. (the “Company”) was originally incorporated as Dynalyst Manufacturing Corporation on March 13, 2002 and adopted a name change to Universal Media Corporation upon completion of a reverse acquisition of Dynalyst Manufacturing Corporation in August of 2009. In March 2011, we changed our name to UMED Holdings, Inc. (“UMED”).
UMED is a diversified holding company that owns and operates businesses in a variety of industries including energy, mining and
agriculture. Our focus is to acquire businesses as wholly-owned subsidiaries that meet some key requirements: (1) solid management that will not have to be replaced in the near future, (2) the ability to grow with steady growth to follow, and (3) an emphasis on emerging core industry markets, such as energy, metals and agriculture.
In this Form 10-K, we refer to ourselves as "UMED," "We," Us," “the Company,” and "Our."
Our executive offices are located at: UMED Holdings, Inc., 6628 Bryant Irvin Road, Suite 250, Fort Worth, Texas 76132; tel. voice: 817-346-6900, fax: 817-887-1943. Our Web site is www.umedholdings.com
Our growth is dependent on attaining profit from our operations and our raising capital through the sale of stock or debt. There is no assurance that we will be able to raise any equity financing or sell any of our products at a profit.
Our functional currency is the U.S. dollar. Our independent registered public accounting firm issued a going concern qualification in their report dated March 27, 2015, which raises substantial doubt about our ability to continue as a going concern.
Our stock is traded on the OTC Pink Markets with a QB designation and our trading symbol is "UMED."
Corporate History
UMED Holdings, Inc. (“UMED,” or the “company”) was incorporated in Texas on March 13, 2002. UMED owns technology for converting natural gas to liquids, primarily diesel and jet fuel (“GTL”), mining claims on federal Bureau of Land Management (BLM) in Southwest Arizona, a mamaki tea farm on 25 acres located on the big island in Hawaii, and oil rig drilling data management technology. The Company is in the process of seeking funding to operate the mamaki tea farm in Hawaii, secure clients for the Logistix Technology for oil and gas drilling rigs technology software, build the GTL units, begin the mining operations on the BLM land.
The Company staked the BLM placer mining claims on the 1,440 acres in Arizona in September 2011, and, since then, has maintained the claims and will establish an exploration and development plan, when capital is available.
The Company purchased 80% of Mamaki Tea & Extract of Hawaii, Inc. in May of 2012 (nka Mamaki of Hawaii, Inc. (and the remaining 20% in December 2012), and, since then, has worked to bring the tea plant into production. The Company has begun to harvest some tea leaves from its mamaki tea farm and place samples out with distribution chains to gage the desirability of our tea product. The Company’s current plan is to work the mamaki tea farm to produce revenues that can sustain the Company while it seeks capital to launch the Logistic software, the mining on the BLM mining claims and GTL operations.
In August of 2012, the Company acquired Greenway Innovative Energy, Inc. and has received two patents from the US Patent Office for its GTL technology.
In August 2012, the Company acquired 50% of Rig Support Services, Inc. (nka Logistix Technology Systems, Inc.), which is developing a unique and valuable technology and asset management Tool for the Oil and Gas Industry. In February 2013, we acquired the remaining 50%. We believe that this tool will not only provide independent rig owners and operating companies the ability to more accurately view and report on drilling operations, it will also allow for a more streamlined approach to processing purchase orders and receiving parts.
1
As shown in the accompanying consolidated financial statement, the Company has incurred a cumulative deficit of $6,730,300 as of December 31, 2014. The ability of the Company to continue as a going concern is in doubt and dependent upon on the ability of the Company to obtain necessary capital and financing to fund ongoing operations and achieving a profitable level of operations. UMED does not have the financial resources and does not have any commitments for funding from unrelated parties or any other firm agreements that will provide working capital to its business segments. We cannot give any assurance that UMED will locate any funding or enter into any agreements that will provide the required operating capital. UMED has been depended on the sale of equity and advances from shareholders to provide it with working capital to date.
UMED Strategy
UMED is a diversified holding company that owns and operates businesses in a variety of industries including energy, mining
and agriculture.
Our focus is to acquire businesses as wholly-owned subsidiaries that meet some key requirements: (1) solid management that will not have to be replaced in the near future, (2) the ability to grow with steady growth to follow, and (3) an emphasis on emerging core industry markets, such as energy, metals and agriculture.
Operationally, the Company plans to initially focus on the Mamaki Tea Plantation while it seeks the capital necessary to market the Logistic software to track drilling rig components, develop and build the GTL units, and drill test holes and test the samples on its Arizona placer mining claims to determine the potential value of the various metals that may be located on the claims.
Competition
Most of our competitors have greater financial and other resources than we have, and there is no assurance that we will be able to successfully compete.
Currently, there is significant competition for personnel and financial capital to be deployed in agriculture, mining and mineral extraction, particularly in relation to the oil and gas extractive industries. Therefore, it is difficult for smaller companies such as UMED to attract investment for its various business activities. We cannot give any assurances that we will be able to compete for capital funds, and without adequate financial resources management cannot assure that the company will be able to compete in our business activities and ultimately in agricultural, metals and mineral deposit development, production and sales.
Intellectual Property
As of December 31, 2014, the Company’s wholly-owned subsidiary Greenway Innovative Energy, Inc. (GIE) owns US Patents 8,574,501 and 8,795,597 B2 covering its mobile Gas-to-Liquids (“GTL”) conversion unit for the purpose of converting natural gas to clean synthetic fuels.
In the United States, a patent’s term may be up to 21 years if the earliest claimed filing date is that of a provisional application. Other legal provisions may, however, shorten or lengthen a patent’s term. In the United States, a patent’s term may, in certain cases, be lengthened by patent term adjustment, which compensates a patentee for administrative delays by the U.S. Patent and Trademark Office in examining and granting a patent. Alternatively, a patent’s term may be shortened if a patent is terminally disclaimed over a commonly owned patent or a patent naming a common inventor and having an earlier expiration date.
Employees
We currently employ three executives, our Chief Executive Officer Kevin Bentley, our President, Richard Halden, and our Chief Financial Officer, Randy Moseley. Messrs. Bentley, Halden and Moseley have written employment agreements discussed in Note 12 to the financial statements.
Mamaki of Hawaii, Inc. currently has two executives, a president and a vice president of business development, who work under agreements with Mamaki of Hawaii, Inc. Currently Mamaki uses day labor to perform the farming tasks.
Greenway Innovative Energy, Inc. employees consist of Chief Executive Officer, Conrad Greer, President Ray Wright and Vice President Pat Six, who work under agreements with Greenway. Greenway plans to use outside consultants to perform the engineering and design work on the GTL Unit, at such time as capital funds are available.
2
We do not have any other employees at this time. In the future, when we need other persons for aspects of the exploratory work and other functions, we will hire persons under service agreements as consultants, part-time and full time employees as necessary. We do not have any arrangements for the hiring of any persons at this time.
Available Information about US
The public may read and copy any materials we file with the Securities and Exchange Commission (“SEC”) at the SEC’s Public Reference Room at 100 F Street, NE, Washington, D.C. 20549, on official business days during the hours of 10:00 am to 3:00 pm. The public may obtain information on the operation of the Public Reference Room by calling the Commission at 1-800-SEC-0330. The Commission maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the Commission at (http://www.sec.gov). Our Internet site is www.umedholdings.com.
Disclosure is not required as a result of our Company’s status as a smaller reporting company.
The Company’s principal office is at 6628 Bryant Irvin Road, Suite 250, Fort Worth, Texas 76132, where it has leases approximately 3,500 square feet of office space, at a rate of $6,400 per month.
The Company’s subsidiary Mamaki of Hawaii, Inc. owns approximately 25 acres on the big island of Hawaii. There are facilities on the property including a 3,000 square foot home with office space and an equipment barn.
The Company has staked 72 placer mining claims in Mohave County, Arizona on BLM land (BLM file no. AMC 403533) covering approximately 1,440 acres in Mohave County southeast of Kingman, Arizona.
In the ordinary course of business, we may be subject to legal proceedings involving contractual and employment relationships, liability claims and a variety of other matters. Although the results of these other legal proceeding cannot be predicted with certainty, we do not believe that the final outcome of these matters should have a material adverse effect on our business, results of operations, cash flows or financial condition.
Item 4. Mine Safety Disclosures.
Not applicable.
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
Our stock is traded on the OTC Pink Market with a QB designation and our trading symbol is "UMED." The following table sets forth the quarterly high and low bid price per share for our common stock. These bid and asked price quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission, and may not represent actual prices. Our fiscal year ends December 31.
Common Stock Price Range
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2014
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2013
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HIGH
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LOW
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HIGH
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LOW
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First Quarter
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$ | 0.20 | $ | 0.09 | $ | 0.15 | $ | 0.075 | ||||||||
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Second Quarter
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0.325 | 0.111 | 0.11 | 0.07 | ||||||||||||
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Third Quarter
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0.35 | 0.16 | 0.10 | 0.05 | ||||||||||||
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Fourth Quarter
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0.28 | 0.155 | 0.14 | 0.06 | ||||||||||||
3
Common Stock
On March 27, 2015, we had outstanding 146,493,878 shares of Common Stock, $0.0001 par value per share.
On March 27, 2015, the closing bid price of our stock was $0.11 per share.
On March 27, 2015, we had approximately 359 shareholders of record.
Our transfer agent is Transfer Online, Inc.
We have not paid any cash dividends and we do not expect to declare or pay any cash dividends in the foreseeable future. Payment of any cash dividends will depend upon our future earnings, if any, our financial condition, and other factors as deemed relevant by the Board of Directors.
Sale of Unregistered Securities
During the three months ended December 31, 2014, the Company issued unregistered securities as set forth below;
On October 16, 2014, the Company issued 400,000 shares of restricted common stock for the conversion of $40,000 in debt owed by the Company.
On October 29, 2014, the Company issued 357,142 shares of restricted common stock for the conversion of $50,000 in debt owed by the Company.
On December 31, 2014, the Company issued 876,000 shares of restricted common stock for the conversion of $60,000 in debt owed by the Company.
On December 31, 2014, the Company issued 1,000,000 shares of restricted common stock to six investors for cash consideration of $127,500.
On December 31, 2014, the Company issued 225,000 shares of restricted common stock for consulting services valued at $22,500.
The offer and sale of such shares of our common stock were effected in reliance upon the exemptions for sales of securities not involving a public offering, as set forth in Section 4(2) of the Securities Act, based upon the following: (a) each investor confirmed to us that the investor was an “accredited investor,” as defined in Rule 501 promulgated under the Securities Act and had such background, education and experience in financial and business matters as to be able to evaluate the merits and risks of an investment in the securities; (b) there was no public offering or general solicitation with respect to each offering; (c) the investors were provided with certain disclosure materials and all other information requested with respect to our company; (d) the investors acknowledged that all securities being purchased were “restricted securities” for purposes of the Securities Act, and agreed to transfer such securities only in a transaction registered under the Securities Act or exempt from registration under the Securities Act; and (e) a legend was placed on the certificates representing each such security stating that it was restricted and could only be transferred if subsequently registered under the Securities Act or transferred in a transaction exempt from registration under the Securities Act.
Securities Authorized For Issuance under Equity Compensation Plans
None
Employee Stock Option Plans
None
Disclosure is not required as a result of our Company’s status as a smaller reporting company.
The following discussion and analysis of the financial condition and results of operations of the Company should be read in conjunction with the financial statements and the related notes and the discussions under “Application of Critical Accounting Policies,” which describes key estimates and assumptions we make in the preparation of our financial statements.
4
Overview
UMED Holdings, Inc. (“UMED”) was originally incorporated as Dynalyst Manufacturing Corporation (“Dynalyst”) under the laws of the State of Texas on March 13, 2002. On June 7, 2006, Dynalyst Manufacturing Corporation amended its Articles of Incorporation to increase its authorized number of common shares from Twenty Million (20,000,000) to Seventy Five Million (75,000,000) shares and authorized Twenty Five Million (25,000,000) shares of preferred stock.
In connection with the merger with Universal Media Corporation (“UMC”), a Nevada corporation, on August 17, 2009, the company changed its name to Universal Media Corporation. The transaction was accounted for as a reverse merger, and Universal Media Corporation is the acquiring company on the basis that Universal Media Corporation’s senior management became the entire senior management of the merged entity and there was a change of control of Dynalyst. While the transaction is accounted for using the purchase method of accounting, in substance the transaction was a recapitalization of Dyanlyst’s capital structure. In connection with the merger, Dynalyst issued 57,500,000 restricted common shares to stockholders of Universal Media Corporation for 100% of Universal Media Corporation.
On August 18, 2009, Dynalyst approved the amendment of its Articles of Incorporation and filed with the Texas Secretary of State to change the Company’s name to Universal Media Corporation and approved the increase in authorized shares to 300,000,000 shares of common stock, par value $.0001 and 20,000,000 shares of preferred, par value $.0001.
On March 23, 2011, Universal Media Corporation approved the amendment of its Articles of Incorporation and filed with the Texas Secretary of State to change the Company’s name to UMED Holdings, Inc.
UMED Holdings, Inc. a Texas corporation, (hereinafter “UMED” or “the Company”) is a holding company with present interest in energy, mining and agriculture. The Company has established its corporate offices at 6628 Bryant Irvin Road, Suite 250, Fort Worth, Texas 76132 consisting of approximately 3,500 square feet.
Energy Interest
In August 2012, UMED acquired Greenway Innovative Energy, Inc., filed a patent application, and is conducting research on Gas-to-Liquid (“GTL”) technology. The Technology is based upon the Fischer-Tropsch (“FT”) conversion system that has been operational in various locations throughout the world since the early 1930s. Thousands of FT systems have operated during the last 80 years, being most notably responsible for driving energy economies of wartime Nazi Germany and Imperial Japan. More recently, and for a more sustained period, FT has been responsible for providing much of the motive energy required to meet the needs of the Republic of South Africa, a country recognized as having pushed FT technology much further than any other nation since the development of the process.
Greenway’s research has been centered on developing a portable production-scale FT system (“the Portable Technology”) to accommodate the needs of smaller gas plays that are increasingly beginning to characterize natural gas production within the US and elsewhere. Based on preliminary estimates with new, improved and more efficient technology than previously projected , the Company is currently seeking funding of $30 - $35 million to manufacture the initial (2,000 barrel per day) GTL unit near an existing pipeline to obtain the cleanest gas possible and not have to deal with desulfurization on the first unit. The GTL Unit will be composed of the front end to produce the syn-gas that will be processed by the FT section and the resulting liquid will be separated into diesel, jet fuel and other products in the fractionation tower.
Mining Interest
In December 2010, UMED acquired the rights to approximately 1,440 acres of placer mining claims in Mohave County, Arizona for 5,066,000 shares of restricted common stock. Actual mining and processing will determine the ultimate value realized. The Company’s current expectations are that it will need approximately $2,000,000 to begin certified assaying ($500,000), development of a mining plan with the BLM ($500,000) and acquire exploration equipment ($1,000,000). The total requirement will not be known until reports from consulting geologist are received.
5
Mamaki Tea Farm
On May 2, 2012, the Company acquired 80% of Mamaki of Hawaii, Inc. (formerly Mamaki Tea & Extract, Inc.), a Nevada corporation in exchange for 5,000,000 shares of the Company’s restricted common stock and $150,000 in cash. On December 31, 2012, the Company acquired the remaining 20% of Mamaki of Hawaii, Inc. for 500,000 shares of its restricted common stock and $127,000 in cash. The Company is currently seeking funding of $5,000,000 to acquire additional acreage, to build additional facilities, marketing and operations.
Technology Systems Services
In August 2012, the Company acquired 50% of Rig Support Group, Inc., (nka Logistix Technology Systems, Inc.) which is developing a unique and valuable technology and asset management Tool for the Oil and Gas Industry for 100,000 shares of restricted common stock. In February 2013, we acquired the remaining 50% for 500,000 shares of restricted common stock. We believe that this tool will provide independent rig owners and operating companies the ability to more accurately view and report on drilling operations and also allow for a more streamlined approach to processing purchase orders, receiving parts.
Going Concern
We remain dependent on outside sources of funding for continuation of our operations. Our independent registered public accounting firm issued a going concern qualification in their report dated March 27, 2015, which raises substantial doubt about our ability to continue as a going concern.
During the years ended December 31, 2014 and 2013, we have been unable to generate cash flows sufficient to support our operations and have been dependent on debt and equity raised from qualified individual investors and loans from a related party. We experienced negative financial results as follows:
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2014
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2013
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|||||||
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Net loss
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$
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(2,685,346
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)
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$
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(975,056
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)
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Cash flow (negative) from operations
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(968,641
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)
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(672,426
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)
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Negative working capital
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(3,249,363
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)
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(2,455,676
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)
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||||
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Stockholders’ deficit
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(2,034,631
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)
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(1,211,700
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)
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||||
These factors raise substantial doubt about our ability to continue as a going concern. The financial statements contained herein do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts and classification of liabilities that might be necessary should we be unable to continue in existence. Our ability to continue as a going concern is dependent upon our ability to generate sufficient cash flows to meet our obligations on a timely basis, to obtain additional financing as may be required, and ultimately to attain profitable operations. However, there is no assurance that profitable operations or sufficient cash flows will occur in the future.
Our ability to achieve profitability will depend upon our ability to execute and deliver high quality, reliable connectivity services. Our growth is dependent on attaining profit from our operations and our raising additional capital either through the sale of stock or borrowing. There is no assurance that we will be able to raise any equity financing or sell any of our products at a profit.
Results of Operations
Revenues for consolidated operations for the years ended December 2014 and 2013 were $24,581 and $15,479, respectively. The revenues were from the Company’s mamaki tea operations. The mamaki tea operations are not considered season, although sales will fluctuate from quarter to quarter as the business grows. We reported consolidated net losses during the years ended December 31, 2014 and 2013 of $2,685,346 and $975,056, respectively.
6
The following chart summarizes consolidated operating expenses and other income and expenses for the year ended December 31, 2014 and 2013:
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2014
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2013
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||||||
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General and administrative
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$
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2,092,746
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$
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618,075
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||||
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Research and development
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218,000
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0
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||||||
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Depreciation and amortization
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119,350
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118,457
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||||||
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Net interest expense
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225,135
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87,281
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||||||
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Loss on sale of assets
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0
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70,300
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||||||
The table below illustrates the Company’s results for the reporting segment for the year ended December 31, 2014:
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Mamaki Tea
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Other
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Total
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||||||||||
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Sales
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$ | 24,581 | $ | 0 | $ | 24,581 | ||||||
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Cost of sales
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54,696 | 0 | 54,696 | |||||||||
| (30,115 | ) | 0 | (30,115 | ) | ||||||||
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General and administration expense
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415,010 | 1,677,736 | 2,092,746 | |||||||||
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Research and development
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0 | 218,000 | 218,000 | |||||||||
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Depreciation expense
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118,954 | 396 | 119,350 | |||||||||
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Operating loss
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(564,082 | ) | (1,896,132 | ) | (2,460,211 | ) | ||||||
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Other income (expense)
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||||||||||||
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Interest expense
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(150,755 | ) | (74,380 | ) | (225,135 | ) | ||||||
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Loss on sale of assets
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0 | 0 | 0 | |||||||||
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Total Other income
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(150,755 | ) | (74,380 | ) | (225,135 | |||||||
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Net loss
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$ | (714,834 | ) | $ | (1,970,512 | ) | $ | (2,685,346 | ) | |||
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Mamaki Tea
12-31- 2014
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Other
12-31-2014
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Total
12-31-2014
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||||||||||
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Total assets
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$ | 1,842,558 | $ | 313,656 | $ | 2,156,214 | ||||||
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Total liabilities
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$ | 1,860,520 | $ | 2,329,325 | $ | 4,189,845 | ||||||
The table below illustrates the Company’s results for the reporting segment for the year ended December 31, 2013:
|
Mamaki Tea
|
Other
|
Total
|
||||||||||
|
Sales
|
$ | 15,479 | $ | 0 | $ | 15,479 | ||||||
|
Cost of sales
|
96,422 | 0 | 96,422 | |||||||||
| (80,943 | ) | 0 | (80,943 | ) | ||||||||
|
General and administration expense
|
528,441 | 89,634 | 618,075 | |||||||||
|
Depreciation expense
|
118,061 | 396 | 118,457 | |||||||||
|
Operating loss
|
(727,445 | ) | (90,030 | ) | (817,475 | ) | ||||||
|
Other income (expense)
|
||||||||||||
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Interest expense
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(84,876 | ) | (2,405 | ) | (87,281 | ) | ||||||
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Loss on sale of assets
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(70,300 | ) | 0 | (70,300 | ) | |||||||
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Total Other income
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(155,176 | ) | (2,405 | ) | (157,581 | ) | ||||||
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Net loss
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$ | (882,621 | ) | $ | (92,435 | ) | $ | (975,056 | ) | |||
7
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Mamaki Tea
12-31- 2013
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Other
12-31-2013
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Total
12-31-2013
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||||||||||
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Total assets
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$ | 1,882,468 | $ | 277,504 | $ | 2,159,972 | ||||||
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Total liabilities
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$ | 1,687,487 | $ | 1,684,185 | $ | 3,371,672 | ||||||
For the year ended December 31, 2014, consolidated general and administrative costs of $2,092,746 consisted primarily of consulting fees of $77,350, management fees of $663,750, contract labor of $362,691, legal fees of $77,900, rent expense of $76,800, travel expenses of $24,563, transfer agent expenses of $10,823, and stock based compensation of $738,842.
For the year ended December 31, 2013, consolidated general and administrative costs of $618,075 consisted primarily of legal fees of $45,345, contract labor of $214,650, rent expense of $76,800, travel expenses of $68,400, transfer agent expenses of $12,537, and stock based compensation of $129,433.
Consolidated net loss was $2,685,346 or $0.01 per basic and diluted earnings per share for the year ended December 31, 2014 compared to $975,056 or $0.01 per share for the year ended December 31, 2013. The weighted-average number of shares used in the earnings per share for the basic and dilutive computation was 138,442,759 for the year ended December 31, 2014 and 127,324,190 for the year ended December 31, 2013.
Liquidity and Capital Resources
We do not currently have sufficient working capital to fund our future operations. We cannot assure that we will be able to continue our operations without adequate funding. We had $82,656 in cash, total assets of $2,155,214 and total liabilities of $4,189,845 as of December 31, 2014. Total stockholder’s deficit at December 31, 2014 was $2,034,631.
For the years ended December 31, 2014 and 2013, cash used by operating activities was $968,641 and $672,426, respectively. Cash used by investing activities were $0 and $43,204 for the years ended December 31, 2013 and 2012, respectively.
Cash provided by financing activities for the years ended December 31, 2014 and 2013 was $1,049,855 and $521,629, respectively, primarily from the sale of common stock and advances by shareholders.
We project that approximately $40 - $45 million of capital will be needed for all aspects of our business development. We project a need of $30 -$35 million to build the first portable GTL Unit, $5 million to develop our Mamaki Tea operations, $2 million for our mining exploration plan, and $3 million for general and administration. Further, until there is a fuller assessment of the mining property, we cannot determine the capital requirements and our operating budgets, if it is decided to pursue full exploration and development. We also will be subject to environmental expenses in connection with these activities. We will also have the expense of maintaining and defending any patents obtained, our claims, and seeking further patents and claims to be able to garner enough area to make our operations more viable, once we have shown appropriate mineral deposits present in our claims, if at all. After building the first GTL Unit and determining the commercialability of the mining claims, we will need substantial capital to build additional GTL Units, develop the mining claims, acquire plant and equipment and hire personnel.
We intend to seek equity forms of capital. We do not believe that debt financing is available to the company at this time, partly because we do not have any earnings with which to support debt service or maintain typical debt covenants. We have no firm arrangements for any capital at this time. Additionally, equity capital for small companies generally and small companies in the oil and gas and mining segments in particular, have a difficult time competing for investors because of the high risk at this stage of development and the fact that the investment is long term. The market for the transportation fuel and metals that the company believes may be derived from the GTL Units and from its mining claims also influences investment decisions, such that if there is strong demand, then funds may be relatively more available, but if market demand is not strong or the price of transportation fuels and the metals declines, funding may be unavailable. Additionally, the capital demands of the oil and gas industries present competition for funds for companies in the metals segment. The failure to obtain the necessary working capital would have a material adverse effect on the business prospects and, depending upon the shortfall, the Company may have to curtail or cease its operations.
The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates realization of assets and the satisfaction of liabilities in the normal course of business. The general business strategy of the Company is to first develop the mamaki tea farm to provide the source of revenue to maintain the Company’s viability, while seeking capital to construct the first portable GTL Unit and explore and research its existing mining leases properties. As shown in the accompanying consolidated financial statement, the Company has incurred a cumulative deficit of $6,730,300 and $4,044,454 as of December 31, 2014 and 2013, respectively. The ability of the Company to continue as a going concern is in doubt and dependent upon achieving a profitable level of operations and on the ability of the Company to obtain necessary financing to fund ongoing operations.
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Commitments
Employment Contracts
In June 2011, the Company entered into employment agreements with its chief executive officer, president and chief financial officer. The Agreements are for a term of 5 years with compensation of $180,000 the first year, $240,000 the second year, $300,000 the third year, $350,000 the fourth year and the fifth year at a salary commensurate with those in similar industries. The employment agreements also provide for the officers to received 1,250,000 shares of restricted common stock annually for each year of the employment agreement. During the year ended December 31, 2014, with the consent of management, the Company accrued $595,000 towards the employment agreements. During the year ended December 31, 2013, management agreed to eliminate $1,221,327of their accrued compensation due under their employment agreements, which reduced general and administration expense by $321,328 for the year ended December 31, 2013.
In August 2012, the Company entered into employment agreements with the president and chairman of the board of Greenway Innovative Energy, Inc. for a term of 5 years with compensation of $90,000 per year. In June of 2014, the president’s employment agreement was amended to increase his pay to $180,000. During the year ended December 31, 2014, with their consent, the Company accrued $168.700 towards the employment agreements. At December 31, 2013, Greenway’s management agreed to eliminate $107,500 of their accrued compensation due under their employment agreements, which reduced general and administration expense by $107,500 for the year ended December 31, 2013.
Mining Leases
The Company’s minimum commitment for 2014 is approximately $11,000 in annual maintenance fees, which are due September 1, 2014. Once the company enters the production phase, royalties owed to the BLM are equal to 10% of production.
Financing
The Company’s financing has been provided by advances from shareholders and by issuing shares of its common stock in various private placements to related parties and individuals.
Off-Balance Sheet Arrangements
We do not have any off balance sheet arrangements that are reasonably likely to have a current or future effect on our financial condition, revenues, and results of operations, liquidity or capital expenditures.
Significant Accounting Policies
Critical Accounting Policies and Estimates
Our discussion and analysis of our financial condition and results of operations are based upon financial statements which have been prepared in accordance with generally accepted accounting principles in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities. On an ongoing basis, we evaluate these estimates. We base our estimates on historical experience and on assumptions that are believed to be reasonable. These estimates and assumptions provide a basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions, and these differences may be material.
We believe that the following critical accounting policies affect our more significant judgments and estimates used in the preparation of our financial statements.
Revenue Recognition
The Company will recognize revenue in accordance with Accounting Standards Codification subtopic 605-10, Revenue Recognition (“ASC 605-10”) which requires that four basic criteria must be met before revenue can be recognized: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred; (3) the selling price is fixed and determinable; and (4) collectability is reasonably assured. Determination of criteria (3) and (4) are based on management's judgments regarding the fixed nature of the selling prices of the products delivered and the collectability of those amounts. Provisions for discounts and rebates to customers, estimated returns and allowances, and other adjustments are provided for in the same period the related sales are recorded.
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ASC 605-10 incorporates Accounting Standards Codification subtopic 605-25, Multiple-Element Arraignments (“ASC 605-25”). ASC 605-25 addresses accounting for arrangements that may involve the delivery or performance of multiple products, services and/or rights to use assets. The effect of implementing 605-25 on the Company's financial position and results of operations was not significant.
Stock-Based Compensation
Accounting Standard 718, "Accounting for Stock-Based Compensation" ("ASC 718") established financial accounting and reporting standards for stock-based employee compensation plans. It defines a fair value based method of accounting for an employee stock option or similar equity instrument. In January 2006, UMED implemented ASC 718, and accordingly, UMED accounts for compensation cost for stock option plans in accordance with ASC 718.
UMED accounts for share based payments to non-employees in accordance with ASC 505-50 “Accounting for Equity Instruments Issued to Non-Employees for Acquiring, or in Conjunction with Selling, Goods or Services”.
Use of Estimates
The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States 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 amount of revenue and expenses during the reported period. Actual results could differ materially from the estimates.
Cash and Cash Equivalent
The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. At December 31, 2014, cash consists of a checking accounts held by financial institutions.
Mine Exploration and Development Costs
The Company accounts for mine exploration costs in accordance with Accounting Standards Codification 932, Extractive Activities. All exploration expenditures are expensed as incurred. Mine development costs are capitalized until production, other than production incidental to the mine development process, commences and are amortized on a units of production method based on the estimated proven and probable reserves. Mine development costs represent costs incurred in establishing access to mineral reserves and include costs associated with sinking or driving shafts and underground drifts, permanent excavations, roads and tunnels. The end of the development phase and the beginning of the production phase takes place when construction of the mine for economic extraction is substantially complete. Amortization of capitalized mine development is computed based on the estimated life of the mine and commences when production, other than production incidental to the mine development process, begins. At December 31, 2014, the Company had not incurred any mine development costs.
Mining Properties
The Company accounts for mine properties in accordance with Accounting Standard Codification 930, Extractive Activities-Mining. Costs of acquiring mine properties are capitalized by project area upon purchase of the associated claims. Mine properties are periodically assessed for impairment of value and any diminution in value.
Income Taxes
The Company has adopted Accounting Standards Codification subtopic 740-10, (“ASC 740-10”) which requires the recognition of deferred tax liabilities and assets for the expected future tax consequences of events that have been included in the financial statement or tax returns. Under this method, deferred tax liabilities and assets are determined based on the difference between financial statements and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Temporary differences between taxable income reported for financial reporting purposes and income tax purposes consist primarily of timing differences such as deferred officers’ compensation and stock compensation accounting versus tax differences.
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Net Loss Per Share, basic and diluted
The Company has adopted Accounting Standards Codification Subtopic 260-10, Earnings Per Share (“ASC 260-10), specifying the computation, presentation and disclosure requirements of earning per share information. Basic loss per share has been computed by dividing net loss available to common shareholders by the weighted average number of common shares outstanding for the period. Shares issuable upon conversion of the notes payable and exercise of warrants has been excluded as a common stock equivalent in the diluted loss per share because their effect is anti-dilutive on the computation.
Derivative Financial Instruments
The Company does not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. UMED evaluates all of it financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported as charges or credits to income. For option-based derivative financial instruments, UMED uses the Black-Scholes option-pricing model to value the derivative instruments at inception and subsequent valuation dates. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is re-assessed at the end of each reporting period. Derivative instrument liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument could be required within 12 months of the balance sheet date.
Concentration and Credit Risk
Financial instruments and related items, which potentially subject the Company to concentrations of credit risk, consist primarily of cash, cash equivalents and trade receivables. The Company places its cash and temporary cash investments with high credit quality institutions. At times, such investments may be in excess of the FDIC insurance limit.
Impact of New Accounting Standards
The Company has adopted the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 105-10, Generally Accepted Accounting Principles – Overall (“ASC 105-10”), which was formerly known as SFAS 168. ASC 105-10 establishes the FASB Accounting Standards Codification (the “Codification”) as the source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities in the preparation of financial statements in conformity with U.S. GAAP. Rules and interpretive releases of the Securities and Exchange Commission (the "SEC") under authority of federal securities laws are also sources of authoritative U.S. GAAP for SEC registrants. All guidance contained in the Codification carries an equal level of authority. The Codification superseded all existing non-SEC accounting and reporting standards and all other non-grandfathered, non-SEC accounting literature not included in the Positions or Emerging Issues Task Force Abstracts. Instead, it will issue Accounting Standards Updates (“ASUs”). The FASB will not consider ASUs as authoritative in their own right. ASUs will serve only to update the Codification, provide background information about the guidance and provide the basis of conclusions on the change(s) in the Codification. References made to FASB guidance throughout this document have been updated for the Codification.
The Company has reviewed all other 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 consolidated financial statements.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
Pursuant to Item 305(e) of Regulation S-K (§ 229.305(e)), the Company is not required to provide the information required by this Item as it is a “smaller reporting company,” as defined by Rule 229.10(f)(1).
See Financial Statements beginning on page F-1.
a) On December 15, 2013, UMED Holdings, Inc. (the "Company") accepted the resignation of Patrick Rodgers, CPA, PA as the independent registered public accounting firm of the Company. The resignation of Patrick Rodgers, CPA, PA was approved by the Company's Board of Directors.
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On March 6, 2014, the Public Company Accounting Oversight Board (PCAOB) by Order censured the registered public accounting firm Patrick Rodgers, CPA, PA (the "Firm") and revoked the Firm's registration; and censured Patrick E. Rodgers, CPA ("Rodgers") and barred him from being an associated person of a registered public accounting firm. The Order stated that the Firm may reapply for registration after two (2) years from the date of the Order and Rodgers may file a petition for Board consent to associate with a registered public accounting firm after two (2) years from the date of the Order. The entire content of the Order may be found at http://pcaobus.org/Enforcement/Decisions/Documents/2014_Rodgers.pdf.
The reports from Patrick Rodgers, CPA, PA on the Company's financial statements as of and for the fiscal years ended December 31, 2012 and 2011 did not contain an adverse opinion or a disclaimer of opinion, and were not qualified or modified as to uncertainty, audit scope or accounting principle except relevant to the audit report for the year ended December 31, 2012, which stated as follows:
"The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As described in Note 4 of the accompanying financial statements, the Company has incurred losses since inception, has a negative working capital balance at December 31, 2012, and has a retained deficit, which raises substantial doubt about its ability to continue as a going concern. Management's plans in regard to this matter are described in Note 4. The financial statements do not include any adjustments that might result from the outcome of this uncertainty."
During the Company's fiscal years ended December 31, 2012 and 2011 and through December 15, 2013 there were no disagreements with Patrick Rodgers, CPA, PA on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which, if not resolved to the satisfaction of Patrick Rodgers, CPA, PA, would have caused them to make reference to the subject matter of the disagreement in connection with their reports on the financial statements for such years. During the Company's fiscal years ended December 31, 2012 and 2011 and through December 15, 2013 there were no reportable events as defined in Item 304(a)(1)(v) of Regulation S-K.
The Company furnished a copy of the disclosures herein to Patrick Rodgers, CPA, PA and requested that Patrick Rodgers, CPA, PA furnish it with a letter addressed to the Securities and Exchange Commission stating whether or not it agrees with the above statements. Patrick Rodgers’s response is attached as Exhibit 16.1 to this Current Report on Form 8-K/A.
(b) New Independent Registered Public Accounting Firm
On January 16, 2014, the Company's Board of Directors engaged Terry L. Johnson, CPA as its new independent registered public accounting firm to audit the Company's financial statements for the Company's fiscal year ending December 31, 2013. On March 14, 2014, the Company engaged Terry L. Johnson, CPA to audit the Company's financial statements for the Company's fiscal year ending December 31, 2012.
During the last two fiscal years ending December 31, 2012 and December 31, 2011, and the interim period ending December 31, 2013, we have not consulted with Terry L. Johnson, CPA regarding either: (i) the application of accounting principles to a specified transaction, either contemplated or proposed, (ii) the type of audit opinion that might be rendered on your financial statements, or (iii) any matter that was either the subject of a disagreement between us and Patrick Rodgers, CPA, PA as described in Item 304(a)(1)(iv) of Regulation S-K or a reportable event as described in Item 304(a)(1)(v) of Regulation S-K.
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Principal Executive Officer and Principal Financial Officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in the Securities Exchange Act of 1934 Rules 13a-15(e) and 15d-15(e)) as of the end of the period covered by this Annual Report on Form 10-K. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs.
Based on our evaluation, our Principal Executive Officer and Principal Financial Officer, after considering the existence of material weaknesses identified, determined that our internal control over financial reporting disclosure controls and procedures were not effective as of December 31, 2014.
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Management’s Annual Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as amended. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles.
Our internal control over financial reporting includes those policies and procedures that: (i) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets, (ii) provide reasonable assurance that
transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors, and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Management, including our Principal Executive Officer and Principal Financial Officer, assessed the effectiveness of our internal control over financial reporting as of December 31, 2014. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control over Financial Reporting - Guidance for Smaller Public Companies.
We identified the following deficiencies which together constitute a material weakness in our assessment of the effectiveness of internal control over financial reporting as of December 31, 2014;
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The Company has inadequate segregation of duties within its cash disbursement control design.
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During the year ended December 31, 2014, the Company internally performed all aspects of its financial reporting process, including, but not limited to the underlying accounting records and record journal entries and responsibility for the preparation of the financial statement due to the fact these duties were performed often times by the same people, a lack of review was created over the financial reporting process that might result in a failure to detect errors in spreadsheets, calculations, or assumptions used to compile the financial statements and related disclosures as filed with the SEC. These control deficiencies could result in a material misstatement to our interim or annual financial statements that would not be prevented or detected.
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The Company does not have a sufficient number of independent directors for its board and audit committee. We currently have no independent director on our board, which is comprised of four directors, and we do not have a functioning audit committee. As a publicly-traded company, we should strive to have a majority of our Board of Directors be independent.
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The Company is continuing the process of remediating its control deficiencies. However, the material weakness in internal control over financial reporting that has been identified will not be remediated until numerous internal controls are implemented and operate for a period of time, are tested, and the Company is able to conclude that such internal controls are operating effectively. The Company cannot provide assurance that these procedures will be successful in identifying material errors that may exist in the financial statements. The Company cannot make assurances that it will not identify additional material weaknesses in its internal control over financial reporting in the future. Management plans, as capital becomes available to the Company, to increase the accounting and financial reporting staff and provide future investments in the continuing education and public company accounting training of our accounting and financial professionals.
It should be noted that any system of controls, however well designed and operated, can provide only reasonable, and not absolute, assurance that the objectives of the system are met. In addition, the design of any control system is based in part upon certain assumptions about the likelihood of future events. Because of these and other inherent limitations of control system, there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote.
This annual report does not include an attestation report of the Company's registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by the Company's registered public accounting firm pursuant to rules of the Securities and Exchange Commission that permit us to provide only management's report in this annual report.
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We regularly review our system of internal control over financial reporting to ensure we continue to work towards an effective internal control environment. There were no changes that occurred during the fourth quarter of the fiscal year covered by the Annual Report on Form 10-K that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
None.
PART III
Executive Officers and Directors
Set forth below are our present directors and executive officers. Note that there are no other persons who have been nominated or chosen to become directors nor are there any other persons who have been chosen to become executive officers. There are no arrangements or understandings between any of the directors, officers and other persons pursuant to which such person was selected as a director or an officer. Directors are elected to serve until the next annual meeting of stockholders and until their successors have been elected and have qualified. Officers serve at the discretion of the Board of Directors.
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Present Position
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Name
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Age
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and Offices
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Kevin Bentley
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42
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Chief Executive Officer and Director
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Richard Halden
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61
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President and Director
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Randy Moseley
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67
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Treasurer, Chief Financial Officer, Director
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Principal Accounting Officer
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and Secretary
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Raymond Wright
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78
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Director
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Craig Takacs
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48
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Director
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Set forth below are brief accounts of the business experience during the past five years of each director and executive officer of the Company.
KEVIN BENTLEY was appointed chief executive officer and director on March 23, 2011. Prior to joining UMED, Mr. Bentley was vice-president business development of Healthtronics, Inc., a healthcare services and medical devices company focused primarily in urology. Mr. Bentley joined Healthtronics in April 2008 with the acquisition of Advanced Medical Partners, Inc., a leading provider of urological services, where he was chief development officer and principal since 2003. Previously, Mr. Bentley served as chief executive officer of Referral Technologies, Inc., a technology consulting firm specializing in information systems and communications. Prior to that Mr. Bentley held various management positions in the telecommunications and information technology sectors. Mr. Bentley holds a B.B.A in Marketing from The University of Southern Mississippi.
RANDY MOSELEY was appointed chief executive officer, chief financial officer and chairman of the board on August 18, 2009. Mr. Moseley served as chief financial officer and director (August 2009 to December 2012) for Swordfish Financial, Inc. (SWRF), a financial company focusing on recovering financial assets in dormant accounts for clients. Mr. Moseley served as the chief financial officer and director (March 2007 to February 2013) for Utilicraft Aerospace Industries, Inc. (UITA), a developing aerospace company focusing on freight related aircraft. Mr. Moseley served (2001 to 2006) as executive vice president, chief financial officer and director of Urban Television Network Corp, a network created to serve independent broadcast television stations and cable operators. From 1999 to 2001, Mr. Moseley served as executive vice president and chief financial officer for Tensor Information Systems, Inc., a private Fort Worth company in the business of developing custom software applications. Mr. Moseley, a certified public accountant, earned a BBA degree from Southern Methodist University. He is a member of the Texas Society of CPAs.
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RICHARD HALDEN was appointed president and director of UMED Holdings, Inc. on August 18, 2009. Mr. Halden also currently serves as president of Capital Equity Partners, LLC, (2007 to present) a management services firm providing corporate financial and marketing services to public companies. Mr. Halden was co-founder of Channel 28, in 2004, a Dallas, Texas independent television station airing programming provided by Urban Television Network Corporation, which contracted with Mr. Halden from 2001 to
2006. Prior to the founding of Channel 28, Mr. Halden provided consulting services to American Independent Network Corporation, Hispanic Television Network, Inc. and American Tire from 1996 to 2001.
RAYMOND Wright Mr. Wright is a seasoned business executive who at an early age assumed responsibility for the entire European production facilities of a Fortune 50 company. Mr. Wright’s corporate and marketing experience spans several industries and continents. He has functioned as CEO for various corporations, restructuring companies for maximum efficiency and profitability; and developed global purchasing contracts to maximize corporate purchasing power. Mr. Wright owned a Dallas-based manufacturer of oil industry equipment and has owned and operated several financial corporations that structured creative financing through the creation of a worldwide network of private and corporate investors primarily in Europe and the Middle East. He also owned a USA based mining operation with product distribution into global markets. In 2008 Mr. Wright became part of the original planning and development team involved with the development of a natural gas to liquid fuel Project. In 2011, Mr. Wright formed Greenway Innovative Energy, Inc. with the inventor and designer of the GTL conversion unit in order to develop, design, manufacture, and commercialize a portable natural gas to liquid fuel machine.
CRAIG TAKACS has served as a Director of the Company since its incorporation in March 2002. Mr. Takacs served as president and chief executive officer of the Company’s predecessor, Dynalyst Manufacturing Corporation, from March 2002 until his resignation in August 2009. Prior to Dynalyst, Mr. Takacs worked for Institutional Capital Management, where he served as the firm’s technology analyst. Mr. Takacs received his BBA in Business Management in 1984 from Texas A&M University.
None of the directors and officers is related to any other director or officer of the Company.
Significant Employees
We have no employees who are not executive officers, but who are expected to make a significant contribution to our business. We intend in the future to hire independent horticulturalists, geologists, engineers and excavation subcontractors on an as needed basis.
Involvement in Certain Legal Proceedings
To the knowledge of the Company, there have been no events under any bankruptcy act, no criminal proceedings and no judgments, injunctions, orders or decrees as listed in Section 401(f) of Regulation S-K within the past ten years material to the evaluation of the ability and integrity of any director and executive officer of the Company.
Code of Ethics
We have a Code of Ethics that applies to our principal executive officers and our principal financial officers, principal accounting officer or controller, or persons performing similar functions. We undertake to provide to any person, without charge, upon request, a copy of our Code of Ethics. You may request a copy of our Code of Ethics by mailing your written request to us. Your written request must contain the phrase "Request for a Copy of the Code of Ethics of UMED Holdings, Inc." A copy of our Code of Ethics is also posted on our website, www.UMED.com. Our address is: UMED Holdings, Inc., 6628 Bryant Irvin Road, Suite 250, Fort Worth, Texas 76132.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT.
Section 16(a) of the Exchange Act requires our officers, directors and persons who beneficially own more than 10% of our common stock to file reports of ownership and changes in ownership with the SEC. These reporting persons also are required to furnish us with copies of all Section 16(a) forms they file. Based solely on the reports received by us, the transaction report of Company transactions supplied by our transfer agent and our shareholders list as of March 31, 2015, to the best of our knowledge all required directors, officers and greater than 9.99% percent shareholders complied with applicable filing requirements during the fiscal year ended December 31, 2014, except that:
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Ray Wright, a recent addition to the Company’s board of directors, is delinquent in filing his Report on Form 3, which will be filed as soon as possible.
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DIRECTOR INDEPENDENCE.
We currently have four members of our Board of Directors, who were elected and hold office until their successors are elected and qualified. Executive officers are appointed by the Board of Directors and serve until their successors have been duly elected and qualified. There is no family relationship between any of our directors and executive officers.
BOARD OF DIRECTORS MEETINGS.
During the fiscal year ended December 31, 2014, the Board of Directors held one meeting which was attended by all members.
NOMINATING COMMITTEE.
We do not have any nominating committee of the Board, or committee performing a similar function. Shareholders may recommend nominees for Director by sending written communications to the company’s Board of Directors to the attention of the Chairman of the Board, Randy Moseley at UMED Holdings, Inc., 6628 Bryant Irvin Road, Suite 250, Fort Worth, Texas 76132. Every director will participate in the consideration of director nominees.
AUDIT COMMITTEE.
We do not have an audit committee of the Board. Our Board of Directors serves as the audit committee.
Members of the Board of Directors acting in the capacity of the Audit Committee have (1) reviewed and discussed the audited financial statements with management; (2) discussed with the independent auditors the matters required to be discussed by the statement on Auditing Standards No. 61, as amended, as adopted by the Public Accounting Oversight Board in Rule 3200T; (3) have received the written disclosures and the letter from the independent accountant required by applicable requirements of the Public Company Accounting Oversight Board regarding the independent accountant’s communications with the audit committee concerning independence, and (4) have discussed with the independent accountant the independent accountant's independence; and based on the review and discussions referred to above, the audit committee recommended to the board of directors that the audited financial statements be included in the company’s annual report on Form 10-K for the last fiscal year for filing with the Commission. The entire Board of Directors acting in the capacity of the Audit Committee are Randy Moseley, Kevin Bentley, Richard Halden and Craig Takacs.
COMPENSATION COMMITTEE.
We do not have a compensation committee. Our Board of Directors serves as the compensation committee
SHAREHOLDER COMMUNICATIONS.
Shareholders may send written communications to the company’s Board of Directors to the attention of the Chairman of the Board, Randy Moseley. Persons wishing to write to the Board or to a specified director or committee of the Board should send correspondence to the Corporate Secretary at UMED Holdings, Inc., 6628 Bryant Irvin Road, Suite 250, Fort Worth, Texas 76132. Electronic submissions of shareholder correspondence will not be accepted.
The following table sets forth the aggregate compensation paid for services rendered to the Company during the last two fiscal years by the Named Executive Officers:
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The following summary compensation table sets forth information concerning the compensation paid during the fiscal years ended December 31, 2014, 2013 and 2012 to our principal executive officers and principal financial officers. No other officer or person received total annual compensation in excess of $100,000 since in our date of incorporation.
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Summary Compensation Table
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All Other
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Name and Position
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Year
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Salary($)
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Bonus($)
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Compensation ($)
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Total ($)
|
||||||||
|
Kevin Bentley, Chief Executive Officer
|
2014
|
165,000
|
(1)
|
-
|
165,000
|
||||||||
|
2013
|
0
|
(2)
|
-
|
0
|
|||||||||
|
2012
|
240,000
|
(3)
|
-
|
|
240,000
|
||||||||
|
Richard Halden, President
|
2014
|
165,000
|
(4)
|
-
|
165,000
|
||||||||
|
2013
|
0
|
(5)
|
-
|
0
|
|||||||||
|
2012
|
240,000
|
(6)
|
|
240,000
|
|||||||||
|
Randy Moseley, Chief Financial Officer
|
2014
|
165,000
|
(7)
|
-
|
165,000
|
||||||||
|
and Principal Financial Officer
|
2013
|
0
|
(8)
|
-
|
0
|
||||||||
|
2012
|
240,000
|
(9)
|
|
240,000
|
|||||||||
|
Executive agreed to accrue only $165,000 of his annual salary in 2014
|
||
|
(2)
|
Executive agreed to eliminate 50% of his total deferred compensation which made 2013 have 0 accrual.
|
|
|
(3)
|
This amount includes $240,000 accrued by the Company but unpaid.
|
|
|
(4)
|
Executive agreed to accrue only $165,000 of his annual salary in 2014.
|
|
|
(5)
|
Executive agreed to eliminate 50% of his total deferred compensation which made 2013 have 0 accrual.
|
|
|
(6)
|
This amount includes $240,000 accrued by the Company but unpaid.
|
|
|
(7)
|
Executive agreed to accrue only $165,000 of his annual salary in 2014.
|
|
|
(8)
|
Executive agreed to eliminate 50% of his total deferred compensation which made 2013 have 0 accrual.
|
|
|
(9)
|
This amount includes $240,000 accrued by the Company but unpaid.
|
|
Stock Options/SAR Grants
No grants of stock options or stock appreciation rights have been made since our inception.
Compensation of Directors
No cash compensation was paid to our directors for their services as directors since our inception. We have no standard arrangement pursuant to which our directors are to be compensated for their services in their capacity as directors except for the granting from time to time of incentive stock options. The board of directors may award special remuneration to any director undertaking any special services on behalf of our company other than services ordinarily required of a director. Other than indicated below, no director received and/or accrued any compensation for his services as a director, including committee participation and/or special assignments.
17
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
The following table sets forth as of information concerning the number of shares of common stock owned beneficially as of March 27, 2015 which was 78,253,734 shares, by: (i) each person (including any group) known by us to own more than five (5%) of any class of our voting securities, (ii) each of our directors and executive officers, and (iii) our officers and directors as a group. Unless otherwise indicated, the shareholders listed possess sole voting and investment power with respect to the shares shown.
|
|
||||||||
|
Name and Address
|
Amount and Nature
of Beneficial
Ownership(1)
|
Percent of
Class(2)
|
||||||
|
Randy Moseley (3)
|
26,574,224
|
15.4
|
%
|
|||||
|
Richard Halden (4)
|
28,396,947
|
16.56
|
%
|
|||||
|
Kevin Bentley (5)
|
13,125,000
|
7.61
|
%
|
|||||
|
Raymond Wright
|
7,000,000
|
4.1
|
%
|
|||||
|
Craig Takacs
|
3,157,563
|
1.83
|
%
|
|||||
|
All officers and directors
|
||||||||
|
as a group (5 persons)
|
78,253,734
|
45.36
|
%
|
|||||
|
(1)
|
Beneficial ownership is determined based on factors including voting and investment power with respect to shares.
|
|
(2)
|
Percentage of beneficial ownership is based on the 146,493,878 shares of common stock outstanding as of March 27, 2015 and the preferred shares outstanding at March 27, 2015 (738,894 at conversion rate of 15 shares of common for each preferred share) and 15,000,000 shares of preferred for a total of 172,577,288 shares used to determine percent of ownership.
|
|
|
(3)
|
Includes 5,999,000 shares of common held directly by Mr. Moseley, 2,797,000 shares of common held by Mr. Moseley’s spouse, 5,000,000 shares of preferred held directly by Mr. Moseley, 6,626,554 shares of common and 611,956 shares of convertible preferred held by Capital Equity Partners, LLC of which Mr. Moseley is a member, 5,000,000 shares of common held by Media Advertising LLC of which Mr. Moseley is a member, 3,500,000 shares of common held by Arkansas Partners of which Mr. Moseley is a partner, and 625,000 shares of common held by BioEnergy LLC of which Mr. Moseley is a member.
|
|
|
(4)
|
Includes 8,744,000 shares of common held directly by Mr. Halden, 2,500,000 shares of common held by Mr. Halden’s spouse, 5,000,000 shares of preferred held directly by Mr. Halden, 6,626,554 shares of common and 611,956 shares of convertible preferred held by Capital Equity Partners, LLC of which Mr. Halden is a member, 5,000,000 shares of common held by Media Advertising Partners LLC of which Mr. Halden is a member and 3,500,000 shares of common held by Arkansas Partners of which Mr. Halden is a partner.
|
|
|
(5)
|
Includes 8,125,000 shares of common stock and 5,000,000 shares of preferred stock.
|
|
Change in Control
There are no present arrangements known to the Company, including any pledge by any person of the Company’s securities, the operation of which may at a subsequent date result in a change in control of the Company.
During the years ended December 31, 2014 and 2013, the Company engaged in related party transactions as follows:
Shareholders made advances of $667,571 and $187,661 during the years ending December 31, 2014 and 2013, respectively. Shareholders converted advances of $729,029 and $171,435 to common stock during the years ended December 31, 2014 and 2013, respectively.
18
UMED Holdings, Inc. Independent Public Accountant’s Fees
The following table presents fees for professional services rendered by Terry Johnson CPA for the audit of the Company’s financial statements for the years ended December 31, 2014 and 2013:
|
2014
|
2013
|
|||||||
|
Audit Fees
|
$
|
34,000
|
$
|
17,500
|
||||
|
Audit Related Fees
|
$
|
0
|
$
|
0
|
||||
|
Tax Fees
|
$
|
0
|
$
|
0
|
||||
|
All Other Fees
|
$
|
0
|
$
|
0
|
||||
|
Total
|
$
|
1 7,500
|
$
|
2,500
|
||||
Audit Fees were for professional services for auditing and reviewing the Company’s financial statements, as well as for consents and assistance with and review of documents filed with the Securities and Exchange Commission.
Pre-Approval Policy for Services of UMED Holdings Independent Auditors
The Board of Directors reviews the Form 10-Q and Form 10-K filings before their filing. In addition, the Board of Directors reviews the audit plans and anticipated fees for audit and tax work prior to the commencement of that work. All fees paid to the independent auditors are pre-approved by the Board of Directors. These services may include audit services, audit-related services, tax services and other services.
There were no services performed by our independent registered public accounting firm of the type described in Item 9(e)(2) of Schedule 14A. Our board of directors acting in the capacity of the Audit Committee considers that the work done for us by Terry Johnson is compatible with maintaining Terry Johnson’s independence.
19
(b) Exhibits.
|
Exhibit No.
|
Name of Exhibit
|
|
3.1**
|
Articles of Incorporation filed March 13, 2002
|
|
3.2**
|
Amended Articles of Incorporation filed June 7, 2006
|
|
3.3**
|
Amended Articles of Incorporation filed August 18, 2009
|
|
3.4**
|
Amended Articles of Incorporation filed March 23, 2011
|
|
3.5**
|
Bylaws
|
|
10.1*
|
Code of Ethics
|
|
10.2*
|
Agreement and Plan of Merger by end between Dynalyst Manufacturing Corporation and Universal Media Corporation dated August 18, 2009
|
|
10.3*
|
Purchase Agreement between UMED and Mamaki Tea & Extract, Inc. dated May 1, 2012
|
|
10.4*
|
Addendum and Modification to Purchase Agreement between UMED and Mamaki Tea & Extract, Inc. dated December 31, 2012
|
|
10.5*
|
Second Addendum and Modification to Purchase Agreement between UMED and Mamaki Tea & Extract, Inc. dated December 31, 2012
|
|
10.6*
|
Purchase Agreement between UMED and Greenway Innovative Energy, Inc. dated August 29, 2012
|
|
10.7*
|
Purchase Agreement between UMED and Rig Support Services, Inc. dated February 23, 2012
|
|
10.8*
|
Asset Agreement between UMED and JetTech LLC dated October 2, 2011
|
|
10.9*
|
Employment agreement with Kevin Bentley dated May 27, 2011
|
|
10.10*
|
Employment agreement with Randy Moseley dated May 27, 2011
|
|
10.11*
|
Employment agreement with Richard Halden dated May 27, 2011
|
|
10.12*
|
Employment agreement with Raymond Wright dated August 29, 2012
|
|
10.13*
|
Employment with Conrad Greer dated August 29, 2012
|
|
10.14*
|
Consulting agreement with Jabez Capital Group LLC dated May 27, 2011
|
|
10.15**
|
Mamaki of Hawaii, Inc. Promissory Note with Southwest Capital Funding Ltd dated August 17, 2012
|
|
10.16*
|
Modification of Note and Lien between Mamaki of Hawaii, Inc. and Southwest Capital Funding Ltd dated October1, 2012
|
|
10.17*
|
Second Modification of Note and Lien between Mamaki of Hawaii, Inc. and Southwest Capital Funding Ltd dated December 20, 2012
|
|
10.18*
|
Mamaki of Hawaii, Inc. Promissory Note to Robert R. Romer dated August 17, 2012
|
|
10.19**
|
Rig Support Services, Inc. Addendum & Modification to Purchase Agreement
|
|
21***
|
List of Subsidiaries
|
|
31.1***
|
Certification pursuant to Section 13a-14 of CEO
|
|
31.2***
|
Certification pursuant to Section 13a-14 of CFO
|
|
32.1***
|
Certification pursuant to Section 1350 of CEO
|
|
32.2***
|
Certification pursuant to Section 1350 of CFO
|
* Filed in Form 10 filed on August 28, 2013.
** Filed in Form 10 filed on November 12, 2013
*** Filed herewith
20
20
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized in Houston, Texas.
|
UMED HOLDINGS, INC.
|
||
|
March 31, 2015
|
By:
|
/s/ Kevin Bentley
|
|
Kevin Bentley
|
||
|
Director, Chief Executive Officer
|
||
In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
|
March 31, 2015
|
By:
|
/s/ Kevin Bentley
|
|
Kevin Bentley
|
||
|
Director, Chief Executive Officer
|
||
|
March 31, 2015
|
By:
|
/s/ Randy Moseley
|
|
Randy Moseley
|
||
|
Director, Chief Financial Officer and Principal Accounting Officer
|
|
March 31, 2015
|
By:
|
/s/ Richard Halden
|
|
Richard Halden
|
||
|
Director, President
|
|
March 31, 2015
|
By:
|
/s/ Craig Takacs
|
|
Craig Takacs
|
||
|
Director
|
|
March 31, 2015
|
By:
|
/s/ Ray Wright
|
|
Ray Wright
|
||
|
Director
|
21
Financial Statements
Years Ended December 31, 2014 and 2013
Contents
|
Financial Statements:
|
|
|
|
Reports of Independent Registered Public Accounting Firm
|
F- 1
|
|
|
Balance Sheets
|
|
F- 2
|
|
Statements of Operations
|
|
F- 3
|
|
Statements of Stockholders’ Deficit
|
|
F- 4
|
|
Statements of Cash Flows
|
|
F- 5
|
|
Notes to Financial Statements
|
|
F- 6
|
22
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To The Board of Directors and shareholders of
UMED Holdings, Inc.
Fort Worth, Texas
I have audited the accompanying consolidated balance sheets of UMED Holdings, Inc. (the “Company”) as of December 31, 2014 and 2013 and the related statements of operations, stockholders’ deficit and cash flows for the years ended December 31, 2014 and 2013, and the related notes to the financial statements.
Management’s Responsibility for Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United State of America; this includes the design, implementation and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.
Auditor’s Responsibility
My responsibility is to express an opinion on these consolidated financial statements based on my audits. I conducted my audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that I 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 was I engaged to perform, an audit of its internal control over financial reporting. My 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, I express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation. I believe that my audits provide a reasonable basis for my opinion.
Opinion
In my opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of the Company as of December 31, 2014 and 2013 and the consolidated results of its operations and its cash flows for the years ended December 31, 2014 and 2013, in conformity with accounting principles generally accepted in the United States of America.
Emphasis of Matter
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As described in Note 3 of the accompanying consolidated financial statements, the Company has minimal revenues, has incurred losses since inception, and has a negative working capital balance at December 31, 2014, which raises substantial doubt about its ability to continue as a going concern. Management’s plans in regard to this matter are described in Note 3. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ Terry L. Johnson, CPA
Casselberry, Florida
March 27, 2015
F - 1
|
UMED HOLDINGS, INC
|
||||||||
|
Consolidated Balance Sheets
|
||||||||
|
December 31, 2014 and 2013
|
||||||||
|
2014
|
2013
|
|||||||
|
Assets
|
||||||||
|
Current assets
|
||||||||
|
Cash
|
$
|
82,656
|
$
|
1,442
|
||||
|
Accounts receivable
|
780
|
1,680
|
||||||
|
Prepaid expense
|
32,700
|
53,849
|
||||||
|
Total current assets
|
116,136
|
56,971
|
||||||
|
Property, plant and equipment
|
||||||||
|
Land
|
150,000
|
150,000
|
||||||
|
Buildings
|
871,842
|
871,842
|
||||||
|
Property and equipment
|
1,084,755
|
1,084,755
|
||||||
|
2,106,597
|
2,106,597
|
|||||||
|
Less accumulated depreciation
|
312,946
|
193,596
|
||||||
|
1,793,651
|
1,913,001
|
|||||||
|
Other assets
|
||||||||
|
Mine properties
|
100,000
|
100,000
|
||||||
|
Investments
|
90,000
|
90,000
|
||||||
|
Debt issue costs
|
55,427
|
0
|
||||||
|
Total other assets
|
245,427
|
190,000
|
||||||
|
Total assets
|
$
|
2,155,214
|
$
|
2,159,972
|
||||
|
Liabilities and stockholders' deficit
|
||||||||
|
Current liabilities
|
||||||||
|
Accounts payable
|
$
|
70,568
|
$
|
79,855
|
||||
|
Advances from stockholders
|
181,272
|
126,403
|
||||||
|
Accrued management fees
|
1,822,677
|
1,328,826
|
||||||
|
Accrued expenses
|
733,316
|
470,984
|
||||||
|
Convertible note payable, net
|
136,801
|
0
|
||||||
|
Current portion of long term debt
|
451,865
|
506,579
|
||||||
|
Total current liabilities
|
3,396,499
|
2,512,647
|
||||||
|
Long term debt
|
1,245,211
|
1,365,604
|
||||||
|
Less current portion
|
451,865
|
506,579
|
||||||
|
793,346
|
859,025
|
|||||||
|
Total liabilities
|
4,189,845
|
3,371,672
|
||||||
|
Stockholders' deficit
|
||||||||
|
Preferred stock, par value $0.0001; 20,000,000 shares authorized, 15,738,894 and
|
||||||||
|
15,798,894 issued and outstanding at December 31, 2014 and 2013, respectively
|
1,574
|
1,580
|
||||||
|
Common stock, par value $0.0001; 300,000,000 shares authorized 145,559,835
|
||||||||
|
and 128,911,568 issued and outstanding at December 31, 2014 and 2013, respectively
|
14,557
|
12,892
|
||||||
|
Additional paid-in-capital
|
4,679,538
|
2,818,782
|
||||||
|
Accumulated deficit
|
(6,730,300
|
)
|
(4,044,954
|
)
|
||||
|
Total stockholders' deficit
|
(2,034,631
|
)
|
(1,211,700
|
)
|
||||
|
Total liabilities and stockholders' deficit
|
$
|
2,155,214
|
$
|
2,159,972
|
||||
|
The accompanying notes are an integral part of these financial statements.
|
||||||||
F - 2
|
UMED HOLDINGS, INC.
|
||||||||
|
Consolidated Statements of Operations
|
||||||||
|
For the years ended December 31, 2014 and 2013
|
||||||||
|
2014
|
2013
|
|||||||
|
Sales
|
$
|
24,581
|
$
|
15,479
|
||||
|
Cost of sales
|
54,696
|
96,422
|
||||||
|
Gross Profit
|
(30,115
|
)
|
(80,943)
|
|||||
|
Expenses
|
||||||||
|
General and administrative
|
2,092,746
|
618,075
|
||||||
|
Research and development
|
218,000
|
|||||||
|
Depreciation
|
119,350
|
118,457
|
||||||
|
2,430,096
|
736,532
|
|||||||
|
Operating loss
|
(2,460,211
|
)
|
(817,475
|
)
|
||||
|
Other income (expense)
|
||||||||
|
Interest expense
|
(225,135
|
)
|
(87,281)
|
|||||
|
Loss on sale of assets
|
0
|
(70,300)
|
||||||
|
Total other income (expense)
|
(225,135
|
)
|
(157,581)
|
|||||
|
Net loss before income taxes
|
(2,685,346
|
)
|
(975,056
|
)
|
||||
|
Provision for income taxes
|
-
|
-
|
||||||
|
Net loss
|
$
|
(2,685,346)
|
$
|
(975,056)
|
||||
|
Loss per share-basic and diluted
|
$
|
(0.01
|
)
|
$
|
(0.01
|
)
|
||
|
Weighted average number of shares
|
138,442,759
|
127,324,190
|
||||||
The accompanying notes are an integral part of these financial statements.
F - 3
/
|
UMED HOLDINGS, INC.
|
||||||||||||||||||||||||||||
|
Consolidated Statements of Stockholders' Deficit
|
||||||||||||||||||||||||||||
|
Preferred Stock
|
Common Stock
|
|||||||||||||||||||||||||||
|
Par Value
|
Par Value
|
Additional
|
Total
|
|||||||||||||||||||||||||
|
Number of
|
0.0001
|
Number of
|
0.0001
|
Paid-In-
|
Accumulated
|
Stockholders'
|
||||||||||||||||||||||
|
Shares
|
Amount
|
Shares
|
Amount
|
Capital
|
Deficit
|
Deficit
|
||||||||||||||||||||||
|
Balance December 31, 2012
|
15,738,894
|
$
|
1,574
|
125,269,141
|
$
|
12,526
|
$
|
2,454,721
|
$
|
(3,069,898
|
)
|
$
|
(601,077
|
)
|
||||||||||||||
|
Sales of common stock
|
250,000
|
25
|
104,969
|
104,994
|
||||||||||||||||||||||||
|
Sale of preferred
|
||||||||||||||||||||||||||||
|
Stock
|
60,000
|
6
|
6
|
|||||||||||||||||||||||||
|
Warrants issued to
|
||||||||||||||||||||||||||||
|
Shareholder
|
500
|
500
|
||||||||||||||||||||||||||
|
Advances from stockholders'
|
||||||||||||||||||||||||||||
|
converted to common stock
|
877,777
|
88
|
91,912
|
92,000
|
||||||||||||||||||||||||
|
Shares issued for services
|
1,764,650
|
178
|
129,255
|
129,433
|
||||||||||||||||||||||||
|
Investment in Rig Support
|
750,000
|
75
|
37,425
|
37,500
|
||||||||||||||||||||||||
|
Net loss
|
(975,056
|
)
|
(975,056
|
)
|
||||||||||||||||||||||||
|
Balance December 31, 2013
|
15,798,894
|
1,580
|
128,911,568
|
12,892
|
2,818,782
|
(4,044,954
|
)
|
(1,211,700
|
)
|
|||||||||||||||||||
|
Sale of common stock
|
2,310,118
|
231
|
336,269
|
336.500
|
||||||||||||||||||||||||
|
Conversion of preferred stock
|
(60,000)
|
(6)
|
600,000
|
60
|
(54)
|
-
|
||||||||||||||||||||||
|
Advances from stockholders'
|
||||||||||||||||||||||||||||
|
converted to common stock
|
6,703,915
|
670
|
673,490
|
674,160
|
||||||||||||||||||||||||
|
Shares issued for services
|
7,034,234
|
704
|
738,138
|
738,841
|
||||||||||||||||||||||||
|
Warrant value for Convertible Note
|
89,568
|
89,568
|
||||||||||||||||||||||||||
|
Beneficial interest Convertible Note
|
23,346
|
23,346
|
||||||||||||||||||||||||||
|
Net loss
|
(2,685,346
|
)
|
(2,685,346
|
)
|
||||||||||||||||||||||||
|
Balance December 31, 2014
|
15,738,894
|
$
|
1,574
|
145,559,835
|
$
|
14,557
|
$
|
4,679,539
|
$
|
(6,730,300
|
)
|
$
|
(2,034,631
|
)
|
||||||||||||||
The accompanying notes are an integral part of these financial statements.
F - 4
|
UMED HOLDINGS, INC.
|
||||||||
|
Consolidated Statements of Cash Flows
|
||||||||
|
For the years ended December 31, 2014 and 2013
|
||||||||
|
2014
|
2013
|
|||||||
|
Cash Flows from Operating Activities
|
||||||||
|
Net loss
|
$
|
(2,685,346
|
)
|
$
|
(975,056
|
)
|
||
|
Adjustments to reconcile net loss to net cash used in
|
||||||||
|
operating activities
|
||||||||
|
Depreciation
|
119,350
|
118,457
|
||||||
|
Warrants issued
|
89,568
|
500
|
||||||
|
Stock issued for services
|
738,842
|
129,433
|
||||||
|
Changes in operating assets and liabilities:
|
||||||||
|
Accounts receivable
|
900
|
(1,680)
|
||||||
|
Prepaid expenses
|
21,149
|
22,349
|
||||||
|
Accounts payable
|
(9,287
|
)
|
78,464
|
|||||
|
Accrued management fees
|
493,851
|
(302,829)
|
||||||
|
Accrued expenses
|
262,332
|
257,936
|
||||||
|
Net cash provided by (used in) operating activities
|
(968,641
|
)
|
(672,426
|
)
|
||||
|
Cash Flows from Investing Activities
|
||||||||
|
Purchase of property and equipment
|
0
|
(59,204
|
)
|
|||||
|
Investment in Rig Support
|
0
|
16,000
|
||||||
|
Net cash used in investing activities
|
0
|
(43,204
|
)
|
|||||
|
Cash Flows from Financing Activities
|
||||||||
|
Advances from shareholders converted to common stock
|
729,029
|
171,435
|
||||||
|
Increase (decrease) in notes payable
|
(120,393
|
)
|
245,194
|
|||||
|
Debt issue costs
|
(32,082
|
)
|
0
|
|||||
|
Proceeds from convertible note payable, net
|
136,801
|
0
|
||||||
|
Sale of common stock
|
336,500
|
105,000
|
||||||
|
Net cash provided by financing activities
|
1,049,855
|
521,629
|
||||||
|
Net increase in cash
|
81,214
|
(194,001
|
)
|
|||||
|
Cash beginning of period
|
1,442
|
194,443
|
||||||
|
Cash end of period
|
$
|
82,656
|
$
|
1,442
|
||||
|
Supplemental Disclosures of Cash Flow Information
|
||||||||
|
Cash paid during the period for interest
|
$
|
81,715
|
$
|
70,055
|
||||
|
Common stock issued for Rig Support Services, Inc.
|
$
|
0
|
$
|
37,500
|
||||
The accompanying notes are an integral part of these financial statements.
F - 5
UMED COMPANY HOLDINGS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2014
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations
UMED Holdings, Inc. (“UMED” or the “Company”) was organized on March 13, 2002 under the laws of the State of Texas as Dynalyst Manufacturing Corporation. On August 18, 2009, in connection with a merger with Universal Media Corporation, a privately held Nevada company, the Company changed its name to “Universal Media Corporation (“Universal Media”). The company changed its name to UMED Holdings, Inc. on March 23, 2011. See discussion in Note 2 Merger and Recapitalization.
UMED’s mission is to operate as a holding company through the acquisition of businesses as wholly-owned subsidiaries that meet some key requirements: (1) solid management that will not have to be replaced in the near future, (2) the ability to grow with steady growth to follow, and (3) an emphasis on emerging core industry markets, such as energy, metals and agriculture. It is the Company’s intention to add experienced personnel and select strategic partners to manage and operate the acquired business units.
In September 2010, UMED has acquired 1,440 acres of placer mining claims on Bureau of Land Management land in Mohave County, Arizona. See discussion in Note 1.
In October 2011, UMED has acquired a 49% interest in Jet Regulators, LP, an aircraft maintenance company located at Meacham Field in Fort Worth, Texas. See discussion in Note 6.
In May 2012, the Company acquired 80% of Mamaki Tea & Extract of Hawaii, Inc., which owns and operates Wood Valley Plantation a 25 acre Mamaki Tea plantation located in the Kau district of the Big Island and lies at the foot of Mauna Loa, the Earth’s largest volcano. On December 31, 2012, we acquired the remaining 20%. See discussion in Note 4.
In August 2012, the Company acquired 100% of Greenway Innovative Energy, Inc., which owns proprietary technology that is capable of converting natural gas to diesel/jet fuels. See discussion in Note 4.
In August 2012, the Company acquired 50% of Rig Support Group, Inc., (nka Logistix Technology Systems, Inc.) which has implemented a unique and valuable technology and asset management Tool for the Oil and Gas Industry for 100,000 shares of restricted common stock. In February 2013, we acquired the remaining 50% for 500,000 shares of restricted common stock.
See discussion in Note 4.
The Company’s year-end is December 31.
A summary of significant accounting policies applied in the presentation of consolidated financial statements are as follows:
Property & Equipment
Property and equipment is recorded at cost. Major additions and improvements are capitalized. The cost and related accumulated depreciation of equipment retired or sold are removed from the accounts and any differences between the undepreciated amount and the proceeds from the sale are recorded as a gain or loss on sale of equipment. Depreciation is computed using the straight-line method over the estimated useful life of the assets as follows.
|
Buildings
|
20 years
|
|
Mamaki bushes
|
15 years
|
|
Equipment
|
5 to 7 years
|
F - 6
Impairment of Long-Lived Assets
We assess the impairment of long-lived assets whenever events or changes in circumstances indicate that the carrying amount may not be recoverable, in accordance with ASC Topic 360, Property, Plant and Equipment. An asset or asset group is considered impaired if its carrying amount exceeds the undiscounted future net cash flow the asset or asset group is expected to generate. If an asset or asset group is considered impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds its fair value. If estimated fair value is less than the book value, the asset is written down to the estimated fair value and an impairment loss is recognized.
Revenue Recognition
The Company will recognize revenue in accordance with Accounting Standards Codification subtopic 605-10, Revenue Recognition (“ASC 605-10”), which requires that four basic criteria must be met before revenue can be recognized: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred; (3) the selling price is fixed and determinable; and (4) collectability is reasonably assured. Determination of criteria (3) and (4) are based on management's judgments regarding the fixed nature of the selling prices of the products delivered and the collectability of those amounts. Provisions for discounts and rebates to customers, estimated returns and allowances, and other adjustments are provided for in the same period the related sales are recorded.
ASC 605-10 incorporates Accounting Standards Codification subtopic 605-25, Multiple-Element Arraignments (“ASC 605-25”). ASC 605-25 addresses accounting for arrangements that may involve the delivery or performance of multiple products, services and/or rights to use assets. The effect of implementing 605-25 on the Company's financial position and results of operations was not significant.
Use of Estimates
The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States 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 amount of revenue and expenses during the reported period. Actual results could differ materially from the estimates.
Cash and Cash Equivalent
The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. At December 31, 2014 cash consists of a checking account and money market account held by financial institutions.
Segment Information
ASC 280, Segment Reporting requires use of the management approach model for segment reporting. The management approach model is based on the way a company’s management organizes segments within the company for making operating decisions and assessing performance. The Company determined that is has one operating segment Mamaki of Hawaii in addition to its corporate activities as of December 31, 2014 and 2013, respectively.
Mine Exploration and Development Costs
The Company accounts for mine exploration costs in accordance with Accounting Standards Codification 932, Extractive Activities. All exploration expenditures are expensed as incurred. Mine development costs are capitalized until production, other than production incidental to the mine development process, commences and are amortized on a units of production method based on the estimated proven and probable reserves. Mine development costs represent costs incurred in establishing access to mineral reserves and include costs associated with sinking or driving shafts and underground drifts, permanent excavations, roads and tunnels. The end of the development phase and the beginning of the production phase takes place when construction of the mine for economic extraction is substantially complete. Coal extracted during the development phase is incidental to the mine’s production capacity and is not considered to shift the mine into the production phase. Amortization of capitalized mine development is computed based on the estimated life of the mine and commences when production, other than production incidental to the mine development process, begins. Through December 31, 2014, the Company had not incurred any mine development costs.
F - 7
Mine Properties
The Company accounts for mine properties in accordance with Accounting Standard Codification 930, Extractive Activities-Mining. Costs of acquiring mine properties are capitalized by project area upon purchase of the associated claims. Mine properties are periodically assessed for impairment of value and any diminution in value. The Company had 1,440 acres of placer mining claims as of December 31, 2014 and 2013, respectively, which were acquired in exchange for 5,066,000 shares of common stock valued at a nominal amount of $100,000.
Income Taxes
The Company accounts for income taxes in accordance with accounting guidance now codified as FASB ASC 740, Income Taxes, which requires that the Company recognize deferred tax liabilities and assets based on the differences between the financial statement carrying amounts and the tax bases of assets and liabilities, using enacted tax rates in effect in the years the differences are expected to reverse. Deferred income tax benefit (expense) results from the change in net deferred tax assets or deferred tax liabilities. A valuation allowance is recorded when it is more likely than not that some or all deferred tax assets will not be realized.
The Company has adopted the provisions of FASB ASC 740-10-05 Accounting for Uncertainty in Income Taxes. The ASC clarifies the accounting for uncertainty in income taxes recognized in an enterprise's financial statements. The ASC prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The ASC provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure and transition.
Net Loss Per Share, Basic and Diluted
The Company has adopted Accounting Standards Codification Subtopic 260-10, Earnings Per Share (“ASC 260-10) specifying the computation, presentation and disclosure requirements of earning per share information. Basic loss per share has been computed by dividing net loss available to common shareholders by the weighted average number of common shares outstanding for the period. Shares issuable upon conversion of the notes payable and exercise of warrants has been excluded as a common stock equivalent in the diluted loss per share because their effect is anti-dilutive on the computation.
Derivative Instruments
The Company accounts for derivative instruments in accordance with Accounting Standards Codification 815, Derivatives and Hedging (“ASC 815”), which establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities. They require that an entity recognize all derivatives as either assets or liabilities in the balance sheet and measure those instruments at fair value.
If certain conditions are met, a derivative may be specifically designated as a hedge, the objective of which is to match the timing of gain or loss recognition on the hedging derivative with the recognition of (i) the changes in the fair value of the hedged asset or liability that are attributable to the hedged risk or (ii) the earnings effect of the hedged forecasted transaction. For a derivative not designated as a hedging instrument, the gain or loss is recognized in income in the period of change.
The Company has not engaged in any derivative transactions or hedging activities during the years ended December 31, 2014 and 2013.
Original Issue Discount
For certain convertible debt issued, the Company provides the debt holder with an original issue discount (“OID”). An OID is the difference between the original cash proceeds and the amount of the note upon maturity. The Note is originally recorded for the proceeds received. The OID is expensed into interest expense pro-rata over the term of the Note, and upon maturity, the Note shall equal the proceeds due.
Fair Value of Financial Instruments
The Company's financial instruments, as defined by Accounting Standard Codification subtopic 825-10, Financial Instrument (“ASC 825-10), include cash, accounts payable and convertible note payable. All instruments are accounted for on a historical cost basis, which, due to the short maturity of these financial instruments, approximates fair value at December 31, 2014.
F - 8
FASB ASC 820 defines fair value, establishes a framework for measuring fair value in accordance with generally accepted accounting principles, and expands disclosures about fair value measurements. ASC 820 establishes a three-tier fair value hierarchy which prioritizes the inputs used in measuring fair value as follows:
Level 1: Observable inputs such as quoted prices in active markets;
Level 2: Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and
Level 3: Unobservable inputs in which there is little or no market data, which requires the reporting entity to develop its own assumptions
The Company does not have any assets or liabilities measured at fair value on a recurring basis at December 31, 2014. The Company did not have any fair value adjustments for assets and liabilities measured at fair value on a nonrecurring basis during the period ended December 31, 2014.
Stock Based Compensation
The Company follows Accounting Standards Codification subtopic 718-10, Compensation (“ASC 718-10”) which requires that all share-based payments to both employees and non-employees be recognized in the income statement based on their fair values.
As of December 31, 2014, the Company did not have any issued or outstanding stock options.
Concentration and Credit Risk
Financial instruments and related items, which potentially subject the Company to concentrations of credit risk, consist primarily of cash, cash equivalents and trade receivables. The Company places its cash and temporary cash investments with high credit quality institutions. At times, such investments may be in excess of the FDIC insurance limit.
Research and Development
The Company accounts for research and development costs in accordance with Accounting Standards Codification subtopic 730-10, Research and Development (“ASC 730-10”). Under ASC 730-10, all research and development costs must be charged to expense as incurred. Accordingly, internal research and development costs are expensed as incurred. Third-party research and development costs are expensed when the contracted work has been performed or as milestone results have been achieved as defined under the applicable agreement. Company-sponsored research and development costs related to both present and future products are expensed in the period incurred. The Company incurred $218,000 in research and development expenses during the year ended December 31, 2104 and $390,975 from March 13, 2002 (date of inception) through December 31, 2014.
Accounting for Business Combinations
We use the acquisition method of accounting under the authoritative guidance on business combinations. Each acquired company’s operating results are included in our consolidated financial statements starting on the date of acquisition. The purchase price is equivalent to the fair value of consideration transferred. Tangible and identifiable intangible assets acquired and liabilities assumed as of the date of acquisition are recorded at fair value as of the acquisition date. Goodwill is recognized for the excess of purchase price over the net fair value of assets acquired and liabilities assumed. Contingent consideration, which is primarily based on the business achieving certain performance targets, is recognized at its fair value on the acquisition date, and changes in fair value are recognized in earnings until settled. No such changes have been recognized for the years ended December 31, 2014 and 2013. The fair value of the contingent consideration is based on our estimations of future performance of the business and is determined based on level two observable inputs.
Issuance of common stock
The issuance of common stock for other than cash is recorded by the Company at management's estimate of the fair value of the assets acquired or services rendered.
Impact of New Accounting Standards
The Company has adopted the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 105-10, Generally Accepted Accounting Principles – Overall (“ASC 105-10”), which was formerly known as SFAS 168. ASC 105-10 establishes the FASB Accounting Standards Codification (the “Codification”) as the source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities in the preparation of financial statements in conformity with U.S. GAAP. Rules and interpretive releases of the Securities and Exchange Commission (the "SEC") under authority of federal securities laws are also sources of authoritative U.S. GAAP for SEC registrants. All guidance contained in the Codification carries an equal level of authority. The Codification superseded all existing non-SEC accounting and reporting standards and all other non-grandfathered, non-SEC accounting literature not included in the Positions or Emerging Issues Task Force Abstracts. Instead, it will issue Accounting Standards Updates (“ASUs”). The FASB will not consider ASUs as authoritative in their own right. ASUs will serve only to update the Codification, provide background information about the guidance and provide the basis of conclusions on the change(s) in the Codification. References made to FASB guidance throughout this document have been updated for the Codification.
F - 9
The Company has reviewed all other 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 material effect on its consolidated financial statements.
NOTE 2 - BASIS OF PRESENTATION
Principles of Consolidation
The accompanying consolidated financial statements include the financial statements of UMED and its subsidiary (refer below table) are prepared to conform to accounting principles generally accepted in the United States of America. All significant inter-company accounts and transactions were eliminated in consolidation.
Basis of Presentation
The accompanying consolidated financial statements include the accounts of the following entities, all of which the Company maintains control through a majority ownership:
|
Form of
|
State of
|
||||
|
Name of Entity
|
%
|
Entity
|
Incorporation
|
Relationship
|
|
|
UMED Holdings, Inc.
|
0
|
Corporation
|
Texas
|
Parent
|
|
|
Mamaki Tea & Extract, Inc.
|
100
|
%
|
Corporation
|
Nevada
|
Subsidiary
|
|
Universal Media Corporation
|
100
|
%
|
Corporation
|
Wyoming
|
Subsidiary
|
|
Greenway Innovative Energy, Inc.
|
100
|
%
|
Corporation
|
Nevada
|
Subsidiary
|
|
Logostix Technology Systems, Inc.
|
100
|
%
|
Corporation
|
Texas
|
Subsidiary
|
NOTE 3 - GOING CONCERN UNCERTAINTIES
Going Concern Uncertainties
The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates realization of assets and the satisfaction of liabilities in the normal course of business. As shown in the accompanying consolidated financial statement, the Company has incurred a deficit of $6,760,300 as of December 31, 2014. The ability of the Company to continue as a going concern is in doubt and dependent upon achieving a profitable level of operations or on the ability of the Company to obtain necessary financing to fund ongoing operations. Management believes that its current and future plans enable it to continue as a going concern for the next twelve months.
To meet these objectives, the Company continues to seek other sources of financing in order to support existing operations and expand the range and scope of its business. However, there are no assurances that any such financing can be obtained on acceptable terms and timely manner, if at all. The failure to obtain the necessary working capital would have a material adverse effect on the business prospects and, depending upon the shortfall, the Company may have to curtail or cease its operations.
The accompanying consolidated financial statements do not include any adjustment to the recorded assets or liabilities that might be necessary should the Company have to curtail operations or be unable to continue in existence.
NOTE 4 – ACQUISITIONS
2013 Acquisitions
In August 2012, the Company acquired 50% of Rig Support Group, Inc., (nka Logistix Technology Systems, Inc.) which has implemented a unique and valuable technology and asset management Tool for the Oil and Gas Industry for 100,000 shares of restricted common stock. In February 2013, we acquired the remaining 50% for 500,000 shares of restricted common stock. This tool will not only provide independent rig owners and operating companies the ability to more accurately view and report on drilling operations, it will also allow for a more streamlined approach to processing purchase orders, receiving parts, saving dollars And ensuring increased efficiency by significantly decreasing rig down-time due to mechanical break-downs. The purchase price of $47,500 was allocated to software assets. As additional consideration to the Logistix Technology Systems officer and sole shareholder, we have agreed to issue shares of restricted common stock based on certain revenue milestones, however the officer resigned from the company and such milestone earn-outs were terminated.
F - 10
NOTE 5 – PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment, their estimated useful lives, and related accumulate depreciation at December 31, 2014 and 2013, respectively, are summarized as follows:
|
Range of
|
||||||||||||
|
Lives in
|
December 31,
|
|||||||||||
|
Years
|
2014
|
2013
|
||||||||||
|
Land
|
150,000
|
150,000
|
||||||||||
|
Buildings
|
20
|
$
|
871,842
|
$
|
871,842
|
|||||||
|
Mamaki Tea Bushes
|
20
|
750,000
|
750,000
|
|||||||||
|
Equipment
|
5
|
241,665
|
241,665
|
|||||||||
|
Vehicles
|
5
|
15,000
|
15,000
|
|||||||||
|
Logistic software
|
5
|
73,500
|
73,500
|
|||||||||
|
Furniture and fixtures
|
5
|
4,590
|
4,590
|
|||||||||
|
2,106,597
|
2,106,597
|
|||||||||||
|
Less accumulate depreciation
|
(312,946
|
)
|
(193,596
|
)
|
||||||||
|
$
|
1,793,651
|
1,913,001
|
||||||||||
|
Depreciation expense
|
$
|
119,350
|
$
|
118,457
|
||||||||
NOTE 6 – INVESTMENTS
Investments consisted of the following at December 31, 2014 and 2013;
|
December 31,
|
December 31, | |||||||
|
2014
|
2013 | |||||||
|
Jet Tech LLC
In October 2011, the Company acquired a 49% interest in JetTech LLC which is
an aerospace maintenance operation located at Meacham Airport in Fort Worth,
Texas for 600,000 shares of the Company’s restricted common stock. The shares
were valued at $.15 per share.
|
$ | 90,000 | $ | 90,000 | ||||
|
TOTAL INVESTMENTS
|
$ | 90,000 | $ | 90,000 | ||||
F - 11
NOTE 7 – TERM NOTES PAYABLE
Term notes payable consisted of the following at December 31, 2014 and 2013:
|
December 31,
|
December 31,
|
|||||||
|
2014
|
2013
|
|||||||
|
Secured note payable dated August 17, 2013 (Southwest Capital
|
||||||||
|
Funding, Ltd.), at 7.7% interest, payable on 15 year amortization schedule
|
||||||||
|
with balance due August 16, 2017
|
$
|
773,591
|
$
|
808,950
|
||||
|
Secured note payable dated August 17, 2013 (Bob Romer), at 9.0% interest,
|
||||||||
|
payable on 15 year amortization schedule with balance due on
|
||||||||
|
August 16, 2015
|
141,665
|
143,650
|
||||||
|
Unsecured note payable dated August 17, 2013 (Bob Romer), monthly
|
||||||||
|
installments of $1,500, including interest at 9.0%, through 2017
|
94,443
|
95,767
|
||||||
|
Secured note payable (John Deere), monthly installments of $4,632,
|
||||||||
|
including interest at 4.9% through December 2016
|
9,312
|
12,658
|
||||||
|
Secured note payable (Individual), due January 16, 2014 including
|
||||||||
|
interest at 15.0%
|
25,000
|
25,000
|
||||||
|
Secured note payable (Individual), due September 12, 2014, including
|
||||||||
|
interest at 10.0%
|
25,000
|
25,000
|
||||||
|
Secured note payable (Individual), due March 25, 2014, including
|
||||||||
|
interest at 10.0%
|
20,000
|
20,000
|
||||||
|
Secured note payable (Individual), due March 28, 2014, including
|
||||||||
|
interest at 10.0%
|
0
|
25,000
|
||||||
|
Unsecured note payable (Individual), due July 28, 2013, including
|
||||||||
|
interest at 10.0%
|
0
|
30,000
|
||||||
|
Unsecured note payable (Individual), due July 28, 2014, including
|
||||||||
|
interest at 1.25%
|
6,200
|
29,579
|
||||||
|
Secured note payable (Individual), due July 18, 2014, including
|
||||||||
|
Interest at 12% plus 1% of Mamaki of Hawaii revenues beginning in the
|
||||||||
|
thirteenth month from date of the note until noteholder receives a 50%
|
||||||||
|
total return including interest income
|
150,000
|
150,000
|
||||||
|
Total
|
1,245,211
|
1,365,604
|
||||||
|
Less current portion
|
793,346
|
506,579
|
||||||
|
Term notes payable-long-term portion
|
$
|
451,865
|
$
|
859,025
|
||||
Accrued interest payable on the term notes payable was $40,404 and $22,141 at December 31, 2014 and 2013, respectively.
NOTE 8 – CONVERTIBLE PROMISSORY NOTE
On September 18, 2014, the Company issued a $154,000 convertible promissory note bearing interest at 10.0% per annum to an accredited investor, payable on or before July 18, 2015, in monthly installments of $31,600 plus accrued interest beginning 6 months after the date of this promissory note. The convertible promissory note may be converted into common stock of the Company at a conversion price equal to 70% of the average of the 3 lowest volume weighted average trading prices during the 20 day period ending on the latest complete trading day prior to the conversion date. Trading price means the closing bid price on the OTC Market Over-the-Counter Bulletin Board Pink Sheets.
F - 12
If any portion of the principal or accrued interest on this convertible debenture is not paid within ten (10) days of when it is due, the note shall become immediately due and payable and the Company shall pay to the note holder in full satisfaction of its obligations hereunder, an amount equal to that can reach as much as 60% of the outstanding balance and 22% interest calculated from the date of default.
The Company shall have the right to prepay the principle and accrued interest of the convertible promissory note at 125% multiplied by the then outstanding balance of principle and accrued interest. The Company evaluated the terms of the convertible note in accordance with ASC 815-40, Contracts in Entity’s Own Equity, and concluded that the Convertible Note did not result in a derivative. The Company evaluated the terms of the convertible note and concluded that there was a beneficial conversion feature since the convertible note was convertible into shares of common stock at a discount to the market value of the common stock. The discount related to the beneficial conversion feature on the note was valued at $154,000 based on intrinsic value. The discount related to the beneficial conversion feature ($23,346) is being amortized over the term of the debt (10 months). For the period ended December 31, 2014, the Company recognized $10,247 of interest expense related to the amortization of the discount.
In connection with the issuance of the $158,000 note discussed above, the Company incurred debt issue costs as follows:
|
●
|
10.4% cash – which is equivalent to $16,500, and
|
|
|
●
|
8% warrants – having a fair value of $89,568, which was computed as follows;
|
|
Commitment Date
|
||||
|
Expected dividends
|
0%
|
|||
|
Expected volatility
|
209%
|
|||
|
Expected term: conversion feature
|
5 years
|
|||
|
Risk free interest rate
|
1.20%
|
|||
The debt issue costs have been capitalized and are being amortized over the life of the note.
Amortization of debt issue costs for the year ended December 31, 2014 $50,602. Net debt issue costs at September 30, 2014 was $55,427.
During the year ended December 31, 2014, the company recorded original issue discounts of $14,000.
The original issue discount pertains to discount taken by lender against the total convertible note of $158,000, resulting in a disbursement of $144,000 to the company.
During the nine months ended September 30, 2014, the Company amortized $5,900 in debt discount.
NOTE 9 – ACCRUED EXPENSES
Accrued expenses consisted of the following at December 31, 2014 and 2013:
|
2014
|
2013
|
|||||||
|
Accrued consulting fees
|
$
|
144,500
|
$
|
130,000
|
||||
|
Bank over-drafts
|
4,897
|
12,371
|
||||||
|
Accrued interest expense
|
45,540
|
22,141
|
||||||
|
Other accrued expenses
|
199
|
25,312
|
||||||
|
Accrued wages
|
538,180
|
281,160
|
||||||
|
Total accrued expenses
|
$
|
733,316
|
$
|
470,984
|
F - 13
NOTE 10 – CAPITAL STRUCTURE
The Company's capital structure is not complex. The Company is authorized to issue 300,000,000 shares of common stock with a par value of $.0001 per share and 20,000,000 shares of preferred stock with a par value of $.0001 per share. Each common stock share has one voting right and the right to dividends if and when declared by the board of directors. At December 31, 2014 and 2013 there were 145,559,835 and 128,911,568 shares of common stock issued and outstanding, respectively.
Common Stock
During the period from October 1 through December 31, 2014, the Company issued 400,000 shares of restricted common stock for the conversion of $40,000 in debt owed by the Company.
During the period from October 1 through December 31, 2014, the Company issued 357,142 shares of restricted common stock for the conversion of $50,000 in debt owed by the Company.
During the period from October 1 through December 31, 2014, the Company issued 876,000 shares of restricted common stock for the conversion of $60,000 in debt owed by the Company.
During the period from October 1 through December 31, 2014, the Company issued 1,000,000 shares of restricted common stock to six investors for cash consideration of $127,500.
During the period from October 1 through December 31, 2014, the Company issued 225,000 shares of restricted common stock for consulting services valued at $22,500.
During the period from July 1, 2014 through September 30, 2014, the Company issued 1,118,000 shares of restricted common stock for conversion of $134,160 in advances from shareholder, or $0.12 per share.
During the period from July 1, 2104 through September 30, 2104, the Company issued 3,770,182 shares of restricted common stock for services rendered. The shares were valued at $397,341, or $0.105 per share.
During the period from July 1, 2104 through September 30, 2014, the Company entered into subscription agreements with individuals and sold 550,000 shares of restricted common stock for $67,000 cash, or $0.122 per share.
During the period from April 1, 2014 through June 30, 2014, the Company issued 2,216,233 shares of restricted common stock for conversion of $227,500 in advances from shareholder, or $0.103 per share.
During the period from April 1, 2104 through June 30, 2104, the Company issued 1,645,000 shares of restricted common stock for services rendered. The shares were valued at $164,500, or $0.10 per share.
During the period from April 1, 2104 through June 30, 2014, the Company entered into subscription agreements with individuals and sold 490,888 shares of restricted common stock for $107,000 cash, or $0.218 per share.
During the period from January 1, 2014 through March 31, 2014, the Company issued 1,736,540 shares of restricted common stock for conversion of $162,500 in advances from shareholder.
During the period from January 1, 2014 through March 31, 2014, the Company issued 634,652 shares of restricted common stock for services rendered. The shares were valued at $70,500, or $0.11 per share.
During the period from January 1, 2014 through March 31, 2014, the Company issued 100,000 shares of restricted common stock for services rendered. The shares were valued at $10,000, or $0.10 per share.
During the period from January 1, 2014 through March 31, 2014, the Company issued 600,000 shares of restricted common stock for the conversion of 60,000 shares of preferred stock at the conversion rate of 10 shares of restricted common stock for each share of preferred stock.
F - 14
During the period from January 1, 2014 through March 31, 2014, the Company issued 500,000 shares of restricted common stock for legal services rendered. The shares were valued at $50,000, or $0.10 per share.
During the period from January 1, 2014 through March 31, 2014, the Company issued 160,000 shares of restricted common stock for services rendered. The shares were valued at $16,000, or $0.10 per share.
During the period from October 1, 2013 through December 31, 2013, the Company issued 600,000 shares of restricted common stock to a corporation for the conversion of $42,000 in advances to the Company.
During the period from October 1, 2013 through December 31, 2013, the Company issued 45,400 shares of restricted common stock to individuals for services rendered to the Company and valued the shares at $5,903.
During the period from October 1, 2013 through December 31, 2013, the Company issued 120,000 shares of restricted common stock for consulting services and valued the shares at $12,000.
During the period from October 1, 2013 through December 31, 2013, the Company issued 200,000 shares of restricted common stock and 60,000 shares of preferred stock to an individual in a private place for $100,000.
During the period from June 1, 2013 through September 30, 2013, the Company issued 80,000 shares of restricted common stock for consulting services and valued the shares at $8,000.
During the period from June 1, 2013 through September 30, 2013, the Company issued 427,000 shares of restricted common stock to an individual for the conversion to common stock of a $15,000 note payable from the company.
During the period from June 1, 2013 through September 30, 2013, the Company issued 92,250 shares of restricted common stock for consulting services and valued the shares at $10,500.
During the period from June 1, 2013 through September 30, 2013, the Company sold 50,000 shares of restricted common stock in a private placement to and individual for $5,000.
During the period from June 1, 2013 through September 30, 2013, the Company issued 277,777 shares of restricted common stock for the conversion to common stock of a $50,000 advance to the company.
During the period from January 1, 2013 through March 31, 2013, the Company issued 1,000,000 shares of restricted common stock for consulting services and valued the shares at $65,275.
During the period from January 1, 2013 through March 31, 2013, the Company issued 750,000 shares to Ryan Wester for 100% ownership of Rig Support Systems, Inc. and valued the shares at $37,500.
The issuance of these shares was exempt from the registration requirements of the Securities Act of 1933 under Section 4 (2) thereof.
Preferred Stock
At December 31, 2014 and 2013, there were 15,738,894 and 15,798,894 shares of preferred stock, respectively, issued and outstanding. Each preferred share is convertible, at the option of the preferred shareholder, into common stock with 738,894 being convertible at the rate of one preferred share for fifteen shares of common stock and 15,060,000 shares being convertible on a one for one basis, with 15,000,000 shares have voting rights equal to 15 votes per preferred share on all matters voted on by the Company’s shareholders.
In September 2013, the Company issued 60,000 shares of preferred stock to an individual as part of a private placement offering. These preferred shares are convertible into common stock at the rate of 10 shares of common stock for each share of preferred stock.
In February 2014, the 60,000 shares of preferred stock were converted to 600,000 shares of common stock.
The issuance of these shares was exempt from the registration requirements of the Securities Act of 1933 under Section 4 (2) thereof.
F - 15
Stock Options, Warrants and Other Rights
As of December 31, 2014, the Company has not adopted any employee stock option plans.
In September 2013, the Company issued 60,000 warrants to an investor exercisable at $0.25 per shares. The Company valued the warrants at $500 based on the Black Scholes method using the assumptions of; exercise price of $0.25 per share; value on date of measurement of $0.12 per share; five year term; computed volatility of 132%; annual dividend of 0; and discount rate of 1.25%.
NOTE 11 – RELATED PARTY TRANSACTIONS
Shareholders made advances of $667,571 and $187,661 during the years ending December 31, 2014 and 2013, respectively. Shareholders converted advances of $729,029 and $171,435 to common stock during the years ended December 31, 2014 and 2013, respectively.
NOTE 12 – INCOME TAXES
At December 31, 2014 and 2013, the Company had approximately $3.5 million and $2.0 million, respectively, of net operating losses (“NOL”) carry forwards for federal and state income tax purposes. These losses are available for future years and expire through 2032. Utilization of these losses may be severely or completely limited if the Company undergoes an ownership change pursuant to Internal Revenue Code Section 382.
The provision for income taxes for continuing operations consists of the following components for the years ended December 31:
|
2013
|
2012
|
|||||||
|
Current
|
$
|
-
|
$
|
-
|
||||
|
Deferred
|
-
|
-
|
||||||
|
Total provision for (benefit from) income taxes
|
$
|
-
|
$
|
-
|
||||
A comparison of the provision for income tax expense at the federal statutory rate of 34% for the years ended December 31 to the Company’s effective rate is as follows:
|
|
2013
|
2012
|
||||||
|
Federal statutory rate
|
(34.0
|
)%
|
(34.0
|
)%
|
||||
|
State tax, net of federal benefit
|
-
|
-
|
||||||
|
Permanent differences and other including surtax exemption
|
-
|
-
|
||||||
|
Valuation allowance
|
34.0
|
34.0
|
||||||
|
Effective tax rate
|
-
|
%
|
-
|
%
|
||||
The net deferred tax assets and liabilities included in the financial statements consist of the following amounts at December 31:
|
2013
|
2013
|
|||||||
|
Deferred tax assets
|
||||||||
|
Net operating loss carry forwards
|
$
|
3,477,275
|
$
|
2,044,100
|
||||
|
Deferred compensation
|
1,966,523
|
1,472,700
|
||||||
|
Other allowances
|
1,286,002
|
527,700
|
||||||
|
Total
|
6,729,800
|
4,044,500
|
||||||
|
Less valuation allowances
|
(6,729,800
|
)
|
(4,044,500
|
)
|
||||
|
Deferred tax assets
|
$
|
-
|
$
|
-
|
||||
|
Deferred tax liabilities
|
||||||||
|
Depreciation and amortization
|
$
|
-
|
$
|
-
|
||||
|
Net long-term deferred tax asset
|
$
|
-
|
$
|
-
|
||||
F - 16
The change in the valuation allowance was $2,685,300 and $974,000 for the years ended December 31, 2014 and 2013, respectively. The Company has recorded a 100% valuation allowance related to the deferred tax asset for the loss from operations, interest expense, interest income and other income subsequent to the change in ownership, which amounted to $6,729,800 and $4,044,500 for the years ended December 31, 2014 and 2013, respectively.
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, historical taxable income including available net operating loss carry forwards to offset taxable income, and projected future taxable income in making this assessment.
NOTE 13 – COMMITMENTS
Employment Agreements
In June 2011, the Company entered into employment agreements with its chief executive officer, president and chief financial officer. The Agreements are for a term of 5 years with compensation of $180,000 the first year, $240,000 the second year, $300,000 the third year, $350,000 the fourth year and the fifth year at a salary commensurate with those in similar industries. The employment agreements also provide for the officers to received 1,250,000 shares of restricted common stock annually for each year of the employment agreement. During the year ended December 31, 2014, with the consent of management, the Company accrued $595,000 towards the employment agreements. During the year ended December 31, 2013, management agreed to eliminate $1,221,327of their accrued compensation due under their employment agreements, which reduced general and administration expense by $321,328 for the year ended December 31, 2013.
In August 2012, the Company entered into employment agreements with the president and chairman of the board of Greenway Innovative Energy, Inc. for a term of 5 years with compensation of $90,000 per year. In June of 2014, the president’s employment agreement was amended to increase his pay to $180,000. During the year ended December 31, 2014, with their consent, the Company accrued $168.700 towards the employment agreements. At December 31, 2013, Greenway’s management agreed to eliminate $107,500 of their accrued compensation due under their employment agreements, which reduced general and administration expense by $107,500 for the year ended December 31, 2013.
Leases
The Company was committed on a lease for 3,500 square feet of office space through August 2012 at the rate of $5,800 per month. Subsequent to August 2012, the Company continued to lease this space on a month-to-month basis at the rate of $6,400 per month. During the years ended December 31, 2013 and 2012, the Company paid $76,800 and $76,800, respectively, in rent expense.
Legal
In the ordinary course of business, we may be subject to legal proceedings involving contractual and employment relationships, liability claims and a variety of other matters. Although the results of these other legal proceeding cannot be predicted with certainty, we do not believe that the final outcome of these matters should have a material adverse effect on our business, results of operations, cash flows or financial condition.
NOTE 14 – SEGMENT INFORMATION
The accounting standards for reporting information about operating segments define operating segments as components of an enterprise for which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how allocate resources and in assessing performance. The Company’s chief operating decision maker is the Chief Executive Officer. The Company is organized by line of business. While the Chief Executive Officer evaluates results in a number of different ways, the line of business management structure is the primary basis for which the allocation of resources and financial results are assessed. Under aforementioned criteria, the Company operates in one reporting segment and corporate activities.
Mamaki of Hawaii is the reporting segment that derives its income from the sale of mamaki tea.
The information provided below is obtained from internal information that is provided to the Company’s chief operating decision maker for the purpose of corporate management. The Company uses operating income (loss) to measure segment performance. The Company does not allocate corporate interest income and expense, income taxes, other income and expenses related to corporate activity or corporate expense for management and administrative services to its reporting segment. Because of this unallocated income and expense, the operating income (loss) of the reporting segment does not reflect the operating income (loss) the reporting segment would report as a stand-alone business and therefore we do not present indirect operating expenses.
F - 17
The table below illustrates the Company’s results for the Mamaki tea reporting segment for the years ended December 31, 2014, respectively:
|
2014
|
2013
|
|||||||
|
Sales
|
$ | 24,581 | $ | 15,479 | ||||
|
Cost of sales
|
54,696 | 96,422 | ||||||
|
Gross Profit
|
(30,115 | ) | (80,943 | ) | ||||
|
General and administration expense
|
415,010 | 528,441 | ||||||
|
Depreciation expense
|
118,954 | 118,061 | ||||||
|
Operating loss
|
(564,082 | ) | (727,445 | ) | ||||
|
Other income (expense)
|
||||||||
|
Interest expense
|
(150,755 | ) | (84,876 | ) | ||||
|
Net loss
|
$ | (714,834 | ) | $ | (882,621 | ) | ||
|
December 31,
2014
|
December 31,
2013
|
|||||||
|
Total assets
|
$ | 1,842,558 | $ | 1,882,468 | ||||
|
Total liabilities
|
$ | 1,860,520 | $ | 1,687,487 | ||||
NOTE 15 – SUBSEQUENT EVENTS
During the period from January 1, 2015 through March 27, 2015, the Company issued 156,666 shares of restricted common stock for conversion of $18,500 in advances from shareholder.
In February 2015, the Company issued 156,666 shares of restricted common stock for services rendered. The shares were valued at $18,500, or $0.1181 per share.
In February 2015, the Company issued 705,949 shares of restricted common stock to individuals for $98,000 cash. The shares were valued at $0.1388 per share.
In March 2015, the Company issued 71,428 shares of restricted common stock to an individual for $10,000 cash. The shares were valued at $0.14 per share.
F - 18