UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-K
(Mark
One)
[X]
ANNUAL REPORT PURSUANT SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For
the fiscal year ended December 31, 2014
or
[ ]
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For
the transition period from ____________ to _______________
Commission
File No. 000-14859
GARB
OIL & POWER CORPORATION
(Exact
name of registrant as specified in its charter)
Utah |
|
87-0296694
|
(State
or other jurisdiction of |
|
(I.R.S.
Employer |
incorporation
or organization) |
|
Identification.
No.) |
|
|
|
1185
Gooden Xing |
|
|
Largo,
FL |
|
33778 |
(Address
of principal executive offices) |
|
(Zip
Code) |
Registrant’s
Telephone Number, Including Area Code: (888) 573-6622
Securities
registered pursuant to Section 12(b) of the Act:
Title
of each class |
|
Name
of each exchange on which registered |
None |
|
None |
Securities
registered pursuant to Section 12(g) of the Act:
Common
stock, no par value
(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 [X]
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 [X]
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 [X] 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 (§ 232.405 of this chapter) during the
preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [X] 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. [X]
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):
Large accelerated
filer [ ] |
|
Accelerated filer
[ ] |
Non-accelerated
filer [ ] |
|
Smaller
reporting company [X] |
(Do not check
if a smaller reporting company) |
|
|
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act.) Yes [ ] No [X]
State
the aggregate market value of the voting and non-voting common stock held by non-affiliates computed by reference to the price
at which the common stock was sold, or the average bid and asked price of such common stock, as of the last business day of the
registrant’s most recently completed second fiscal quarter, June 30, 2014: $3,885,379.
The number
of shares of issuer’s common stock outstanding as of April 10, 2015: 47,497,578,456.
DOCUMENTS
INCORPORATED BY REFERENCE
None.
FORM
10-K
FOR
THE YEAR ENDED DECEMBER 31, 2014
INDEX
USE
OF CERTAIN DEFINED TERMS
Except
as otherwise indicated by the context, references in this report to “we,” “us,” “our,” “our
Company,” “the Company”, or “Garb” are to the combined business of Garb Oil & Power Corporation
and its consolidated subsidiaries.
In
addition, unless the context otherwise requires and for the purposes of this report only:
|
● |
“Commission”
refers to the Securities and Exchange Commission; |
|
|
|
|
● |
“Exchange
Act” refers to the Securities Exchange Act of 1934, as amended; |
|
|
|
|
● |
“Securities
Act” refers to the Securities Act of 1933, as amended; |
|
|
|
|
● |
“former
management” refers to following individuals, who collectively represent all of the Company’s directors and executive
officers that resigned on August 21, 2013: |
|
● |
John
Rossi is the Company’s former Chief Executive Officer, President, Director, Principal Financial Officer and Principal
Accounting Officer, |
|
|
|
|
● |
Igor
Plahuta is the Company’s former Chief Technology Officer and Director, |
|
|
|
|
● |
Alan
Fleming is the Company’s former Chief Operations Officer and Director; and |
|
● |
“current
management” or “management of the Company” or “management” refers to the following individuals,
who represent the directors and executive officers of the Company as of the date of this annual report on Form 10-K, and those
officers and directors that were appointed on August 21, 2013, after former management resigned: |
|
● |
Tammy
Taylor is the Company’s current Chief Executive Officer, President, Director and Principal Financial Officer, |
|
|
|
|
● |
M.
Aimee Coleman is current Corporate Secretary and Principal Accounting Officer. |
CAUTIONARY
STATEMENT RELATED TO FORWARD-LOOKING STATEMENTS
This
report contains forward-looking statements. The Securities and Exchange Commission encourages companies to disclose forward-looking
information so that investors can better understand a company’s future prospects and make informed investment decisions.
This annual report on Form 10-K and other written and oral statements that we make from time to time contain such forward-looking
statements that set out anticipated results based on management’s plans and assumptions regarding future events or performance.
We have tried, wherever possible, to identify such statements by using words such as “anticipate,” “estimate,”
“expect,” “project,” “intend,” “plan,” “believe,” “will”
and similar expressions in connection with any discussion of future operating or financial performance. In particular, these include
statements relating to future actions, future performance or results of current and anticipated sales efforts, expenses, the outcome
of contingencies, such as legal proceedings, and financial results. A list of factors that could cause our actual results of operations
and financial condition to differ materially is set forth below:
|
●
|
Our
ability to continue as a going concern. |
|
|
|
|
● |
Our
ability to achieve profitability and history of losses. |
|
|
|
|
● |
Our
need for significant additional capital to fund our business plan. |
|
|
|
|
● |
Our
ability to attract customers to our products. |
|
|
|
|
● |
Economic
conditions that have an adverse effect on consumer and corporate spending. |
|
|
|
|
● |
Changes
in applicable Federal and State manufacturing laws and regulations that have an adverse effect on our operations. |
|
|
|
|
● |
The
market price for shares of our common stock has been and may continue to be highly volatile and the impact of penny stock
rules on the liquidity of our common stock. |
We
caution that the factors described herein and other factors could cause our actual results of operations and financial condition
to differ materially from those expressed in any forward-looking statements we make and that investors should not place undue
reliance on any such forward-looking statements. Further, any forward-looking statement speaks only as of the date on which such
statement is made, and we undertake no obligation to update any forward-looking statement to reflect events or circumstances after
the date on which such statement is made or to reflect the occurrence of anticipated or unanticipated events or circumstances.
New factors emerge from time to time, and it is not possible for us to predict all of such factors. Further, we cannot assess
the impact of each such factor on our results of operations or the extent to which any factor, or combination of factors, may
cause actual results to differ materially from those contained in any forward-looking statements.
PART
I
Item
1. Business
BUSINESS
OVERVIEW
The
Company has a long history in the fast growing industry of waste recycling and specifically related to waste-to-energy, upon which
the Company is building. Garb is organized to utilize both next-generation machines and new technologies to vertically integrate
into the waste refinement, recycling and energy industries. The current revised company emphasis (effective August 21, 2013) is
in profitable new and “green” solutions for waste-to-energy, alternate energy sources, gas drilling, fuel enhancements,
improving energy usage efficiency and utilizing recycled material in producing both useful and desirable products manufactured
in its own plants. The Company’s use of its first industrial manufacturing property and equipment will be to manufacture
wood pellets to be used as an alternate power fuel and for farm and agricultural applications. In addition, this manufacturing
facility will utilize power saving technology including the use of recycled materials as fuel that will result in lower operating
costs. Also, excess electricity will be generated that may be sold back to the power company, thereby generating an additional
source of revenue.
HISTORY
OF COMPANY
Garb
Oil & Power Corporation (the “Company” or “Garb”) was incorporated in the State of Utah in 1972 under
the name Autumn Day, Inc. The Company changed its name to Energy Corporation International in 1978 and to Garb-Oil Corporation
of America in 1981, which marked the start of the Company’s development state in the energy and recycling industries. The
Company changed its name to Garb Oil & Power Corporation in 1985 and then to Garb Corporation in May 2013. In February 2014,
the Company changed its name back to Garb Oil & Power Corporation. The Company’s activities have consisted of raising
capital and developing technology related to waste-to-energy electricity production, pyrolysis (extraction of oil, carbon, and
steel from used tires), and recovery of used rubber from large off-the-road tires, repair and sale of used truck tires, sale of
new truck tires and sale of industrial shredders.
Effective
August 21, 2013, all of the Company’s former executive officers and directors resigned. Also effective August 21, 2013,
following the resignation of the Company’s former management, Ms. Tammy Taylor was appointed as the Company’s Chief
Executive Officer, President and Principal Financial Officer, and Ms. M. Aimee Coleman was appointed as the Company’s Corporate
Secretary and Principal Accounting Officer. Ms. Taylor was also appointed as the Company’s sole director.
COMPANY
SUBSIDIARIES
Resource
Protection Systems GmBH
On
October 27, 2009, the Company entered into an agreement to purchase Resource Protection Systems GmBH, a company organized and
currently active under the laws of Germany (“RPS”). The purchase was for all outstanding shares, as well as for specified
RPS assets and liabilities. As consideration, the Company paid the shareholders of RPS an aggregate of 27,829,291 shares of the
Company’s common stock and options to purchase 100,000,000 shares of the Company’s common stock with an expiration
date of November 1, 2014, and an exercise price equal to one-tenth of the closing ask price for 10 trading days prior to the exercise
of the option. The options were contingent upon the Company increasing its authorized shares, which it did in March 2010. The
RPS specified assets were not transferred to the Company and therefore the purchase was not fully consummated. All of the options
expired on November 1, 2014 without being exercised.
On
January 15, 2010, RPS purchased 80% of the issued and outstanding stock of Newview S.L., a company organized under the laws of
Spain (“Newview”). The Company has been unable to determine whether Newview was active.
The
Company’s auditor for 2009 and 2010 was also engaged by current management to audit years 2011 through 2014 and review the
first three quarters of years 2012 through 2014.
The
Company’s financial statements from the year ended December 31, 2009 through the quarter ended June 30, 2013 each contains
its audited or reviewed, as the case may be, consolidated financial statements for the Company and its subsidiaries, which includes
RPS consolidated financials that were converted into United States Dollars (USD). The Company has included RPS and Newview as
Company subsidiaries and accounted for as entities under common control, since RPS, Newview, and the Company had common management
during this period of time. As the transaction combines two commonly controlled entities that historically, prior to October 27,
2009, have not been presented together, the resulting financial statements are, in effect, considered those of a different reporting
entity. This resulted in a change in reporting entity, which required retrospectively combining the entities for all periods presented
as if the combination had been in effect since inception of common control. The financial information of previously separate entities,
prior to the acquisition date, is now shown as combined. The former management left the Company during the quarter ended September
30, 2013 (on August 21, 2013). Therefore beginning with the quarter ended September 30, 2013, entities under common control ceased
to exist since the Company did not have the same management as RPS and Newview and the Company’s financial statements omit
the RPS and Newview financial statements including the Company’s financial statements contained in this annual filing.
Garb
Global Services, Inc.
On
January 24, 2014, the Company signed a letter of intent (the “LOI”) and a collaborative effort agreement (the “CE
Agreement”) with Shredderhotline.com Company (“Shredderhotline”) and Dan Scott Burda, Shredderhotline’s
President/Owner. The LOI includes a stock purchase equal to 10% of each stock classes’ authorized shares at the time of
execution in exchange for $448,683 in total cash and other assets to the Company. The cash portion is $44,868. The shares by stock
class issued February 4, 2014 was two restricted shares of the Company’s Class A preferred stock, 441,930 restricted shares
of the Company’s Class B preferred stock and 3,796,521,515 restricted shares of the Company’s common stock. In general,
the CE Agreement is a long-term collaboration with the intent of the Company receiving over time all of Shredderhotline’s
assets, including complete customer database, shredder patents and recycle plant designs. In addition, the CE Agreement provides
that the two ranking executive officers of both companies will collaborate on future sales and operations within a newly formed
wholly owned subsidiary of the Company, Garb Global Services, Inc. (“Garb Global”).
On
November 18, 2014, the Company and Shredderhotline mutually determined that their business interests had diverged and
the Company and Shredderhotline released one another from their rights and obligations under the LOI and CE Agreement both dated
January 24, 2014. Garb Global will continue as an operating subsidiary of the Company.
OUR
INDUSTRY
The
industry in which Garb is operating is still in its maturing stages. Technological developments, the economic climate and the
growing global awareness of waste as a possible raw material resource, have changed the recycling industry, placing demands on
the industry for new products and for new solutions. Garb is dedicated to creating products that increases energy efficiency and
reduces the carbon footprint while helping to preserve the environment. With its knowledge of solutions, its comprehensive product
portfolio, its experience and, above all, with personnel and advisors who understand the industry, Garb will provide superior
products and services into profitable solutions that will provide the Company with a competitive advantage in the market and do
our part in making the world a greener place while passing cost savings on tour customers.
OUR
MARKETS
Tires
and Commercial Waste Shredders: Garb’s past has been resurrected by current management, new truck tires and commercial
waste shredders. In addition, Garb is currently in the development stage to enter into the retread truck tire production and sales
market.
Waste-to-Energy:
Waste-to-energy is considered a renewable resource since its fuel source, garbage and other materials that have been destined
to landfills, is sustainable and non-depletable. According to the U.S. Environmental Protection Agency, waste-to-energy is a “clean,
reliable, renewable source of energy.”
In
2012, Americans generated about 251 million tons of trash and recycled and composted almost 87 million tons of this material,
equivalent to a 34.5 percent recycling rate.
Opportunities
abound in the recycling industry to produce power and Garb is developing this area.
Biomass
and Alternate Fuels: The United States has been moving towards greater energy independence and the increase of clean renewable
fuels. Biofuel is simple to use, biodegradable, nontoxic, and essentially free of sulfur and aromatics. Alternate energy sources
can produce more net energy for less money than current technologies. Garb is currently pursuing multiple avenues in this growing
arena.
Hemp
and Medical Marijuana Paraphernalia: Within the cannabis industry, Garb has interest in the potential use of hemp as one of
the raw materials utilized in the production of alternate fuels and energy. To further these endeavors, Garb has begun to create
the Company’s first medical marijuana paraphernalia production operation in the State of Colorado.
PATENTS,
TRADEMARKS AND PROPRIETARY DATA
The
Company has received United States Patent No. 5,299,748 on the OTR Tire Disintegrator System design which expired April 5, 2011,
Patent No. 5,590,838 which expired January 7, 2014 and patent number 6,015,105 which expires January 18, 2018. An additional patent
improvement was granted in Canada on July 6, 1999 as Canadian Patent No. 2,178,326 which expired March 23, 2015.
EMPLOYEES
The
Company’s President and CEO, Tammy Taylor, devotes 40 hours, or more, per week to the Company’s business. The Company’s
Corporate Secretary, M. Aimee Coleman, devotes 10 hours, or more, per week to the Company’s business. All additional work
is performed on a sub-contract basis.
Additional
personnel will be required when the Company expands its business or enters into agreements for construction of waste-to-energy
plants, waste-rubber plants or scrap plants. The Company does not anticipate problems in finding suitable additional personnel.
The
Company believes its relationship with its employees to be good. The Company is not a party to any collective bargaining agreement.
RESEARCH
AND DEVELOPMENT
During
the years ended December 31, 2014 and 2013, the Company has not expended funds on research and development activities. Garb plans
to grow its research and development budget to 8% of its revenue during 2015.
ENVIRONMENTAL
REGULATION
Neither
the Company nor its subsidiaries believe that any of its activities result in harmful discharge of pollutants in the air, water
or soil.
Power
plants to be built by the Company in the future utilizing tires as fuel will be required to comply with state and federal regulations
regarding the discharge of pollutants into the atmosphere. The Company believes that the plants can comply with such regulations
without material impact on the Company.
AVAILABLE
INFORMATION
We
are now completing all applicable annual reports on Form 10-K and quarterly reports on Form 10-Q for the periods beginning with
the fiscal year ended December 31, 2011 through the fiscal year ended December 31, 2014. We will file current reports on Form
8-K, proxy statements and other reports as required after the Company files this Form 10-K pursuant to Sections 13(a) and 15(d)
of the Exchange Act.
The
public may read and copy any materials we file or furnish with the SEC at the SEC’s web site that contains reports, proxy
and information statements, and other information regarding reports that we file or furnish electronically with them at http://www.sec.gov.
Item
1A. Risk Factors
Not
required for smaller reporting companies.
Item
1B. Unresolved Staff Comments
Not
required for smaller reporting companies.
Item
2. Properties
The
Company’s current executive offices are located at 1185 Gooden Xing, Bldg. C, Largo, FL under a lease to purchase agreement.
The offices and warehouse consist of approximately 16,838 square feet. The purchase of the entire 55,785 square foot offices and
warehouses space is expected to occur during the second quarter of 2015.
Item
3. Legal Proceedings
We
are not a party to any material litigation, nor to the knowledge of management, is any litigation threatened against us that may
materially affect us.
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
common stock is quoted in The OTC Pink tier of the OTC Markets under the symbol of “GARB”.
The
following table sets forth the range of high and low representative bid quotations for the periods indicated.
| |
High | | |
Low | |
Fiscal Year 2014 | |
| | | |
| | |
First Quarter | |
$ | 0.0006 | | |
$ | 0.0001 | |
Second Quarter | |
$ | 0.0002 | | |
$ | 0.0001 | |
Third Quarter | |
$ | 0.0001 | | |
$ | 0.0001 | |
Fourth Quarter | |
$ | 0.0001 | | |
$ | 0.0001 | |
| |
| | | |
| | |
| |
| High | | |
| Low | |
Fiscal Year 2013 | |
| | | |
| | |
First Quarter | |
$ | 0.0001 | | |
$ | 0.0001 | |
Second Quarter | |
$ | 0.0001 | | |
$ | 0.0001 | |
Third Quarter | |
$ | 0.0001 | | |
$ | 0.0001 | |
Fourth Quarter | |
$ | 0.0001 | | |
$ | 0.0001 | |
The
foregoing OTC Market quotations are inter-dealer quotations without retail mark-ups, mark-downs or commissions and may not represent
actual transactions.
Holders
As
of April 10, 2015 there were approximately 747 holders of record of our common stock. This number does not include shares held
by brokerage clearing houses, depositories or others in unregistered form.
Dividends
No
cash dividends have been paid by the Company in the past, and dividends are not contemplated in the foreseeable future. Utah law
currently prohibits the payment of dividends since the Company’s liabilities exceed its assets. Dividends will be dependent
directly upon the earnings of the Company, financial needs, and other similar unpredictable factors. For the foreseeable future,
it is anticipated that any earnings that may be generated from the operations of the Company will be used to finance the operations
of the Company and dividends will not be declared for shareholders. The Company is not subject to any contractual restrictions
on the payment of dividends.
Securities
Authorized for Issuance under Compensation Plans
The
Company has no equity compensation plans under which equity securities of the Company are authorized for issuance.
Sales
of Unregistered Securities
Date | | |
Purchaser | |
Shares | | |
Price
per share | | |
Amount
$ | | |
Consideration | |
Class/Series |
January
31, 2014 | | |
Affiliate
of Company | |
| 3,796,521,515 | | |
$ | 0.00003 | | |
$ | 113,895.65 | | |
Direct
investment pursuant to the terms of a Securities Purchase Agreement | |
Restricted
Common stock |
January
31, 2014 | | |
Affiliate of Company | |
| 2 | | |
$ | 1,670.00 | | |
$ | 3,340.00 | | |
Direct
investment pursuant to the terms of a Securities Purchase Agreement | |
Series
A
Preferred stock |
January
31, 2014 | | |
Affiliate of Company | |
| 441,930 | | |
$ | 0.75 | | |
$ | 331,447.50 | | |
Direct
investment pursuant to the terms of a Securities Purchase Agreement | |
Series
B
Preferred stock |
March
25, 2014 | | |
Unaffiliated
party | |
| 100,000,000 | | |
$ | 0.0002 | | |
$ | 20,000.00 | | |
Services | |
Common
stock |
March
31, 2014 | | |
Affiliate of Company | |
| 266,666,667 | | |
$ | 0.00007 | | |
$ | 20,000.00 | | |
Direct
investment pursuant to the terms of a Securities Purchase Agreement | |
Restricted
Common stock |
April
14, 2014 | | |
Affiliate of Company | |
| 1,750,000,000 | | |
$ | 0.0001 | | |
$ | 1,750,000.00 | | |
Conversion
of 700,000 shares of Preferred stock | |
Common
stock |
May
16, 2014 | | |
Unaffiliated
party | |
| 860,000,000 | | |
$ | 0.0001 | | |
$ | 86,000.00 | | |
Services | |
Common
stock |
June
16, 2014 | | |
Unaffiliated
party | |
| 1,428,571,429 | | |
$ | 0.0001 | | |
$ | 142,857.14 | | |
Conversion
of Company debt | |
Common
stock |
September
23, 2014 | | |
Assignee of debtor | |
| 3,167,500,000 | | |
$ | 0.0001 | | |
$ | 316,750.00 | | |
Conversion
of Company debt | |
Common
stock |
October
8, 2014 | | |
Unaffiliated
party | |
| 183,690 | | |
$ | 2.50 | | |
$ | 459,225.00 | | |
Conversion
of 1,836,896,308 shares of Common stock | |
Series
B
Preferred stock |
These
shares were issued in reliance on exemptions form registration provided by Sections 4(a)(2) and 3(a)(9) of the Securities Act.
Item
6. Selected Financial Data
Not
applicable.
Item
7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Current
Management Overview
Effective
August 21, 2013, all of the Company’s former executive officers and directors resigned. Also effective August 21, 2013,
following the resignation of the Company’s former management, Ms. Tammy Taylor was appointed as the Company’s Chief
Executive Officer, President and Principal Financial Officer, and Ms. M. Aimee Coleman was appointed as the Company’s Corporate
Secretary and Principal Accounting Officer. Ms. Taylor was also appointed as the Company’s sole director effective August
21, 2013.
Current
management of the Company is pursuing avenues of generating cash or revenues during the next twelve months. The Company is pursuing
sales of new truck tires and commercial waste shredders and is developing waste-to-energy, biomass alternate fuels including hemp
and medical marijuana paraphernalia manufacturing operations. The Company continues to pursue financing to build and operate its
own manufacturing plants. We believe that our current Company personnel and advisors have the necessary industry expertise and
marketing skills to implement our current business model.
Results
of Operations
Comparison
of the Year Ended December 31, 2014 and 2013
Revenues
During
the year ended December 31, 2014 the Company recognized $300,000 from sale of equipment. During the year ended December 31, 2013
the Company recognized no revenues from sales.
Selling,
General, and Administrative Expenses
Selling,
general, and administrative expenses decreased $1,584,484 to $801,580 for the year ended December 31, 2014, from $2,386,064 for
the year ended December 31, 2013. The decrease was related to employee compensation decreasing $261,500, professional fees decreasing
$122,332, consulting fees decreasing $431,129 and bad debt expense decreasing $579,655. These decreases were partially offset
by an increase in sales commissions of $110,000.
Interest
Expense
Interest
expense was $486,530 and $248,300 for the years ended December 31, 2014 and 2013, respectively. The increase in expense was related
to recognizing change in derivative liabilities for the year ended December 31, 2014.
Gain
/ Loss on Conversion of Debt and Settlement of Accrued Interest
Conversion
of debt and settlement of accrued interest resulted in a loss of $320,617 and a gain of $587,256 for the years ended December
31, 2014 and 2013, respectively. This is a non-cash expense reported on the statements of operations. The substantial change from
a gain to an expense was due to an above the average market value of the Company stock at the time the shares were issued during
the prior fiscal year reported to at the average market value of the Company stock at the time the shares were issued during the
current fiscal year reported.
Net
Loss
Comprehensive
loss was $3,658,707 and $2,050,994 for the years ended December 31, 2014 and 2013, respectively. Net loss was attributable to
a lack of consistent revenues as discussed above, together with a substantial amount of change in fair value of derivative liabilities.
While the Company has substantially decreased selling, general, and administrative expenses, we expect to continue to incur losses
until such time as we can begin to generate consistent revenue from operations.
Liquidity
and Capital Resources
Liquidity
is the ability of an enterprise to generate adequate amounts of cash to meet its needs for cash requirements. The Company is not
generating consistent revenues. Operating expenses for the Company have been paid in part from short-term unsecured notes and
the issuance of Company stock. It also has a working capital and stockholders’ deficit of $6,898,053, respectively, at December
31, 2014.
The
Company has incurred and continued to incur indebtedness in order to finance its operations. As of December 31, 2014, the Company’s
total liabilities were $8,156,051, with a working capital deficit of $8,155,855. See Note 8 – Notes Payable, Note 9 –
Derivative Liability, Note 10 – Notes Payable-Related Party, and Note 11 – Derivative Liability-Related Party of the
Company’s financial statements appearing elsewhere in this annual report on Form 10-K.
Net
cash used in operating activities was $(161,925) and $(17,700) for the years ended December 31, 2014 and 2013, respectively. Cash
was primarily used to fund our net losses from operations.
Net
cash used in investing activities was $0 for both of the years ended December 31, 2014 and 2013. During the years ended December
31, 2014 and 2013, the Company did not use cash that was received for investing activities.
Net
cash provided by financing activities was $162,118 and $17,700 for the years ended December 31, 2014 and 2013, respectively. During
the year ended December 31, 2014, we received cash of $189,119 from the issuance of notes payable, of which $27,000 cash was used
as repayments of financing activities.
The
accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization
of assets and the satisfaction of liabilities in the ordinary course of business. As shown in the consolidated financial statements,
during the years ended December 31, 2014 and 2013, the Company has incurred a net loss of $3,658,707 and $2,050,994, respectively,
and as of December 31, 2014, the Company’s accumulated deficit was $19,400,144. These factors, among others, raise substantial
doubt about the Company’s ability to continue as a going concern for a reasonable period of time. The consolidated financial
statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amount
and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. The Company’s
ability to continue as a going concern is dependent upon its ability to generate consistent cash flows to meet its obligations
on a timely basis, to obtain additional financing as may be required, and its ability to continue its implementation of operations.
Management is continuing its efforts to obtain the necessary financing as may be required to generate sufficient cash flows for
current and future operations. Management is pursuing avenues of generating cash or revenues during the next twelve months. The
Company is also attempting to interest purchasers, or potential purchasers, of shredders, recycling equipment and new tires, and
establishing manufacturing plants. The Company also continues to pursue financing to build and operate its own waste refinement
and recycling industrial manufacturing plants.
There
is no assurance that the Company will be able to obtain additional cash flow from operations or to obtain additional financing.
If these are not available to the Company, the Company may not be able to continue operations. While management remains confident
that transactions will proceed, no assurances can be expressed as to the Company’s continuing viability in the absence of
consistent revenues. Current funding has come from operations and sales and the Company is currently in negotiations with several
investment sources for equity investment in the company, which if successful, will satisfy long-term operations and capital expenditures.
There are no guarantees that such negotiations will be successful.
Off
Balance Sheet Arrangements
None.
Item
7A. Quantitative and Qualitative Disclosures about Market Risk
Not
applicable
Item
8. Financial Statements and Supplementary Data
See
Index to Financial Statements and Financial Statement Schedules appearing on pages F-1 through F-25 of this annual report on Form
10-K.
INDEX
TO CONSOLIDATED FINANCIAL STATEMENTS
December
31, 2014 and 2013
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board
of Directors
Garb Oil
& Power Corporation
Largo, Florida
We
have audited the accompanying consolidated balance sheets of Garb Oil & Power Corporation and subsidiaries as of December
31, 2014 and 2013, and the related consolidated statements of operations, stockholders’ equity (deficit), and cash flows
for the years then ended. These consolidated financial statements are the responsibility of the Company’s management. Our
responsibility is to express an opinion on these consolidated financial statements based on our audits.
We
conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements
are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal
control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for
designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit
also includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements,
assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated
financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In
our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position
of Garb Oil & Power Corporation and subsidiaries as of December 31, 2014 and 2013, and the results of their operations and
their cash flows for the years then ended, in conformity with U.S. generally accepted accounting principles
The
accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern.
As discussed in Note 1 to the consolidated financial statements, the Company’s continual net losses and large accumulated
deficit, among other issues, raise substantial doubt about its ability to continue as a going concern. Management’s plans
concerning these matters are also described in Note 1. The consolidated financial statements do not include any adjustments that
might result from the outcome of this uncertainty.
/s/ HJ &
Associates, LLC |
|
HJ & Associates, LLC |
|
Salt Lake City, Utah |
|
April 15, 2015 |
|
Garb
Oil & Power Corporation and Subsidiaries
Consolidated
Balance Sheets
| |
December
31, | |
| |
2014 | | |
2013 | |
ASSETS | |
| | | |
| | |
Current assets: | |
| | | |
| | |
Cash | |
$ | 196 | | |
$ | 3 | |
Accounts receivable, net | |
| - | | |
| - | |
Total current assets | |
| 196 | | |
| 3 | |
Property and equipment, net | |
| 1,257,802 | | |
| - | |
| |
| | | |
| | |
Total assets | |
$ | 1,257,998 | | |
$ | 3 | |
| |
| | | |
| | |
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) | |
| | | |
| | |
Current liabilities: | |
| | | |
| | |
Accounts payable and accrued expenses | |
$ | 1,189,558 | | |
$ | 832,166 | |
Related party payable | |
| 3,947 | | |
| 4,285 | |
Notes payable | |
| 1,454,062 | | |
| 1,396,559 | |
Derivative liability | |
| 2,250,243 | | |
| - | |
Notes payable – related party | |
| 155,645 | | |
| 150,000 | |
Derivative liability – related party | |
| 33,987 | | |
| - | |
Capital lease payable | |
| 1,292,571 | | |
| - | |
Accrued interest | |
| 1,521,067 | | |
| 1,283,367 | |
Wage and payroll taxes payable | |
| 254,971 | | |
| 203,447 | |
Total current liabilities | |
| 8,156,051 | | |
| 3,869,824 | |
| |
| | | |
| | |
Total liabilities | |
| 8,156,051 | | |
| 3,869,824 | |
| |
| | | |
| | |
Stockholders’ Deficit: | |
| | | |
| | |
Class A preferred as of December 31, 2014; ($.0001 par value) 1,000,000 shares authorized, 24 shares outstanding as of
December 31, 2014 and 22 shares outstanding as of December 31, 2013 | |
| - | | |
| - | |
Class B preferred as of December 31, 2014; ($2.50 par value) 10,000,000 shares authorized, 4,419,918 shares outstanding
as of December 31, 2014 and 4,494,298 shares issued and outstanding as of December 31, 2013 | |
| 11,049,795 | | |
| 11,235,745 | |
Common stock as of December 31, 2014; (no par value) 50,000,000,000 shares authorized, 47,497,578,456 shares outstanding
at December 31, 2014 and 37,965,215,154 shares outstanding at December 31, 2013 | |
| (13,723,527 | ) | |
| (15,713,804 | ) |
Preferred Class A additional paid in capital | |
| 1,486,010 | | |
| 1,482,670 | |
Preferred Class B additional paid in capital | |
| 14,093,628 | | |
| 14,867,005 | |
Subscription Receivable | |
| (403,815 | ) | |
| - | |
Accumulated deficit | |
| (19,400,144 | ) | |
| (15,741,437 | ) |
Total stockholders’ deficit | |
| (6,898,053 | ) | |
| (3,869,821 | ) |
Total liabilities and stockholders’
deficit | |
$ | 1,257,998 | | |
$ | 3 | |
The
accompanying notes are an integral part of these consolidated financial statements.
Garb
Oil & Power Corporation and Subsidiaries
Consolidated
Statements of Operations and Comprehensive Income (Loss)
| |
Year
Ended December 31, | |
| |
2014 | | |
2013 | |
SALES | |
| | | |
| | |
Sales | |
$ | 300,000 | | |
$ | - | |
TOTAL SALES | |
| 300,000 | | |
| - | |
COST OF SALES | |
| 190,000 | | |
| - | |
GROSS PROFIT | |
| 110,000 | | |
| - | |
| |
| | | |
| | |
OPERATING EXPENSES | |
| | | |
| | |
Selling, general and administrative | |
| 801,580 | | |
| 2,386,064 | |
Total Operating Expenses | |
| 801,580 | | |
| 2,386,064 | |
| |
| | | |
| | |
LOSS FROM OPERATIONS | |
| (691,580 | ) | |
| (2,386,064 | ) |
| |
| | | |
| | |
OTHER INCOME (EXPENSE) | |
| | | |
| | |
Gain (loss) on extinguishment of debt | |
| (320,617 | ) | |
| 587,256 | |
Loss on disposal of assets | |
| - | | |
| (3,886 | ) |
Derivative liability expense | |
| (2,159,980 | ) | |
| - | |
Interest expense | |
| (486,530 | ) | |
| (248,300 | ) |
Total Other Income (Expense) | |
| (2,967,127 | ) | |
| 335,070 | |
LOSS BEFORE INCOME TAXES | |
| (3,658,707 | ) | |
| (2,050,994 | ) |
PROVISION (BENEFIT) FOR INCOME TAXES | |
| - | | |
| - | |
| |
| | | |
| | |
NET LOSS | |
$ | (3,658,707 | ) | |
$ | (2,050,994 | ) |
| |
| | | |
| | |
BASIC AND DILUTED LOSS PER COMMON SHARE ATTRIBUTABLE TO GARB OIL &
POWER SHAREHOLDERS | |
$ | (0.00 | ) | |
$ | (0.00 | ) |
| |
| | | |
| | |
WEIGHTED AVERAGE OF COMMON SHARES OUTSTANDING | |
| 43,188,026,388 | | |
| 35,643,824,071 | |
The
accompanying notes are an integral part of these consolidated financial statements.
Garb
Oil & Power Corporation and Subsidiaries
Consolidated
Statements of Stockholders’ Deficit
| |
Preferred
Stock - A | | |
Preferred
Stock - B | | |
Common
Stock | | |
Accumulated | | |
| | |
| | |
Total | | |
| | |
| |
| |
($.0001
par value) | | |
($2.50
par value) | | |
(no
par value) | | |
Other | | |
| | |
| | |
GARB | | |
Non | | |
Total | |
| |
| | |
Par | | |
APIC | | |
| | |
Par | | |
APIC | | |
| | |
| | |
Comprehensive | | |
Subscription | | |
Accumulated | | |
Stockholders’ | | |
Controlling | | |
Stockholders’ | |
| |
Shares | | |
Amount | | |
Amount | | |
Shares | | |
Amount | | |
Amount | | |
Shares | | |
Amount | | |
Income | | |
Receivable | | |
Deficit | | |
Deficit | | |
Interest | | |
Deficit | |
Balance,
December 31, 2012 | |
| 7 | | |
$ | - | | |
$ | 471,760 | | |
| 2,694,298 | | |
$ | 6,735,745 | | |
$ | 19,366,824 | | |
| 45,483,744,154 | | |
$ | (18,823,864 | ) | |
$ | 143,297 | | |
$ | - | | |
$ | (14,423,007 | ) | |
$ | (6,529,244 | ) | |
$ | (34,403 | ) | |
$ | (6,563,647 | ) |
Common
shares issued for services | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 1,850,000,000 | | |
| 185,000 | | |
| - | | |
| - | | |
| - | | |
| 185,000 | | |
| - | | |
| 185,000 | |
Common
shares issued for liabilities | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 250,000,000 | | |
| 25,000 | | |
| - | | |
| - | | |
| - | | |
| 25,000 | | |
| - | | |
| 25,000 | |
Common
shares issued upon conversion of notes payable and accrued interest | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 6,092,971,000 | | |
| 522,798 | | |
| - | | |
| - | | |
| - | | |
| 522,798 | | |
| - | | |
| 522,798 | |
Common
shares issued for accrued wages | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 2,288,500,000 | | |
| 2,188,507 | | |
| - | | |
| - | | |
| - | | |
| 2,188,507 | | |
| - | | |
| 2,188,507 | |
Common
shares exchanged for Class B preferred shares | |
| - | | |
| - | | |
| - | | |
| 1,800,000 | | |
| 4,500,000 | | |
| (4,499,820 | ) | |
| -18,000,000,000 | | |
| (180 | ) | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | |
Preferred
shares issued for services | |
| 15 | | |
| - | | |
| 1,010,910 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 1,010,910 | | |
| - | | |
| 1,010,910 | |
Debt
discount | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 14,000 | | |
| - | | |
| - | | |
| - | | |
| 14,000 | | |
| - | | |
| 14,000 | |
Deconsolidation
due to entities no longer under common control | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 174,935 | | |
| (143,297 | ) | |
| - | | |
| 732,564 | | |
| 764,202 | | |
| 34,403 | | |
| 798,605 | |
Net
loss for the year ended December 31, 2013 | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (2,050,994 | ) | |
| (2,050,994 | ) | |
| | | |
| (2,050,994 | ) |
Balance,
December 31, 2013 | |
| 22 | | |
$ | - | | |
$ | 1,482,670 | | |
| 4,494,298 | | |
$ | 11,235,745 | | |
$ | 14,867,005 | | |
| 37,965,215,153 | | |
$ | (15,713,804 | ) | |
$ | - | | |
$ | - | | |
$ | (15,741,437 | ) | |
$ | (3,869,821 | ) | |
$ | - | | |
$ | (3,869,821 | ) |
Common
shares issued for services | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 960,000,000 | | |
| 106,000 | | |
| - | | |
| - | | |
| - | | |
| 106,000 | | |
| - | | |
| 106,000 | |
Common
shares issued for cash | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 4,063,188,182 | | |
| 133,896 | | |
| - | | |
| - | | |
| - | | |
| 133,896 | | |
| - | | |
| 133,896 | |
Common
shares issued upon conversion of notes payable and accrued interest | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 4,596,071,428 | | |
| 459,606 | | |
| - | | |
| - | | |
| - | | |
| 459,606 | | |
| - | | |
| 459,606 | |
Class
A preferred shares issued for cash | |
| 2 | | |
| - | | |
| 3,340 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 3,340 | | |
| - | | |
| 3,340 | |
Class
B preferred shares issued for cash | |
| - | | |
| - | | |
| - | | |
| 441,930 | | |
| 1,104,825 | | |
| (773,377 | ) | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 331,448 | | |
| - | | |
| 331,448 | |
Class
B preferred shares exchanged for Common shares | |
| - | | |
| - | | |
| - | | |
| (700,000 | ) | |
| (1,750,000 | ) | |
| - | | |
| 1,750,000,000 | | |
| 1,750,000 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | |
Common
shares exchanged for Class B preferred shares | |
| - | | |
| - | | |
| - | | |
| 183,690 | | |
| 459,225 | | |
| - | | |
| (1,836,896,307 | ) | |
| (459,225 | ) | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | |
Subscription
receivable | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (403,815 | ) | |
| - | | |
| (403,815 | ) | |
| - | | |
| (403,815 | ) |
Net
loss for the year ended December 31, 2014 | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (3,658,707 | ) | |
| (3,658,707 | ) | |
| - | | |
| (3,658,707 | ) |
Balance,
December 31, 2014 | |
| 24 | | |
$ | - | | |
$ | 1,486,010 | | |
| 4,419,918 | | |
$ | 11,049,795 | | |
$ | 14,093,628 | | |
| 47,497,578,456 | | |
$ | (13,723,527 | ) | |
$ | - | | |
$ | (403,815 | ) | |
$ | (19,400,144 | ) | |
$ | (6,898,053 | ) | |
$ | - | | |
$ | (6,898,053 | ) |
The
accompanying notes are an integral part of these consolidated financial statements.
Garb
Oil & Power Corporation and Subsidiaries
Consolidated
Statements of Cash Flows
| |
Year Ended December 31, | |
| |
2014 | | |
2013 | |
Cash flows from operating activities: | |
| | | |
| | |
Net loss | |
$ | (3,658,707 | ) | |
$ | (2,050,994 | ) |
Adjustments to reconcile net loss to net cash used in operating activities: | |
| | | |
| | |
Depreciation expense | |
| 10,843 | | |
| - | |
Common stock issued for services | |
| 106,000 | | |
| 185,000 | |
Preferred Shares for services | |
| - | | |
| 1,010,910 | |
(Gain) loss on extinguishment of debt | |
| 320,617 | | |
| (587,256 | ) |
Amortization of debt discount | |
| 59,429 | | |
| 34,922 | |
Loss on derivative liability | |
| 2,159,980 | | |
| - | |
Accretion of present value of capital lease | |
| 30,926 | | |
| - | |
Disposition of fixed assets | |
| - | | |
| 3,886 | |
Bad debt expense | |
| - | | |
| 579,655 | |
Loan fees | |
| 77,250 | | |
| - | |
Changes in operating assets and liabilities: | |
| | | |
| | |
Accounts receivable | |
| - | | |
| (786 | ) |
Accounts payable and accrued expenses | |
| 382,392 | | |
| 245,356 | |
Accrued interest | |
| 259,169 | | |
| 213,378 | |
Related party payable | |
| (338 | ) | |
| (46,271 | ) |
Wages and payroll taxes payable | |
| 90,514 | | |
| 394,500 | |
Net cash used in operating activities | |
| (161,925 | ) | |
| (17,700 | ) |
| |
| | | |
| | |
Cash flows from investing activities: | |
| | | |
| | |
Purchases of property, plant and equipment | |
| - | | |
| - | |
Net cash used in investing activities | |
| - | | |
| - | |
| |
| | | |
| | |
Cash flows from financing activities: | |
| | | |
| | |
Proceeds from notes payable | |
| 124,250 | | |
| 17,700 | |
Payments on notes payable | |
| (20,000 | ) | |
| - | |
Cash received on issuances of common stock | |
| 64,868 | | |
| - | |
Payments on capital lease | |
| (7,000 | ) | |
| - | |
Net cash provided by financing
activities | |
| 162,118 | | |
| 17,700 | |
Net increase (decrease) in cash | |
| 193 | | |
| - | |
Cash at beginning of period | |
| 3 | | |
| 3 | |
Cash at end of period | |
$ | 196 | | |
$ | 3 | |
(Continued)
Garb
Oil & Power Corporation and Subsidiaries
Consolidated
Statements of Cash Flows
(Continued)
| |
Year
Ended December 31, | |
| |
2014 | | |
2013 | |
Supplemental disclosures of cash flow information: | |
| | | |
| | |
| |
| | | |
| | |
Cash paid for: | |
| | | |
| | |
Interest | |
$ | - | | |
$ | - | |
Income taxes | |
$ | - | | |
$ | - | |
| |
| | | |
| | |
Non-cash financing activities: | |
| | | |
| | |
Common shares issued for debt and accrued interest | |
$ | 138,990 | | |
$ | 528,798 | |
Debt discount | |
$ | 124,250 | | |
$ | 14,000 | |
Common shares issued for accrued compensation | |
$ | - | | |
$ | 2,188,507 | |
Common shares exchanged for Class B preferred shares | |
$ | - | | |
$ | 180 | |
Purchase of property, plant and equipment financed by capital lease | |
$ | 1,268,645 | | |
$ | - | |
Accrued interest reclassified to note principal | |
$ | 21,469 | | |
$ | - | |
Accounts payable reclassified to note principal | |
$ | 25,000 | | |
$ | - | |
Wages payable reclassified to note payable | |
$ | 38,990 | | |
$ | - | |
Class B preferred shares exchanged for Common shares | |
$ | 1,290,774 | | |
$ | - | |
Common shares for subscription receivable | |
$ | 69,028 | | |
$ | - | |
Preferred shares for subscription receivable | |
$ | 334,787 | | |
$ | - | |
The
accompanying notes are an integral part of these consolidated financial statements.
Garb
Oil & Power Corporation and Subsidiaries
Notes
to Consolidated Financial Statements
December
31, 2014 and 2013
Forward
“Former
management” refers to prior Company management who were managing the Company until August 21, 2013. “Current management”
refers to current Company management who have managed the Company since August 21, 2013.
Note
1 – Organization and Summary of Significant Accounting Principles
a.
Organization To Date
Garb
Oil & Power Corporation (the “Company” or “Garb”) was incorporated in the State of Utah in 1972 under
the name Autumn Day, Inc. The Company changed its name to Energy Corporation International in 1978 and to Garb-Oil Corporation
of America in 1981, which marked the start of the Company’s development state in the energy and recycling industries. The
Company changed its name to Garb Oil & Power Corporation in 1985 and then to Garb Corporation in May 2013. In February 2014,
the Company changed its name back to Garb Oil & Power Corporation.
The
Company has a long history in the fast growing industry of waste recycling and specifically related to waste-to-energy, upon which
the Company is building. Garb is organized to utilize both next-generation machines and new technologies to vertically integrate
into the waste refinement, recycling and energy industries. The current revised company emphasis (effective August 21, 2013) is
in profitable new and “green” solutions for waste-to-energy, alternate energy sources, gas drilling, fuel enhancements,
improving energy usage efficiency and utilizing recycled material in producing both useful and desirable products manufactured
in its own plants. The Company’s use of its first industrial manufacturing property and equipment will be to manufacture
wood pellets to be used as an alternate power fuel and for farm and agricultural applications. In addition, this manufacturing
facility will utilize power saving technology including the use of recycled materials as fuel that will result in lower operating
costs. Also, excess electricity will be generated that may be sold back to the power company, thereby generating an additional
source of revenue.
Effective
August 21, 2013, all of the Company’s former executive officers and directors resigned. Also effective August 21, 2013,
following the resignation of the Company’s former management, Ms. Tammy Taylor was appointed as the Company’s Chief
Executive Officer, President and Principal Financial Officer, and Ms. M. Aimee Coleman was appointed as the Company’s Corporate
Secretary and Principal Accounting Officer. Ms. Taylor was also appointed as the Company’s sole director.
COMPANY
SUBSIDIARIES
Resource
Protection Systems GmBH
On
October 27, 2009, the Company entered into an agreement to purchase Resource Protection Systems GmBH, a company organized and
currently active under the laws of Germany (“RPS”). The purchase was for all outstanding shares, as well as for specified
RPS assets and liabilities. As consideration, the Company paid the shareholders of RPS an aggregate of 27,829,291 shares of the
Company’s common stock and options to purchase 100,000,000 shares of the Company’s common stock with an expiration
date of November 1, 2014, and an exercise price equal to one-tenth of the closing ask price for 10 trading days prior to the exercise
of the option. The options were contingent upon the Company increasing its authorized shares, which it did in March 2010.The RPS
specified assets were not transferred to the Company and therefore the purchase was not fully consummated. All of the options
expired on November 1, 2014 without being exercised.
On
January 15, 2010, RPS purchased 80% of the issued and outstanding stock of Newview S.L., a company organized under the laws of
Spain (“Newview”). The Company has been unable to determine whether Newview was active.
The
Company’s financial statements from the year ended December 31, 2009 through the quarter ended June 30, 2013 each contains
its audited or reviewed consolidated financial statements for the Company and its subsidiaries which includes RPS consolidated
financials that were converted into United States Dollars (USD). The Company has included RPS and Newview as Company subsidiaries,
accounted for as entities under common control, since RPS, Newview, and the Company had common management during this period of
time. As the transaction combines two commonly controlled entities that historically prior to October 27, 2009 have not been presented
together, the resulting financial statements are, in effect, considered those of a different reporting entity. This resulted in
a change in reporting entity, which required retrospectively combining the entities for all periods presented as if the combination
had been in effect since inception of common control. The financial information of previously separate entities, prior to the
acquisition date, is to be shown as combined. Since the former management left the Company during the quarter ended September
30, 2013 (on August 21, 2013) the Company’s financial statements beginning with the quarter ended September 30, 2013 omits
the RPS and Newview financial statements including the Company’s financial statements contained in this annual filing.
Garb
Global Services, Inc.
On
January 24, 2014 the Company signed a letter of intent (the “LOI”) and a collaborative effort agreement (the “CE
Agreement”) with Shredderhotline.com Company (“Shredderhotline”) and Dan Scott Burda, Shredderhotline’s
President/Owner. The LOI includes a stock purchase equal to 10% of each stock classes’ authorized shares at the time of
execution in exchange for $448,683 in total cash and other assets to the Company. The cash portion is $44,868. The shares by stock
class issued February 4, 2014 was two restricted shares of the Company’s Class A preferred stock, 441,930 restricted shares
of the Company’s Class B preferred stock and 3,796,521,515 restricted shares of the Company’s common stock. In general,
the CE Agreement is a long-term collaboration with the intent of the Company receiving over time all of Shredderhotline’s
assets including complete customers database, shredder patents and recycle plant designs. In addition, the CE Agreement provides
that the two ranking executive officers of both companies’ will collaborate on future sales and operations within a newly
formed wholly owned subsidiary of the Company, Garb Global Services, Inc. (“Garb Global”). On November 18, 2014, the
Company and Shredderhotline mutually determined that their business interests had diverged and the Company and Shredderhotline
released one another from their rights and obligations under the LOI and CE Agreement both dated January 24, 2014. Garb Global
will continue as an operating subsidiary of the Company.
b.
Use of Estimates
The
preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States
of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates.
c.
Basis of Presentation - Going Concern
The
accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization
of assets and the satisfaction of liabilities in the ordinary course of business. As shown in the consolidated financial statements,
during the years ended December 31, 2014 and 2013, the Company has incurred a net loss of $3,658,707 and $2,050,994, respectively,
and as of December 31, 2014, the Company’s accumulated deficit was $19,400,144. These factors, among others, raise substantial
doubt about the Company’s ability to continue as a going concern for a reasonable period of time. The consolidated financial
statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amount
and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. The Company’s
ability to continue as a going concern is dependent upon its ability to generate consistent cash flows to meet its obligations
on a timely basis, to obtain additional financing as may be required, and its ability to continue its implementation of operations.
Management is continuing its efforts to obtain the necessary financing as may be required to generate sufficient cash flows for
current and future operations. Management is pursuing avenues of generating cash or revenues during the next twelve months. The
Company is also attempting to interest purchasers, or potential purchasers, of shredders, recycling equipment and new tires, and
establishing manufacturing plants. The Company also continues to pursue financing to build and operate its own waste refinement
and recycling industrial manufacturing plants.
There
is no assurance that the Company will be able to obtain additional cash flow from operations or to obtain additional financing.
If these are not available to the Company, the Company may not be able to continue operations. While management remains confident
that transactions will proceed, no assurances can be expressed as to the Company’s continuing viability in the absence of
revenues. Current funding has come from operations and sales and the Company is currently in negotiations with several investment
sources for equity investment in the company, which if successful, will satisfy long-term operations and capital expenditures.
There are no guarantees that such negotiations will be successful.
d.
Principles of Consolidation To Date
The
consolidated financial statements contained in this annual filing include the accounts of Garb and Garb Global. The accounts of
RPS discontinued inclusion with Garb began with the quarter ended September 30, 2013 since it was an entity under common control
from October 27, 2009 through August 21, 2013. Newview was 80% owned by RPS and therefore its accounts were also discontinued
inclusion with Garb beginning with the quarter ended September 30, 2013. Garb Global was 100% owned since February 12, 2014 and
therefore its accounts began to be included with Garb beginning with the quarter ended March 31, 2014. When Garb has subsidiaries
as of the filing ended date, all significant intercompany accounts and transactions have been eliminated in consolidation.
e.
Property and Equipment
Property
and equipment is recorded at cost and is depreciated using the straight-line method based on the expected lives of the assets
which range from five to thirty nine years. Leases determined to be capital leases are classified as being owned by the Company
and recorded accordingly. (Also see Note 12 – Capital Lease.) Depreciation expense for the years ended December 31, 2014
and 2013 was $10,843 and $0, respectively.
The
Company records impairment losses when indicators of impairment are present and undiscounted cash flows estimated to be generated
by those assets are less than the assets’ carrying amount.
f.
Revenue Recognition To Date
Revenue
is recognized when the following criteria are met: 1. persuasive evidence of an arrangement exists, which is generally in the
form of a signed contract which specifies a fixed price, 2. the sales amount is determinable, 3. when title is transferred, which
is when goods shipped to the customer has been received and accepted or services have been rendered, and 4. collection is reasonably
assured. The Company engages in product sales.
g.
Accounts Receivable/Allowance for Bad Debt
The
Company’s allowance for uncollectible accounts receivable is based on its historical bad debt experience and on current
management’s evaluation of its ability to collect individual outstanding balances. The Company had $599,051 allowance for
doubtful accounts as of December 31, 2014 and 2013. (Also see Note 4 – Related Party Transactions.)
h.
Advertising Costs
The
Company expenses all advertising costs as incurred. The Company recorded $0 and $563 advertising expense for the years ended December
31, 2014 and 2013 respectively.
i.
Basic Income (Loss) Per Share
The
following is an illustration of the reconciliation of the numerators and denominators of the basic loss per share calculation:
| |
For the Years Ended December
31, | |
| |
2014 | | |
2013 | |
Comprehensive loss (numerator) | |
$ | (3,658,707 | ) | |
$ | (2,050,994 | ) |
Weighted average shares outstanding (denominator) | |
| 43,188,026,388 | | |
| 35,643,824,071 | |
Basic loss per share | |
$ | (0.00 | ) | |
$ | (0.00 | ) |
For
the year ended December 31, 2014 and 2013, the Company had no common stock equivalents that are excluded from the computation
of diluted earnings per share as their effect is anti-dilutive due to net losses.
j.
Financial Instruments
Cash
equivalents include highly liquid short-term investments with original maturities of three months or less, readily convertible
to known amounts of cash. The amounts reported as cash, prepaid expenses, trade accounts payable and notes payable to related
parties are considered to be reasonable approximations of their fair values. The fair value estimates presented herein were based
on available market information for the year ended December 31, 2014. The use of different market assumptions and/or estimation
methodologies could have a material effect on the estimated fair value amounts. The reported fair values do not take into consideration
potential expenses that would be incurred in an actual settlement.
k.
Stock-Based Compensation
The
Company records expense associated with the fair value of stock-based compensation. For fully vested stock and restricted stock
grants the Company calculates the stock based compensation expense based upon estimated fair value on the date of grant. For stock
options, the Company uses the Black-Scholes option valuation model to calculate stock based compensation at the date of grant.
Option pricing models require the input of highly subjective assumptions, including the expected price volatility. Changes in
these assumptions can materially affect the fair value estimate.
l.
Concentration of Credit and Other Risks
The
Company maintains cash in federally insured bank accounts. At times these amounts exceed insured limits. The Company does not
anticipate any losses from these deposits.
The
Company had one customer for the year ended December 31, 2014. The Company had no customers whose sales were greater than 10%
for the year ended December 31, 2013.
The
Company’s December 31, 2014 and 2013 accounts receivable was due entirely from three other entities during the years. (Also
see Note 4 – Related Party Transactions.)
During
the year ended December 31, 2014, the Company had concentration of credit risk.
m.
Derivative Liability
The
Company has embedded conversion options in its convertible notes payable, with conversion rates that prevent calculating the number
of shares into which the notes could eventually be converted into. The Company values these conversion features using the Black
Scholes option valuation model. The resulting derivative liability is valued at each reporting date and the change in the liability
is reflected as change in derivative liability in the statement of operations (Also see Note 9 – Derivative Liability and
Note 11 – Derivative Liability – Related Party)
n.
Fair Value of Financial Instruments
The
Company’s financial instruments include accounts receivable, accounts payable and accrued expenses, related party payable,
notes payable, related party notes payable and derivative liabilities. The principal balance of accounts receivable, accounts
payable and accrued expenses, related party payable, notes payable and related party notes payable approximate fair value because
current interest rates and terms available to the Company for similar instruments are substantially the same. Derivative liabilities
are recorded at fair value.
The
Company uses a framework for measuring fair value with 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
fair value hierarchy for recurring fair value measurements is as follows:
| |
Fair
Value | | |
Fair
Value Measurements at December 31, 2014 | |
| |
as
of | | |
Using
Fair Value Hierarchy | |
| |
December 31, 2014 | | |
Level
1 | | |
Level
2 | | |
Level
3 | |
Liabilities: | |
| | | |
| | | |
| | | |
| | |
Derivative liability | |
$ | 2,250,243 | | |
$ | - | | |
$ | 2,250,243 | | |
$ | - | |
Derivative liability - related party | |
$ | 33,987 | | |
$ | - | | |
$ | 33,987 | | |
$ | - | |
(Also see
Note 9 – Derivative Liability and Note 11 – Derivative Liability – Related Party)
o.
Income Taxes
Deferred
income taxes are provided using the liability method whereby deferred tax assets are recognized for deductible temporary differences
and operating loss and tax credit carry forwards and deferred tax liabilities are recognized for taxable temporary differences.
Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred
tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion
or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of the
changes in tax laws and rates of the date of enactment.
When
tax returns are filed, it is highly certain that some positions taken would be sustained upon examination by the taxing authorities,
while others are subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately
sustained. The benefit of a tax position is recognized in the financial statements in the period during which, based on all available
evidence, management believes it is more likely than not that the position will be sustained upon examination, including the resolution
of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions. Tax positions
that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more than 50
percent likely of being realized upon settlement with the applicable taxing authority. The portion of the benefits associated
with tax positions taken that exceeds the amount measured as described above is reflected as a liability for unrecognized tax
benefits in the accompanying balance sheet along with any associated interest and penalties that would be payable to the taxing
authorities upon examination.
Interest
and penalties associated with unrecognized tax benefits are classified as additional income taxes in the statement of income.
p.
Foreign Currency
Not
applicable to the Company’s reported financial statements.
q.
Recent Accounting Standards
The
Company does not expect the adoption of any recently issued accounting pronouncement to have a significant impact on its financial
position, results of operations or cash flows.
Note
2 – Acquisitions
Newview,
S.L.
On
January 15, 2010, RPS purchased, through a business combination, 80% of the issued and outstanding stock of Newview S.L. The Company
purchased Newview since it held certain proprietary information and other technology relating to the Company’s e-waste recycling
and processing business. At the time of the purchase, Igor Plahuta was a Company Director and 100% owner of Newview. The Company
has been unable to determine whether Newview was active.
The
total maximum consideration that was to be paid to Mr. Plahuta for the Newview Acquisition was €600,000 ($870,000), including
cancellation of indebtedness owed by Mr. Plahuta to RPS of €300,000 ($435,000), cash up to €150,000 ($217,000) from
the sale of a 47% participation in Sistema Proteccion Recursos, a company organized under the laws of Spain when RPS consummates
such sale and receives payment, and cash up to €150,000 ($217,000) from profits of RPS based on a percent of gross sales
of RPS during a certain period. Other than the cancellation of indebtedness, none of the consideration for the purchase was paid.
RPS had $0 gross sales (revenues) from October 27, 2009 until August 21, 2013 – the time period during which the Company
and RPS had common management.
The
transaction was accounted for as entities under common control. As the transaction combines two commonly controlled entities that
historically have not been presented together, the resulting financial statements were, in effect, considered those of a different
reporting entity. This resulted in a change in the reporting entity, which required retrospectively combining the entities for
all periods presented as if the combination had been in effect since inception of common control.
On
August 21, 2013, the Company and RPS ceased to have common control, thereafter the combined RPS and Newview, S.L. financial statements
were no longer combined into the Company’s financial Statements, including the Company’s financial statements contained
in this annual filing.
Garb
Global Services, Inc.
On
January 24, 2014 the Company signed a letter of intent (the “LOI”) and a collaborative effort agreement (the “CE
Agreement”) with Shredderhotline.com Company (“Shredderhotline”) and Dan Scott Burda, Shredderhotline’s
President/Owner. The LOI includes a stock purchase equal to 10% of each stock classes’ authorized shares at the time of
execution in exchange for $448,683 in total cash and other assets to the Company. The cash portion is $44,868. The shares by stock
class issued February 4, 2014 was two restricted shares of the Company’s Class A preferred stock, 441,930 restricted shares
of the Company’s Class B preferred stock and 3,796,521,515 restricted shares of the Company’s common stock. In general,
the CE Agreement is a long-term collaboration with the intent of the Company receiving over time all of Shredderhotline’s
assets including complete customers database, shredder patents and recycle plant designs. In addition, the CE Agreement provides
that the two ranking executive officers of both companies’ will collaborate on future sales and operations within a newly
formed wholly owned subsidiary of the Company, Garb Global Services, Inc. (“Garb Global”). On November 18, 2014, the
Company and Shredderhotline have mutually determined that their business interests have diverged and the Company and Shredderhotline
have released one another from their rights and obligations under the LOI and CE Agreement both dated January 24, 2014. Garb Global
will continue as an operating subsidiary of the Company and its financial statements are combined into the Company’s year
ended December 31, 2014 financial statements as presented in this annual report.
Note
3 – Property And Equipment
The
major classes of property and equipment as of December 31, 2014 and 2013 are as follows:
| |
| | |
| | |
Estimated |
| |
| | |
| | |
Service Lives |
| |
December
31, 2014 | | |
December
31, 2013 | | |
in
Years |
Property | |
$ | 1,268,645 | | |
$ | - | | |
39 |
| |
| | | |
| | | |
|
| |
| | | |
| | | |
|
Total property and equipment | |
| 1,268,645 | | |
| - | | |
|
| |
| | | |
| | | |
|
Less accumulated depreciation | |
| (10,843 | ) | |
| - | | |
|
| |
| | | |
| | | |
|
Property and equipment, net | |
$ | 1,257,802 | | |
$ | - | | |
|
(Also
see Note 12 – Capital Lease.)
Note
4 – Related Party Transactions
During
the years ended December 31, 2014 and 2013, the Company accrued $137,500 and $394,500 in salaries to managers and directors of
the Company.
Related
Party Company Stock Issuances during the Year Ended December 31, 2014
In
January 2014, The Company approved the issuance of 3,796,521,515 shares of Common Stock, 2 shares of Class A Preferred Stock,
and 441,930 shares of Class B Preferred Stock to Shredderhotline.com Company for $448,683 in total cash and other assets to the
Company. The terms of the sale was $44,868 cash and the remaining $403,815 as other assets to be transferred to the Company, recognized
as Subscription Receivable on the Company’s books. The balance of Subscription Receivable as of December 31, 2014 was $403,815.
(Also see Note 1a.)
In
March 2014, the Company approved the issuance of 266,666,667 shares of Common Stock to Kindness Wave, Inc. for cash of $20,000.
Tammy Taylor is a director of Kindness Wave, Inc.
In
March 2014, Corporate Business Advisors, Inc. converted 700,000 shares of Class B Preferred Stock to 1,750,000,000 shares of Common
Stock using a conversion rate of $2.50.
Related
Party Company Stock Issuances during the Year Ended December 31, 2013
In
February 2013, Igor Plahuta converted the 12,000,000,000 shares of Common Stock received during June 2012 to 1,200,000 shares
of Class B Preferred Stock using a stated conversion rate of $0.0001.
In
February 2013, Alan Fleming converted the 6,000,000,000 shares of Common Stock received during June 2012 to 600,000 shares of
Class B Preferred Stock using a stated conversion rate of $0.0001.
In
June 2013, the Company approved the issuance of 850,000,000 shares of Common Stock to John Rossi for accrued salary of $810,000.
In
June 2013, the Company approved the issuance of 866,000,000 shares of Common Stock to Igor Plahuta for accrued salary of $826,000.
In
June 2013, the Company approved the issuance of 572,500,000 shares of Common Stock to Alan Fleming for accrued salary of $552,507.
In
December 2013, the Company approved the issuance of 600,000,000 shares of Common Stock to Tammy Taylor for services of $60,000.
In
December 2013, the Company approved the issuance of 600,000,000 shares of Common Stock to M Aimee Coleman for services of $60,000.
In
December 2013, the Company approved the issuance of 600,000,000 shares of Common Stock to Corporate Business Advisors, Inc. for
services of $60,000.
In
December 2013, the Company approved the issuance of 2 shares of Class B Preferred Stock to Tammy Taylor for services of $134,788.
In
December 2013, the Company approved the issuance of 1 share of Class B Preferred Stock to M Aimee Coleman for services of $67,394.
In
December 2013, the Company approved the issuance of 12 shares of Class B Preferred Stock to Corporate Business Advisors, Inc.
for services of $808,728.
Related
party payable consisted of the following at December 31, 2014 and 2013:
| |
December 31, 2014 | | |
December 31, 2013 | |
| |
| | |
| |
Accounts payable to a related parties, due on demand, no interest, unsecured | |
$ | 3,947 | | |
$ | 4,285 | |
| |
| | | |
| | |
Total | |
$ | 3,947 | | |
$ | 4,285 | |
Notes
payable - related party consisted of the following at December 31, 2014 and 2013:
| |
December 31, 2014 | | |
December 31, 2013 | |
| |
| | |
| |
Notes payable to a related party, due within one year, no interest, unsecured | |
$ | 155,645 | | |
$ | 150,000 | |
| |
| | | |
| | |
Total | |
$ | 155,645 | | |
$ | 150,000 | |
As
of December 31, 2014 and 2013, accounts receivable related to cash received by management without supportive cash receipts was
$249,051. As of December 31, 2014 and 2013, allowances for bad debt was $249,051, resulting in net accounts receivable from related
party balances as of December 31, 2014 and 2013 as $0.
Note
5 – Income Taxes
The
Company accounts for income taxes in accordance with Accounting Standards Codification Topic 740, Income Taxes (“Topic 740”),
which requires the recognition of deferred tax liabilities and assets at currently enacted tax rates for the expected future tax
consequences of events that have been included in the financial statements or tax returns. A valuation allowance is recognized
to reduce the net deferred tax asset to an amount that is more likely than not to be realized. Topic 740 provides guidance on
the accounting for uncertainty in income taxes recognized in a company’s financial statements. Topic 740 requires a company
to determine whether it is more likely than not that a tax position will be sustained upon examination based upon the technical
merits of the position. If the more-likely-than-not threshold is met, a company must measure the tax position to determine the
amount to recognize in the financial statements. At the adoption date of January 1, 2007, the Company had no unrecognized tax
benefit which would affect the effective tax rate if recognized. The Company includes interest and penalties arising from the
underpayment of income taxes in the statements of operation in the provision for income taxes. As of December 31, 2014, the Company
had no accrued interest or penalties related to uncertain tax positions.
The
Company files income tax returns in the U.S. federal jurisdiction and in the state of Utah. Deferred taxes are provided on a liability
method whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carry
forwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences
between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance
when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be
realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.
Net deferred tax liabilities consist of the following components as of December 31, 2014 and 2013.
| |
December 31, 2014 | | |
December 31, 2013 | |
Deferred tax assets: | |
| | | |
| | |
NOL carryover | |
$ | 4,043,300 | | |
$ | 2,776,000 | |
Allowance for doubtful accounts | |
| 233,600 | | |
| 237,900 | |
Accrued wages | |
| 91,800 | | |
| 76,700 | |
Deferred tax liabilities: | |
| | | |
| | |
Depreciation | |
| 1,300 | | |
| - | |
Valuation allowance | |
| (4,370,000 | ) | |
| (3,090,600 | ) |
Net deferred tax liability | |
$ | - | | |
$ | - | |
The
income tax provision differs from the amount of income tax determined by applying the U.S. federal and state income tax rates
to pretax income from continuing operations for the years ended December 31, 2014 and 2013 due to the following:
| |
December 31, 2014 | | |
December 31, 2013 | |
Book income (loss) | |
$ | (1,426,900 | ) | |
$ | (744,000 | ) |
Allowance for doubtful accounts | |
| - | | |
| 141,100 | |
Accrued wages | |
| 15,200 | | |
| 25,200 | |
Non-deductible meals and entertainment | |
| 100 | | |
| 1,100 | |
Other non-deductible expenses | |
| 166,400 | | |
| 382,600 | |
Valuation allowance | |
| 1,245,200 | | |
| 194,000 | |
Income tax provision | |
$ | - | | |
$ | - | |
At
December 31, 2014, the Company had net operating loss carry forwards of approximately $10,367,000 that may be offset against future
taxable income from the year 2015 through 2034. No tax benefit has been reported in the December 31, 2014 consolidated financial
statements since the potential tax benefit is offset by a valuation allowance of the same amount.
Due
to the change in ownership provisions of the Tax Reform Act of 1986, net operating loss carry forwards for Federal income tax
reporting purposes are subject to annual limitations. Since a change in ownership has occurred during the year ended December
31, 2013, net operating loss carry forwards may be limited as to use in future years.
Note
6 – Commitments To Date
The
Company had employment agreements with its former officers. The Company’s prior Chief Executive Officer, John Rossi’s
agreement was for seven years through November 30, 2016 and included a base salary of $240,000 per year. The Company’s prior
Chief Technical Officer, Igor Plahuta’s agreement was for seven years through November 30, 2016 and included a base salary
of $240,000 per year. The Company’s prior Chief Operations Officer, Alan Fleming’s agreement was for five years and
expired on April 14, 2015 and included a base salary of $180,000 year. The former officers’ employment agreements terminated
during August 2013.
The
Company has employment agreements with its current officers installed during August 2013. The Company’s current Chief Executive
Officer, Tammy Taylor’s agreement includes a starting salary of $120,000 per year. The Company’s current Corporate
Secretary, M. Aimee Coleman’s agreement is for starting part time at $250 per week, with hours over 10 hours a week at the
hourly rate of $25 per hour. Both current officers agreed to allow unpaid salaries to accrue and be paid as operations’
cash flows improve. The terms of employment for the length of employment service of both agreements are open ended, at will for
both parties, except for agreement violations’ remedies as specified.
As
of December 31, 2014 and 2013 the Company had accrued a total of $254,971 and $203,447 in wages and payroll taxes payable related
to officer compensation.
Note
7 – Operating Leases
None.
Note
8 – Notes Payable
Both
secured and unsecured notes payable balance net of discounts for the years ended December 31, 2014 and 2013 were $1,454,062, net
of debt discounts of $48,189 and $1,396,559, net of debt discounts of $2,723, respectively.
January
3, 2002 Note
A
$10,000 unsecured promissory note was entered into on January 3, 2002, is due August 1, 2006, plus interest of 12% and is in default.
During the year ended December 31, 2013, the Company and the note holder entered into a debt settlement agreement on this note
and the June 24, 2006 Note that resulted in forgiveness of all the January 3, 2002 Note principal and accrued interest. The balance
of the Note as of December 31, 2014 and December 31, 2013 was $0, net of debt discounts of $0.
January
1, 2003 Note
A
$68,493 unsecured promissory note was entered into on January 1, 2003, is due on demand and plus interest of 12%. The balance
of the Note as of December 31, 2014 and December 31, 2013 was $68,493, net of debt discounts of $0.
January
1, 2003 Note
A
$165,000 unsecured promissory note was entered into on January 1, 2003, is due on demand and plus interest of 12%. The balance
of the Note as of December 31, 2014 and December 31, 2013 was $165,000, net of debt discounts of $0.
January
21, 2003 Note
A
$20,000 unsecured promissory note was entered into on January 21, 2003, is due on demand and plus interest of 10%. The balance
of the Note as of December 31, 2014 and December 31, 2013 was $20,000, net of debt discounts of $0.
June
24, 2006 Note
A
$53,000 promissory note was entered into on June 24, 2006 secured by sales contract and officer guarantee, is due on demand, plus
interest of 12% and plus a $5,000 default interest penalty per week. During the year ended December 31, 2013, the Company and
the note holder entered into a debt settlement agreement on this note and the January 3, 2002 Note that resulted in forgiveness
of the June 24, 2006 Note principal over $35,000 and all accrued interest. During the year ended December 31, 2014, the Company
paid $20,000 cash payments toward the June 24, 2006 Note that was settled as a principal only note. The balance of the Note as
of December 31, 2014 was $15,000 and as of December 31, 2013 was $35,000, both net of debt discounts of $0.
July
5, 2006 Note
A
$2,250 unsecured promissory note was entered into on July 5, 2006, was due September 5, 2006, plus interest of 5% per month and
is in default. The balance of the Note as of December 31, 2014 and December 31, 2013 was $2,250, net of debt discounts of $0.
July
5, 2006 Note
A
$2,750 unsecured promissory note was entered into on July 5, 2006, was due September 5, 2006, plus interest of 5% per month and
is in default. The balance of the Note as of December 31, 2014 and December 31, 2013 was $2,750, net of debt discounts of $0.
October
11, 2007 Note
A
$129,327 unsecured promissory note was entered into on October 11, 2007, is due on demand, plus interest of 18% from October 7,
2005 through January 6, 2006 then $500 per week through April 1, 2009, then $5,000 per month. During the year ended December 31,
2012, the Company issued a total of 15,250,000,000 shares of common stock at an average conversion price of $.000001, or $15,250
as repayment to the original debt holder for principal and accrued interest. During the year ended December 31, 2013 the original
debt holder assigned $6,000 worth of note’s accrued interest. During the year ended December 31, 2012 the original debt
holder assigned $49,000 worth of note’s principle and accrued interest. The balance of the October 11, 2007 Note owed to
the original debt holder as of December 31, 2014 and December 31, 2013 was $327, net of debt discounts of $0.
During
the year ended December 31, 2012, the Company issued a total of 6,350,000,000 shares of common stock at an average conversion
price of $.000006, or $35,750, as repayment for a portion of the year ended December 31, 2012 Assigned October 11, 2007 Note.
The Assigned October 11, 2007 Notes balances total $13,250 as of December 31, 2014 and December 31, 2013, net of debt discounts
of $0.
December
31, 2009 Note
A
$6,000 unsecured promissory note was entered into on December 31, 2009, is due on demand and plus interest of 36%. The balance
of the Note as of December 31, 2014 and December 31, 2013 was $6,000, net of debt discounts of $0.
December
31, 2009 Note
A
$7,500 unsecured promissory note was entered into on December 31, 2009, is due on demand and plus interest of 10%. The balance
of the Note as of December 31, 2014 and December 31, 2013 was $7,500, net of debt discounts of $0.
December
31, 2009 Note
A
$3,000 unsecured promissory note was entered into on December 31, 2009, is due on demand and plus interest of 36%. The balance
of the Note as of December 31, 2014 and December 31, 2013 was $3,000, net of debt discounts of $0.
June
23, 2010 Note
On
June 23, 2010 the Company converted $43,217 of accounts payable into an unsecured promissory note. The note bears interest at
6% per annum and is due on demand. The balance of the June 22, 2010 Note as of December 31, 2014 and December 31, 2013 was $43,217,
net of debt discounts of $0.
June
29, 2010 Note
On
June 29, 2010 the Company issued an unsecured promissory note to a professional services provider for $300,000 related to consulting
services rendered. The note bears interest at 18% per annum and has a maturity date of July 1, 2010. The note agreement contains
a 10% penalty clause if the Company fails to make payment at the maturity date. On July 2, 2010 the Company was in default of
the note and recorded penalties of $30,296 to interest expense. During the year ended December 31, 2011, the professional services
provider (“Assignor”) entered into $309,250 worth of certain assignment of debt agreements with several investors
(“Assignees”) pursuant to which the Assignor granted, transferred and set over until the Assignees its right, title
and interest in the June 29, 2010 Note including, without limitation, all rights, interest terms, benefits and advantages of the
Assignor to be derived here from and burdens, obligations and liabilities to be derived thereunder. The balance of the June 29,
2010 Note owed to the professional services provider as of December 31, 2014 and as of December 31, 2013 was $21,046, net of debt
discounts of $0.
During
the year ended December 31, 2012, the Company issued a total of 324,285,714 shares of common stock at an average conversion price
of $.00012, or $39,000, as repayment for several of the year ended December 31, 2011 Assigned June 29, 2010 Note. The Assigned
June 29, 2010 Notes balances as of December 31, 2014 and as of December 31, 2013 was $57,000, net of debt discounts of $0.
December
29, 2010 Note
On
December 29, 2010 the Company issued an unsecured promissory note to a professional services provider for $50,000 related to consulting
services rendered. The note bears interest at 18% per annum and has a maturity date of December 31, 2010. The note agreement contains
a 10% penalty clause if the Company fails to make payment at the maturity date. On December 31, 2010 the Company was in default
of the Note and recorded penalties of $5,049 to interest expense. The balance of the December 29, 2010 Note as of December 31,
2014 and December 31, 2013 was $55,049, net of debt discounts of $0.
March
29, 2011 Note
On
March 29, 2011 the Company issued an unsecured promissory note to a professional services provider for $50,000 related to consulting
services rendered. The note bears interest at 12% per annum, has a maturity date of March 31, 2011 and has an 18% default interest
rate should the note go into default. The note agreement contains a 10% penalty clause if the Company fails to make payment at
the maturity date. On April 1, 2011 the Company was in default of the March 29, 2011 Note and recorded penalties of $5,000 to
interest expense and the note interest per annum increased to 18%. During the year ended December 31, 2013, the Company issued
a total of 500,000,000 shares of common stock at an average conversion price of $0.0001, or $50,000 as full repayment of the March
29, 2011 Note. The balance of the March 29, 2011 Note as of December 31, 2014 and December 31, 2013 was $0, both net of debt discounts
of $0.
March
31, 2011 Note
On
March 31, 2011 the Company issued an unsecured promissory note to a professional services provider for $75,000 related to consulting
services rendered. The note bears interest at 18% per annum and has a maturity date of September 30, 2011. The note agreement
contains a 10% penalty clause if the Company fails to make payment at the maturity date. On October 1, 2011 the Company was in
default of the March 31, 2011 Note and recorded penalties of $7,500 to interest expense. During the year ended December 31, 2013,
the Company issued a total of 750,000,000 shares of common stock at an average conversion price of $0.0001, or $75,000 as full
repayment of the March 31, 2011 Note. The balance of the March 31, 2011 Note as of December 31, 2014 and December 31, 2013 was
$0, both net of debt discounts of $0.
April
20, 2011 Note
On
April 20, 2011 the Company issued an unsecured promissory note to a professional services provider for $4,000 related to consulting
services rendered. The note bears interest at 20% per annum and has a maturity date of October 20, 2011. The note agreement contains
a change in the interest rate to 36% of the Company fails to make payment at the maturity date. On October 21, 2011 the note began
accruing interest at the 36% default interest rate. During the year ended December 31, 2013, the Company issued a total of 40,000,000
shares of common stock at an average conversion price of $0.0001, or $4,000 as full repayment of the April 20, 2011 Note. The
balance of the April 20, 2011 Note as of December 31, 2014 and December 31, 2013 was $0, both net of debt discounts of $0.
June
30, 2011 Note
On
June 30, 2011 the Company issued an unsecured promissory note to a professional services provider for $75,000 related to consulting
services rendered. The note bears interest at 18% per annum and has a maturity date of December 31, 2011. The note agreement contains
a 10% penalty clause if the Company fails to make payment at the maturity date. On December 30, 2011 the Company recognized being
in default of the June 30, 2011 Note and recorded penalties of $7,500 to interest expense. During the year ended December 31,
2013, the Company issued a total of 750,000,000 shares of common stock at an average conversion price of $0.0001, or $75,000 as
full repayment of the June 30, 2011 Note. The balance of the June 30, 2011 Note as of December 31, 2014 and December 31, 2013
was $0, both net of debt discounts of $0.
July
26, 2011 Note
On
July 26, 2011 the Company issued an unsecured convertible note in the principal amount of $12,300 in exchange for $12,300 in cash
consideration. The note bears interest at 10% per annum and has a maturity date of January 26, 2012. The note agreement contains
a change in the interest rate to 36% of the Company fails to make payment at the maturity date. On January 27, 2012 the Company
defaulted on the note and the note interest per annum increased to 36%. During the year ended December 31, 2013, the Company issued
a total of 123,000,000 shares of common stock at an average conversion price of $0.0001, or $12,300 as full repayment of the July
26, 2011 Note. The balance of the July 26, 2011 Note as of December 31, 2014 and December 31, 2013 was $0, both net of debt discounts
of $0.
August
26, 2011 Note
On
August 26, 2011 the Company issued an unsecured convertible note in the principal amount of $30,000 in exchange for $30,000 in
cash consideration. The note bears interest at 9.9% per annum, has a maturity date of August 26, 2012 and has a 20% default interest
rate should the note go into default. On August 27, 2012 the Company defaulted on the note and the note interest per annum increased
to 20%. During the year ended December 31, 2013, the Company issued a total of 689,344,200 shares of common stock at an average
conversion price of $0.00005, or $34,467 as full repayment of the August 26, 2011 Note’s principal and accrued interest
$(4,467). The balance of the August 26, 2011 Note as of December 31, 2014 and December 31, 2013 was $0, both net of debt discounts
of $0.
September
19, 2011 Note
On
September 19, 2011 the Company issued an unsecured convertible note in the principal amount of $30,000 in exchange for $30,000
in cash consideration. The note bears interest at 9.9% per annum, has a maturity date of September 19, 2012 and has a 20% default
interest rate should the note go into default. On September 20, 2012 the Company defaulted on the note and the note interest per
annum increased to 20%. During the year ended December 31, 2013, the Company issued a total of 685,438,400 shares of common stock
at an average conversion price of $0.00005, or $34,272 as full repayment of the September 19, 2011 Note’s principal ($30,000)
and accrued interest ($4,272). The balance of the September 19, 2011 Note as of December 31, 2014 and December 31, 2013 was $0,
both net of debt discounts of $0.
September
22, 2011 Note
On
September 22, 2011 the Company issued an unsecured convertible note in the principal amount of $20,000 in exchange for $20,000
in cash consideration. The note bears interest at 8% per annum, has a maturity date of September 22, 2012 and has a 24% default
interest rate should the note go into default. On September 23, 2012 the Company defaulted on the note and the note interest per
annum increased to 24%. The balance of the September 22, 2011 Note as of December 31, 2014 and December 31, 2013 was $20,000,
both net of debt discounts of $0.
September
30, 2011 Note
On
September 30, 2011 the Company issued an unsecured promissory note to a professional services provider for $75,000 related to
consulting services rendered. The note bears interest at 10% per annum and has a maturity date of March 31, 2012. On April 1,
2012 the Company defaulted on the note. During the year ended December 31, 2013, the Company issued a total of 750,000,000 shares
of common stock at an average conversion price of $0.0001, or $75,000 as full repayment of the September 30, 2011 Note. The balance
of the September 30 Note as of December 31, 2014 and December 31, 2013 was $0, both net of debt discounts of $0.
October
1, 2011 Note
On
October 1, 2011 the Company issued an unsecured promissory note to a professional services provider for $40,700 related to consulting
services rendered. The note bears interest at 10% per annum and has a maturity date of April 1, 2012. On April 2, 2012 the Company
defaulted on the note. The balance of the October 1, 2011 Note as of December 31, 2014 and December 31, 2013 was $40,700, both
net of debt discounts of $0.
October
31, 2011 Note
On
October 31, 2011 the Company issued an unsecured promissory note in the principal amount of $25,000 in exchange for $25,000 in
cash consideration. The note bears interest at 10% per annum and has a maturity date of April 30, 2012. On May 1, 2012 the Company
defaulted on the note. During the year ended December 31, 2013, the Company issued a total of 250,000,000 shares of common stock
at an average conversion price of $0.0001, or $25,000 as full repayment of the October 31, 2011 Note. The balance of the October
31, 2011 Note as of December 31, 2014 and December 31, 2013 was $0, both net of debt discounts of $0.
November
2, 2011 Note
On
November 2, 2011 the Company issued an unsecured convertible note in the principal amount of $33,000 in exchange for $33,000 in
cash consideration. The note bears interest at 8% per annum, has a maturity date of November 2, 2012 and has a 24% default interest
rate should the note go into default. On November 3, 2012 the Company defaulted on the note and the note interest per annum increased
to 24%. The balance of the November 2, 2011 Note as of December 31, 2014 and December 31, 2013 was $33,000, both net of debt discounts
of $0.
December
30, 2011 Note 1
On
December 30, 2011 the Company issued an unsecured promissory note to a professional services provider for $75,000 related to consulting
services rendered. The note bears interest at 10% per annum and has a maturity date of June 30, 2012. On July 1, 2012 the Company
defaulted on the note. During the year ended December 31, 2013, the Company issued a total of 750,000,000 shares of common stock
at an average conversion price of $0.0001, or $75,000 as full repayment of the December 30, 2011 Note 1. The balance of the December
30, 2011 Note 1 as of December 31, 2014 and December 31, 2013 was $0, both net of debt discounts of $0.
December
30, 2011 Note 2
On
December 30, 2011 the Company issued an unsecured promissory note in the principal amount of $25,000 in exchange for $25,000 in
cash consideration. The note bears interest at 10% per annum and has a maturity date of June 30, 2012. On July 1, 2012 the Company
defaulted on the note. During the year ended December 31, 2013, the Company issued a total of 250,000,000 shares of common stock
at an average conversion price of $0.0001, or $25,000 as full repayment of the December 30, 2011 Note 2. The balance of the December
30, 2011 Note 2 as of December 31, 2014 and December 31, 2013 was $0, both net of debt discounts of $0.
December
30, 2011 Note 3
On
December 30, 2011 the Company issued an unsecured promissory note in the principal amount of $22,000 in exchange for $22,000 in
cash consideration. The note bears interest at 10% per annum and has a maturity date of June 30, 2012. On July 1, 2012 the Company
defaulted on the note. The balance of the December 30, 2011 Note 3 as of December 31, 2014 and December 31, 2013 was $22,000,
both net of debt discounts of $0.
January
24, 2012 Note
On
January 24, 2012 the Company borrowed $16,500 pursuant to an unsecured convertible note. The note bears interest at 7% per annum
and has a maturity date of September 24, 2013. The note agreement contains a change in the interest rate to 20% default interest
rate should the note go into default. On September 25, 2013 the Company defaulted on the note and the note interest per annum
increased to 20%. During the year ended December 31, 2013, the Company issued a total of 355,188,400 shares of common stock at
an average conversion price of $0.00005, or $17,759 as full repayment of the January 24, 2012 Note’s principal ($16,500)
and accrued interest ($1,259). The balance of the January 24, 2012 Note as of December 31, 2014 and December 31, 2013 was $0,
net of debt discounts of $0.
February
28, 2012 Note
On
February 28, 2012 the Company borrowed $20,000 pursuant to an unsecured promissory note. The note bears interest at 10% per annum
and has a maturity date of August 28, 2012. On August 29, 2012 the Company defaulted on the note. During the year ended December
31, 2013, the Company issued a total of 200,000,000 shares of common stock at an average conversion price of $0.0001, or $20,000
as full repayment of the February 28, 2012 Note. The balance of the February 28, 2012 Note as of December 31, 2014 and December
31, 2013 was $0, both net of debt discounts of $0.
March
7, 2012 Note
On
March 7, 2012 the Company borrowed $10,000 pursuant to an unsecured convertible note. The note bears interest at 7% per annum
and has a maturity date of January 24, 2013. The note agreement contains a change in the interest rate to 20% default interest
rate should the note go into default. On January 25, 2013 the Company defaulted on the note and the note interest per annum increased
to 20%. The balance of the March 7, 2012 Note as of December 31, 2014 and December 31, 2013 was $10,000, net of debt discounts
of $0.
May
16, 2012 Note
On
May 16, 2012 the Company borrowed $20,000 pursuant to an unsecured convertible note. The note bears interest at 15% per annum,
has a maturity date of February 16, 2013, and unpaid accrued interest is added to the note’s principal balance at the end
of each quarter. The note agreement contains a change in the interest rate to $500 per day default interest rate (or the highest
rate allowed by law) should the note go into default. On February 17, 2013 the Company defaulted on the note and the note interest
increased to $500 per day. The balance of the May 16, 2012 Note as of December 31, 2014 was $28,901 including added accrued interest
of $8,901 and as of December 31, 2013 was $20,000, both net of debt discounts of $0.
May
23, 2012 Note
On
May 23, 2012 the Company borrowed $15,000 pursuant to an unsecured convertible note. The note bears interest at 15% per annum,
has a maturity date of May 23, 2013, and unpaid accrued interest is added to the note’s principal balance at the end of
each quarter. The note agreement contains a change in the interest rate to $500 per day default interest rate (or the highest
rate allowed by law) should the note go into default. On May 24, 2013 the Company defaulted on the note and the note interest
increased to $500 per day. The balance of the May 23, 2012 Note as of December 31, 2014 was $21,676 including added accrued interest
of $6,676 and as of December 31, 2013 was $15,000, both net of debt discounts of $0.
June
16, 2012 Note
On
June 16, 2012 the Company issued a $700,000 unsecured convertible note in exchange for consolidating and paying in full the unsecured
notes’ outstanding principal and accrued interest that are identified below. The principal total of the notes consolidated
into the June 16, 2012 Note was $544,787 with the Company recognizing the additional $155,213 principal as consulting services
expense. The note bears interest at 6% per annum and has a maturity date of June 16, 2014. The note agreement contains a change
in the interest rate to 24% default interest rate should the note go into default. On June 17, 2014 the Company defaulted on the
note and the note interest per annum increased to 24%. During the year ended December 31, 2014, the Company issued a total of
1,428,571 429 shares of common stock at an average conversion price of $0.0007, or $100,000 as partial repayment of the June 16,
2012 Note. The balance of the June 16, 2012 Note as of December 31, 2014 was $600,000 and as of December 31, 2013 was $700,000,
both net of debt discounts of $0.
Notes
consolidated into the June 16, 2012 Note
June
29, 2010 Note for consulting services, an assignee – $19,000 remaining assigned principal plus accrued interest
June
29, 2010 Note for consulting services, an assignee – $12,500 remaining assigned principal plus accrued interest
October
15, 2010 Note 1 for consulting services, an assignee – $25,000 assigned principal plus accrued interest
October
15, 2010 Note 2 for consulting services, an assignee – $25,000 assigned principal plus accrued interest
December
14, 2010 Note for cash received – $3,902 remaining principal plus accrued interest
January
24, 2011 Note for consulting services – $615 principal plus accrued interest
February
2, 2011 Note for consulting services – $500 principal plus accrued interest
February
24, 2011 Note for consulting services, an assignee – $16,000 remaining assigned principal plus accrued interest
April
1, 2011 Note 1 for consulting services – $1,336 principal plus accrued interest
April
1, 2011 Note 2 for consulting services, an assignee – $50,000 assigned principal plus accrued interest
May
12, 2011 Note for consulting services – $100,000 principal plus accrued interest
July
1, 2011 Note 1 for consulting services, an assignee – $10,500 assigned principal plus accrued interest
July
1, 2011 Note 2 for consulting services, an assignee – $30,000 assigned principal plus accrued interest
October
7, 2011 Note for cash received – $25,000 principal plus accrued interest
December
13, 2011 Note for consulting services – $7,000 principal plus accrued interest
January
13, 2012 Note for cash received – $25,000 principal plus accrued interest
February
15, 2012 Note for consulting services, an assignee – $22,500 assigned principal plus accrued interest
February
20, 2012 Note for consulting services, an assignee – $40,000 assigned principal plus accrued interest
July
2, 2012 Note
On
July 2, 2012 the Company borrowed $15,000 pursuant to an unsecured convertible note. The note bears interest at 15% per annum,
has a maturity date of July 2, 2013, and unpaid accrued interest is added to the note’s principal balance at the end of
each quarter. The note agreement contains a change in the interest rate to $500 per day default interest rate (or the highest
rate allowed by law) should the note go into default. The balance of the July 2, 2012 Note as of December 31, 2014 was $20,892
including added accrued interest of $5,892 and December 31, 2013 was $15,000, both net of debt discounts of $0.
March
12, 2013 Note
On
March 12, 2013 the Company borrowed $14,000 pursuant to an unsecured convertible note. The note bears interest at 10% per annum,
has a maturity date of March 12, 2014, and accrues liquidating damages of $250 per day added to the principal balance of the note
that may be settled to some lower amount at the time of payment in full. The note agreement contains a change in the interest
rate to 20% default interest rate should the note go into default. On March 13, 2014 the Company defaulted on the note and the
note interest per annum increased to 20%. The balance of the March 12, 2013 Note as of December 31, 2014 was $87,250 including
$73,250 of accrued liquidating damages, net of debt discounts of $0 and as of December 31, 2013 was $11,277, net of debt discounts
of $2,723.
April
17, 2013 Note
On
April 17, 2013 the Company borrowed $3,000 pursuant to an unsecured promissory note. The note bears interest at 10% per annum
and has a maturity date of June 15, 2013. On June 16, 2013 the Company defaulted on the note. The balance of the April 17, 2013
Note as of December 31, 2014 and December 31, 2013 was $3,000, net of debt discounts of $0.
April
27, 2013 Note
On
April 27, 2013 the Company borrowed $700 pursuant to an unsecured promissory note. The note bears interest at 10% per annum and
has a maturity date of August 25, 2013. On August 26, 2013 the Company defaulted on the note. The balance of the April 27, 2013
Note as of December 31, 2014 and December 31, 2013 was $700, net of debt discounts of $0.
May
19, 2014 Note
On
May 19, 2014 the Company entered into a $60,000 unsecured convertible note for $50,000 cash to be borrowed during the year ended
December 31, 2014 plus a total of $10,000 in loan fees the Company recorded as an administrative expense as cash was borrowed.
The note bears interest at 8% per annum and has a maturity date of September 10, 2015. The note agreement contains a change in
the interest rate to 20% default interest rate should the note go into default and required 300,000,000 shares of Company’s
common stock to be reserved, but was cancelled on October 8, 2014. During the year ended December 31, 2014 the Company borrowed
$50,000 cash and incurred $10,000 in loan fees.
The
balance of the May 19, 2014 Note as of December 31, 2014 was $22,339, net of debt discounts of $37,661.
June
3, 2014 Note
On
June 3, 2014 the Company entered into a $6,250 unsecured convertible note for a $5,000 cash loan plus $1,250 in documentation
fees the Company recorded as an administrative expense. The note bears interest at 0% per annum and has a maturity date of June
3, 2015. The note agreement contains a change in the interest rate to 10% default interest rate should the note go into default,
interest accruing from the June 3, 2014 Note date. The balance of the June 3, 2014 Note as of December 31, 2014 was $3,613, net
of debt discounts of $2,637.
August
13, 2014 Note
On
August 13, 2014 the Company borrowed $33,000 pursuant to a discounted unsecured convertible note amount of $46,500 when the note
matures. The $13,500 discount will be an administrative expense once the note matures. The note bears interest at 0% per annum,
has a maturity date of February 13, 2015 and has a 12% default interest rate should the note go into default. The note agreement
required 3,000,000,000 shares of Company’s common stock to be reserved, but was cancelled on September 23, 2014. The balance
of the August 13, 2014 Note as of December 31, 2014 was $25,109, net of debt discounts of $7,891.
September
10, 2014 Note
On
September 10, 2014 the Company entered into a $29,000 unsecured convertible note for $25,000 cash borrowed during the six months
ended June 30, 2012 plus $4,000 in loan fees the Company recorded as an administrative expense. The note bears interest at 8%
per annum and has a maturity date of September 10, 2015. The note agreement contains a change in the interest rate to 20% default
interest rate should the note go into default. The balance of the September 10, 2014 Note as of December 31, 2014 was $29,000,
net of debt discounts of $0.
Note
9 – Derivative Liability
The
Company’s derivative liability consists of the embedded conversion feature of its convertible notes payable. As the notes
payable have conversion rates that prevent calculating the number of shares into which they can convert, the conversion feature
has been separated from the underlying notes and valued as a derivative liability.
Prior
to 2014, it was believed that previous management could cause the counterparties to overlook this conversion feature, and settle
for the value of the notes themselves. So they estimated the fair value of the derivative liability was zero. In 2014, new management
reassessed the nature of the notes payable and determined that a possibility exists that the conversion feature could be utilized
by holders of the notes. As a result, the Company estimated the fair value of the derivative liability at December 31, 2014 at
$2,250,243.
Following
is a table showing activity in the derivative liability account.
Balance January 1, 2013 | |
$ | - | |
Additions | |
| - | |
Deletions | |
| - | |
Change in derivative liability | |
| - | |
Balance December 31, 2013 | |
| - | |
Additions | |
| - | |
Deletions | |
| - | |
Change in derivative liability | |
| 2,250,243 | |
Balance December 31, 2014 | |
$ | 2,250,243 | |
The
derivative liability was valued using the Black Scholes option valuation model with the following inputs.
Expected life in years | |
| 1 | |
Stock price volatility | |
| 140.0 | % |
Discount rate | |
| 0.25 | % |
Expected dividends | |
| None | |
Note
10 – Notes Payable - Related Party
Unsecured
related party notes payable balance net of discounts for the years ended December 31, 2014 and 2013 were $155,645, net of debt
discounts of $19,355 and $150,000, net of debt discounts of $0, respectively.
September
26, 2013 Note
On
September 26, 2013 the Company issued an unsecured promissory note to Corporate Business Advisors, Inc. for $150,000 as part of
a non-cash select assets and liabilities purchase agreement. The note bears no interest and has a maturity date of August 31,
2014. On September 1, 2014 the Company defaulted on the note. The balance of the September 26, 2013 Note as of December 31, 2014
and December 31, 2013 was $150,000, net of debt discounts of $0.
December
17, 2014 Note
On
December 17, 2014 the Company entered into a $25,000 unsecured convertible note with Corporate Business Advisors, Inc. for $24,500
in total cash loans to date plus $500 in documentation fees the Company recorded as an administrative expense. The note bears
interest at 18% per annum and has a maturity date of February 17, 2015. The balance of the December 17, 2014 Note as of December
31, 2014 was $5,645, net of debt discounts of $19,355.
Note
11 – Derivative Liability – Related Party
The
Company’s derivative liability – related party consists of the embedded conversion feature of its convertible notes
payable to a related party. As the notes payable to a related party have conversion rates that prevent calculating the number
of shares into which they can convert, the conversion feature has been separated from the underlying notes and valued as a derivative
liability – related party. During the year ended 2014, the Company entered into one convertible note payable to a related
party. The estimated fair value of derivative liability – related party at December 31, 2014 was $33,987.
Following
is a table showing activity in the derivative liability – related party account.
Balance January 1, 2013 | |
$ | - | |
Additions | |
| - | |
Deletions | |
| - | |
Change in derivative liability – related party | |
| - | |
Balance December 31, 2013 | |
| - | |
Additions | |
| - | |
Deletions | |
| - | |
Change in derivative liability – related party | |
| 33,987 | |
Balance December 31, 2014 | |
$ | 33,987 | |
The
derivative liability – related party was valued using the Black Scholes option valuation model with the following inputs.
Expected life in years | |
| 1 | |
Stock price volatility | |
| 140.0 | % |
Discount rate | |
| 0.25 | % |
Expected dividends | |
| None | |
Note
12 – Capital Lease
On
September 1, 2014, the Company entered into a lease to own lease agreement for an office and warehouse’s 16,838 square foot
portion of the property’s total 55,785 square foot space. The lease is considered a capital lease, therefore the building
asset and an offsetting note payable has been recorded on the Company’s books. Lease payments are $7,000 per month with
$5,000 per month being applied to the $1,385,000 purchase price. The balance of the capital lease as of December 31, 2014 was
$1,292,571.
Note
13 – Capital Stock
On
May 20, 2013 and on June 12, 2014 the Company filed amendments with the Utah Secretary of State amending Article IV of the Corporation
Articles of Incorporation such that the Authorized capital stock of the Company is as stated below.
Authorized
capital stock consists of:
|
● |
50,000,000,000
common shares with no par value; and |
|
|
|
|
● |
1,000,000
preferred Class A shares with a par value of $0.0001 per share; and |
|
|
|
|
● |
10,000,000
preferred Class B shares with a par value of $2.50 per share; and |
Changes
in par values have been retroactively reported back to the year ended December 31, 2010 (including this annual filing) based on
Audits performed through the year ended December 31, 2014.
A
summary of the pertinent rights and privileges of the classes of preferred stock are as follows:
Class
A Preferred Stock
Conversion
Rights - Each outstanding share of Class A Preferred Stock shall be convertible, at the option of the holder into shares of
Common Stock equal to (i) four times the total number of shares of Common Stock which are issued and outstanding at the time of
such conversion plus (ii) the total number of shares of Class B Preferred Stock which are issued and outstanding at the
time of such conversion minus (iii) the number of other shares of Class A Preferred Stock issued and outstanding immediately
prior to the time of such conversions.
Voting
Rights - The total aggregate issued shares of Class A Preferred Stock shall have aggregate right to a number of votes equal
to (i) four times the total number of shares of Common Stock which are issued and outstanding at the time of voting, plus (ii)
the total number of shares of Class B Stock which are issued and outstanding at the time of voting minus (iii) the number
of shares of Class A Preferred Stock issued and outstanding at the time of voting.
Class
B Preferred Stock
On
May 20, 2013 and on June 12, 2014 the Company filed amendments with the Utah Secretary of State amending Article IV of the Corporation
Articles of Incorporation such that the Authorized capital stock of the Company is as stated below for Class B Preferred Stock.
The change in Class B Preferred Stock’s par value to $2.50 has been retroactively reported back to the year ended December
31, 2010 (this filing) based on Audits performed through the year ended December 31, 2014.
Dividends
- Class B shareholders shall be entitled to receive dividends, when, as and if declared by the Board of Directors.
Conversion
Rights - Each share of Class B Preferred Stock shall be convertible into the number of shares of Common Stock equal to the
Class B Preferred Stock, $2.50 par value, to the proportional calculation of converting to common stock based on the total par
value of the Class B Preferred Stock being converted, divided by the average closing price per share of the Company’s common
stock over the preceding 10 trading days.
Voting
Rights - Each share of Class B Preferred Stock shall have ten votes.
Common
Stock
Common
Shares Issued for Services
During
the year ended December 31, 2014, the Company issued a total of 960,000,000 shares of common stock at an average per share purchase
price of $0.00011, or $106,000. The Company issued these shares as payment for various outside services received including investor
relations, consulting and marketing related services and recorded the value in general and administrative expenses during the
year ended December 31, 2014.
During
the year ended December 31, 2013, the Company issued a total of 1,850,000,000 shares of common stock at an average per share purchase
price of $0.0001, or $185,000. The Company issued these shares as payment for various outside services received including legal,
investor relations, consulting and marketing related services and recorded the value in general and administrative expenses during
the year ended December 31, 2013.
Common
Shares Issued for Cash
During
the year ended December 31, 2014, the Company issued a total of 4,063,188,182 shares of common stock for cash at an average price
of $0.00003 or $133,896 in the aggregate and was valued at the purchase price according to the respective stock purchase agreement.
During
the year ended December 31, 2013, the Company did not issue common stock as payment for cash.
Common
Shares Issued for Debt and Accrued Interest
During
the year ended December 31, 2014, the Company issued a total of 4,596,071,428 shares of common stock at an average price of $0.0001
or $459,606 in the aggregate, as discussed in Note 8 – Notes Payable.
During
the year ended December 31, 2013, the Company issued a total of 6,092,971,000 shares of common stock at an average price of $0.00005
or $522,798 in the aggregate, as discussed in Note 8 – Notes Payable.
Common
Shares Issued for Accrued Salary
During
the year ended December 31, 2014, the Company did not issue common stock as payment for accrued salary.
During
the year ended December 31, 2013, the Company issued a total of 2,288,500,000 shares of common stock at an average price of $0.001
or $2,188,507 in the aggregate and was valued at the market price on the respective date of issuance.
Common
Shares Issued for Settlement of Liabilities
During
the year ended December 31, 2014, the Company did not issue common stock as payment of outstanding liabilities.
During
the year ended December 31, 2013, the Company issued a total of 250,000,000 shares of common stock at a price of $0.0001 or $25,000
in the aggregate, for payment of outstanding liabilities.
Common
Stock converted to Class B Preferred Stock
During
the year ended December 31, 2014, 1,836,896,307 shares of Common Stock were converted to 183,690 shares of Class B Preferred Stock
at the conversion rate of $0.00025.
During
the year ended December 31, 2013, 18,000,000,000 shares of Common Stock were converted to 1,800,000 shares of Class B Preferred
Stock at the conversion rate of $0.0001.
Class
A Preferred Stock
Class
A Preferred Shares Issued for Services
During
the year ended December 31, 2014, the Company did not issue Class A Preferred stock as consideration for services rendered to
the Company.
During
the years ended December 31, 2013, the Company issued 15 shares of the Company’s Class A Preferred stock at a price of $67,394
for $1,010,910 as consideration for services rendered to the Company.
Class
A Preferred Shares Issued for Cash
During
the year ended December 31, 2014, the Company issued a total of 2 shares of Class A Preferred stock for cash at an average price
of $1,670 or $3,340 in the aggregate and was valued at the purchase price according to the respective stock purchase agreement.
During
the year ended December 31, 2013, the Company did not issue Class A Preferred stock as payment for cash.
Class
B Preferred Stock
Class
B Preferred Shares Issued for Cash
During
the year ended December 31, 2014, the Company issued a total of 441,930 shares of Class B Preferred stock for cash at an average
price of $0.75 or $331,448 in the aggregate and was valued at the purchase price according to the respective stock purchase agreement.
During
the year ended December 31, 2013, the Company did not issue Class B Preferred stock as payment for cash.
Class
B Preferred Stock converted to Common Stock
During
the year ended December 31, 2014, 700,000 shares of Class B Preferred Stock were converted to 1,750,000,000 shares of Common Stock
at the conversion rate of $2.50.
Note
14 – Stock Options/Stock-Based Compensation and Warrants
On
February 27, 2010 the Company entered in to an agreement with Premier Media Services(PMS) in which the Company agreed to pay a
monthly fee for three months of $7,500 per month, issue 500,000 shares of Common stock and 500,000 stock options to purchase shares
of the Company’s common stock. 100,000 options have an exercise price of $ 0.15, 100,000 options have an exercise price
of $0.25, 100,000 options have an exercise price of $0.35, 100,000 options have an exercise price of $0.50 and 100,000 options
have an exercise price of $1.00. These shares vest immediately and are exercisable for 5 years.
As
part of the 2009 RPS purchase agreement, the Company granted common stock options to acquire 100,000,000 shares of common stock.
The company recorded the granting of the 100,000,000 stock options as a $3,150,000 liability on the balance sheet as of December
31, 2009 labeled common stock options payable, because the options did not become effective or exercisable until the authorized
capital of the Company is increased to not less than 220,000,000 shares of common stock. The Company’s authorized capital
was increased during 2010 and the liability was removed with a corresponding increase to additional paid in capital.
In
applying the Black-Scholes methodology to the option grants, the fair value of our stock-based awards granted were estimated using
an expected annual dividend yield of 0% , a risk-free interest rate of 2.51%, an expected option life of 5.0 years and an expected
price volatility of 117%.
The
average risk-free interest rate is determined using the U.S. Treasury rate in effect as of the date of grant, based on the expected
term of the stock option. The expected price volatility was determined using a weighted average of daily historical volatility
of our stock price over the corresponding expected option life and implied volatility based on recent trends of the daily historical
volatility. Compensation expense is recognized immediately for options that are fully vested on the date of grant. During the
year ended December 31, 2010 500,000 stock-based compensation grants were made for a total fair value of $14,500. There were no
options outstanding as of December 31, 2008 and 2009 and no option activity occurred after the year ended December 31, 2010 through
the date this report is submitted.
Changes
in stock options for the years ended December 31, 2014 consisted of the following:
| |
Number of shares | | |
Weighted Average Exercise Price | | |
Remaining Contractual Term (in years) | | |
Intrinsic Value | |
Beginning balance January 1, 2014 | |
| 100,500,000 | | |
$ | 0.01 | | |
| 0.84 | | |
| | |
Granted | |
| - | | |
| - | | |
| - | | |
| | |
Exercised | |
| - | | |
| - | | |
| - | | |
| | |
Forfeited/expired | |
| 100,000,000 | | |
| 0.45 | | |
| - | | |
| | |
Outstanding at December 31, 2014 | |
| 500,000 | | |
$ | 0.45 | | |
| 0.04 | | |
| | |
Exercisable | |
| 500,000 | | |
$ | 0.45 | | |
| 0.04 | | |
$ | - | |
| |
| | | |
| | | |
| | | |
| | |
Weighted average fair value of options granted during year ended December 31, 2014 | |
| | | |
$ | - | | |
| | | |
| | |
The
following table summarizes information about stock options outstanding at December 31, 2014:
| |
Options Outstanding | |
Options Exercisable |
Range of Exercise Prices | |
Number
Outstanding | |
Weighted
Average
Remaining
Contractual Life
(in years) | | |
Weighted
Average Exercise
Price | | |
Number
Exercisable | |
Weighted
Average Exercise
Price | |
$0.15 - $1.00 | |
500,000 | |
| 0.04 | | |
$ | 0.45 | | |
500,000 | |
$ | 0.45 | |
Note
15 – Subsequent Event
Current
management has evaluated subsequent events as of the date of the consolidated financial statements. Below is the subsequent event
that has occurred since the year ended December 31, 2014 through the date of this annual filing.
Subsequent
New Debt
January
30, 2015 Note
On
January 30, 2015 the Company borrowed $4,200 pursuant to a discounted unsecured convertible note amount of $5,040. The Company
recorded the $840 discount as an administrative expense. The note bears interest at 8% per annum and has a maturity date of January
30, 2016. The note agreement contains a change in the interest rate to 18% default interest rate should the note go into default
and requires the Company to reserve 100,000,000 shares of the Company’s common stock.
Item
9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Item
9A. Controls and Procedures
Evaluation
of Disclosure Controls and Procedures.
Under
the supervision and with the participation of our current management, including our Chief Executive Officer and Corporate Secretary
as our Principal Accounting Officer (the “Certifying Officers”), we evaluated the effectiveness of the design and
operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) under the Securities Exchange Act of 1934 (the
“Exchange Act”)) as of December 31, 2014. Based upon that evaluation, the Certifying Officers concluded that, as of
the end of the period covered by this report, our disclosure controls and procedures were not effective. We identified material
weaknesses as discussed below in the report of management on internal control over financial reporting.
Report
of Management on Internal Control over Financial Reporting.
Our
current management is responsible for establishing and maintaining adequate internal control over financial reporting as defined
in Rules 13a-15(f) under the Exchange Act. Our current 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. The Certifying Officers evaluated the effectiveness of the Company’s
internal control over financial reporting and concluded that, as of the end of the period covered by this report, the Company’s
internal control over financial reporting was not effective. 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 U.S. 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 assets
that could have a material effect on the financial statements.
Management
conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal
Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and has
concluded that as of the end of the period covered by this report, our internal control over financial reporting was not effective.
A
material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there
is a reasonable possibility that a material misstatement to the Company’s annual or interim financial statements will not
be prevented or detected. In connection with our evaluation of the effectiveness of our internal control over financial reporting,
management identified the following material weaknesses:
|
● |
We
lacked the controls necessary to ensure timely filings of our SEC filings, |
|
|
|
|
● |
We
lacked the controls necessary to ensure recorded amounts were accurately stated (resulting in multiple audit adjustments), |
|
|
|
|
● |
We
lacked sufficient segregation of duties, and |
|
|
|
|
● |
We
lacked the necessary controls to ensure money taken out of the Company was for business expenditures only. |
We
believe that our consolidated financial statements contained in this Annual Report on Form 10-K fairly present our financial position,
results of operations and cash flows for the fiscal year ended December 31, 2014 in all material respects.
Because
of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even
those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation
and presentation.
This
Annual Report does not include an attestation report of our registered public accounting firm regarding internal control over
financial reporting. Management’s Report was not subject to attestation by the company’s registered public accounting
firm pursuant to temporary rules of the Securities and Exchange Commission that permit us to provide only Management’s Report
in this Annual Report.
Changes
in Internal Control Over Financial Reporting.
There
have been no changes in our internal control over financial reporting during the year ended December 31, 2014 that has materially
affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Item
9B. Other Information
In
order for the Company to have effective and strong internal controls over financial reporting, we believe the Company needs to
be able to financially support bringing in-house the accounting and financial reporting functions. Management will be bringing
in-house the accounting and financial reporting functions once we have consistent revenues to justify adding additional employees.
This will include the Company obtaining a full time Chief Financial Officer.
PART
III
Item
10. Directors, Executive Officers and Corporate Governance
The
following sets forth information about our current directors and officers of the Company.
Name
|
|
Age
|
|
Position
|
Tammy Taylor |
|
47 |
|
CEO, President,
Director, (Principal Financial Officer) |
M. Aimee Coleman |
|
42 |
|
Corporate Secretary
(Principal Accounting Officer) |
The
term of office of each director is one year or until his or her successor is elected at the Company’s annual meeting and
qualified. The term of office for each officer of the Company is at the pleasure of the Board.
Tammy
Taylor has been our President and Chief Executive Officer since August 21, 2013. With over 25 years combined experience
in the business, sales, real estate and human services industries and as a business owner for over 10 years, Ms. Taylor has gained
a wealth of experience in all aspects of running a successful company. Ms. Taylor has the ability to be strategic, detailed and
thorough when presented with any type of business challenge. Mr. Taylor has the ability to analyze an issue and then develop and
implement successful solutions in the development of new businesses and markets. With her combined experience in a number of business
industries, Ms. Taylor serves with passion and is driven to make any professional experience a success. Ms. Taylor has been a
licensed real estate agent in Florida since 2005 and the President of Tammy Taylor, PA, a company she founded in 2008 that has
been engaged in locating buyers and sellers of commercial and residential properties. Ms. Taylor founded Hope4UsNow, Inc. in 2012
and The Kindness Wave, Inc. in 2011 which operate online inspirational communities. Ms. Taylor served as a board member of the
Pinellas Realtor Organization and the Florida Realtors Association from 2008 to 2010. She is also the former Chairman of the International
Council for the Pinellas Realtor Organization in 2010 and has served on the Grievance, Government Relations and Political Action
Committees 2008 to 2010. Ms. Taylor earned sales and service awards six consecutive years as a realtor since 2005, including top
new real estate agent in Pinellas County, Florida. She has also been a spokesperson for the American Cancer Society. Ms. Taylor
earned a B.A. in Business/Organizational Development from Rosemont College in 1988.
We
believe that Ms. Taylor’s significant business, sales and management experience qualifies her to serve as a member of our
board.
M.
Aimee Coleman has been our Corporate Secretary and Principal Accounting Officer since August 28, 2013. Ms. Coleman has
over 25 years of accounting and office management experience. Her experience includes major accounting and business software applications,
attention to back office operations that have provided major contributions to companies operations. She has proved to be instrumental
in the accurate and timely efforts required to move companies forward as quickly as possible including her current position as
bookkeeper at Brookridge Community Property Owners, Inc. where she has been employed since November 2008. In 1994, Ms. Coleman
received an Associate in Arts and Sciences degree in Chemistry from Community College of the Finger Lakes.
Family
Relationships
There
are no family relationships among any of our officers and directors.
Conflicts
of Interest
There
are no conflicts of interest that are inherent in the relationships between our officers and directors.
Involvement
in Certain Legal Proceedings
To
the best of our knowledge, none of our directors or executive officers has been convicted in a criminal proceeding, excluding
traffic violations or similar misdemeanors, or has been a party to any judicial or administrative proceeding during the past 10
years that resulted in a judgment, decree, or final order enjoining the person from future violations of, or prohibiting activities
subject to, federal or state securities laws, or a finding of any violation of federal or state securities laws, except for matters
that were dismissed without sanction or settlement. Except as set forth in our discussion below in “Certain Relationships
and Related Transactions, and Director Independence—Transactions with Related Persons,” none of our directors, director
nominees, or executive officers has been involved in any transactions with us or any of our directors, executive officers, affiliates,
or associates which are required to be disclosed pursuant to the rules and regulations of the Commission.
Corporate
Governance
Our
board has not established any committees, including an audit committee, a compensation committee or a nominating committee, or
any committee performing a similar function. The functions of those committees are being undertaken by our board. Because we do
not have any independent directors, our board believes that the establishment of committees of our board would not provide any
benefits to our Company and could be considered more form than substance.
We
do not have a policy regarding the consideration of any director candidates that may be recommended by our stockholders, including
the minimum qualifications for director candidates, nor have our officers and directors established a process for identifying
and evaluating director nominees. We have not adopted a policy regarding the handling of any potential recommendation of director
candidates by our stockholders, including the procedures to be followed. Our officers and directors have not considered or adopted
any of these policies as we have not received a recommendation from any stockholder for any candidate to serve on our board of
directors.
Given
our relative size and lack of directors’ and officers’ insurance coverage, we do not anticipate that any of our stockholders
will make such a recommendation in the near future. While there have been no nominations of additional directors proposed, in
the event such a proposal is made, all current members of our board will participate in the consideration of director nominees.
As
with most small, early stage companies until such time as our Company further develops our business, achieves a stronger revenue
base and has sufficient working capital to purchase directors’ and officers’ insurance, we do not have any immediate
prospects to attract independent directors. When we are able to expand our board to include one or more independent directors,
we intend to establish an audit committee of our board of directors. It is our intention that one or more of these independent
directors will also qualify as an audit committee financial expert. Our securities are not quoted on an exchange that has requirements
that a majority of our board members be independent and we are not currently otherwise subject to any law, rule or regulation
requiring that all or any portion of our board of directors include “independent” directors, nor are we required to
establish or maintain an audit committee or other committee of our board.
Code
of Ethics
The
Company has adopted a written code of ethics applicable to its principal executive officer, principal financial officer, principal
accounting officer, or persons performing similar functions, which complies with the requirement to adopt such a code of ethics
and is available on the Company’s website at www.garbreorg.com. We intend to post any amendments to the code, or any waivers
of its requirements related to certain matters, on our website.
Board
Oversight in Risk Management
Risk
is inherent with every business, and how well a business manages risk can ultimately determine its success. We face a number of
risks, including liquidity risk, operational risk, strategic risk and reputation risk. Our Chief Executive Officer also serves
as our sole director and therefore, we do not have a lead director. In the context of risk oversight, at the present stage of
our operations, we believe that our selection of one person to serve in both positions provides the board with additional perspective
which combines the operational experience of a member of management with the oversight focus of a member of the board. The business
and operations of our company are managed by our board as a whole, including oversight of various risks that our company faces.
Section
16 Compliance
Section
16(a) of the Exchange Act requires the Company’s directors and executive officers, and persons who own more than 10% percent
of a registered class of the Company’s equity securities, to file with the Securities and Exchange Commission initial reports
of ownership and reports of changes in ownership of common stock and other equity securities of the Company. Officers, directors
and greater than 10% shareholders are required by SEC regulations to furnish the Company with copies of all Section 16(a) forms
they file. To the Company’s knowledge, based solely on review of the copies of such reports furnished to the Company and
written representations that no other reports were required, during the fiscal year ended December 31, 2014 all Section 16(a)
filing requirements applicable to its officers, directors and greater than 10% beneficial owners were complied with.
Item
11. Executive Compensation
2014
Summary Compensation Table
The
following table is the information pertaining to the total compensation for both the Company’s current and former executive
officers for the fiscal years ended December 31, 2014 and December 31, 2013.
Name and Principal Position | |
Fiscal Year | | |
Salary ($) | | |
Bonus ($) | | |
Total ($) | |
Tammy Taylor (1) | |
| 2014 | | |
$ | 120,000 | | |
$ | - | | |
$ | 120,000 | |
Current Chief Executive Officer | |
| 2013 | | |
$ | 60,000 | | |
$ | 194,788 | | |
$ | 254,788 | |
| |
| | | |
| | | |
| | | |
| | |
M Aimee Coleman (1) | |
| 2014 | | |
$ | 13,000 | | |
$ | - | | |
$ | 13,000 | |
Current Corporate Secretary | |
| 2013 | | |
$ | 4,500 | | |
$ | 127,394 | | |
$ | 131,894 | |
| |
| | | |
| | | |
| | | |
| | |
John Rossi (2) | |
| 2014 | | |
$ | - | | |
$ | - | | |
$ | - | |
Former Chief Executive Officer | |
| 2013 | | |
$ | 120,000 | | |
$ | - | | |
$ | 120,000 | |
| |
| | | |
| | | |
| | | |
| | |
Igor Plahuta (2) | |
| 2014 | | |
$ | - | | |
$ | - | | |
$ | - | |
Former Chief Technology Officer | |
| 2013 | | |
$ | 120,000 | | |
$ | - | | |
$ | 120,000 | |
| |
| | | |
| | | |
| | | |
| | |
Alan Fleming (2) | |
| 2014 | | |
$ | - | | |
$ | - | | |
$ | - | |
Former Chief Operating Officer | |
| 2013 | | |
$ | 90,000 | | |
$ | - | | |
$ | 90,000 | |
|
(1) |
Mss.
Taylor and Coleman have been the Company’s current executive officers in their respective capacity since August 21,
2013. |
|
(2) |
Messrs.
Rossi, Plahuta and Fleming are former executive officers of the Company. Each ceased to serve in his respective capacity as
of August 21, 2013. |
The
bonus amounts indicated above were non-cash common stock compensation from the Company during the reported fiscal year ended.
On
October 27, 2009, the Company granted an aggregate of 100,000,000 stock options to Mr. Rossi and Mr. Plahuta as part of the acquisition
of Garb by RPS. The options were void after November 1, 2014 with no purchases being made. The purchase price per share would
have been computed based on the basis of one-tenth of the average closing ask price for 10 trading days prior to the date of exercise
of all or part of the options.
All
or substantially all of the listed salary amounts for both current and former officers were being accrued rather than paid in
cash. All of the former officers’ accrued salaries were converted to company stock and issued during the year ended December
31, 2013 (See Item 5, Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities and Notes to the Consolidated Financial Statements, Note 13 – Capital Stock).
The
Company currently has two employment agreements with its officers or directors and has no retirement, profit sharing, pension
or insurance plans, agreements or understanding covering them.
Compensation
of Directors
The
Company’s directors received no compensation. Directors who are or were also employees (Messrs. Rossi, Plahuta and Fleming;
and Ms. Taylor) are not paid for board services in addition to their regular employee compensation.
Item
12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
A
change in control of the Company occurred on August 21, 2013.
The
following tables set forth certain information, as of April 10, 2015, with the respect of beneficial ownership of the Company’s
outstanding common stock and preferred stock by (i) any holder of more than five (5%) percent, (ii) each of the Company’s
executive officers and directors and (iii) the Company’s executive officers and directors as a group.
Unless
otherwise indicated, the business address of each person listed is in care of Garb Oil & Power Corporation, 1185 Gooden Xing,
Building C, Largo FL 33778. Except as otherwise indicated, the persons listed below have sole voting and investment power with
respect to all shares of the Company’s stock owned by them.
Class
A Preferred Stock (1)
| |
Amount and Nature of | | |
Percentage of | |
Name and Address of Stockholder | |
Beneficial Ownership | | |
Preferred Classes(1) | |
Tammy Taylor(2) | |
| 2 | (3) | |
| 8.3 | % |
M. Aimee Coleman(4) | |
| 1 | | |
| 4.2 | % |
| |
| | | |
| | |
All executive officers and directors as a group (two persons) | |
| 3 | | |
| 12.5 | % |
| |
| | | |
| | |
Corporate Business Advisors, Inc.(5) | |
| 19 | (1) | |
| 79.2 | % |
Rachelle Hoffmann, | |
| | | |
| | |
President and Registered Agent | |
| | | |
| | |
| |
| | | |
| | |
Dan Scott Burda | |
| 2 | | |
| 8.3% | |
|
(1) |
The
voting rights of each share of the Class A Preferred Stock is equal to its percent of total outstanding Class A Preferred
Shares times the product of four times the sum of all other outstanding classes of the Company’s stock (Class B Preferred
Stock and Common Stock). As of April 10, 2015 there are 24 shares of Class A Preferred Stock outstanding with each share of
Class A Preferred Stock holding 7,933,666,396 voting rights, a total of 190,407,993,496 votes in the aggregate. |
|
|
|
|
(2) |
Tammy
Taylor is the Company’s Director, Chief Executive Officer and President and is the President of Hope4UsNow, Inc. |
|
|
|
|
(3) |
The
number of shares owned by Ms. Taylor includes 2 shares of the Class A Preferred Stock currently outstanding and owned by Hope4UsNow,
Inc. Ms. Taylor has voting and dispositive control over securities held by Hope4UsNow, Inc. |
|
|
|
|
(4) |
M.
Aimee Coleman is the Corporate Secretary and Principal Accounting Officer. |
|
|
|
|
(5) |
Ms.
Rachelle Hoffman who is the President of Corporate Business Advisors, Inc. has voting and dispositive control over securities
held by Corporate Business Advisors, Inc. |
Class
B Preferred Stock
| |
Amount and Nature of | | |
Percentage of | |
Name and Address of Stockholder | |
Beneficial Ownership | | |
Class B Preferred (1) | |
Tammy Taylor(2) | |
| 0 | | |
| 0 | |
M. Aimee Coleman(3) | |
| 0 | | |
| 0 | % |
| |
| | | |
| | |
All executive officers and directors as a group (two persons) | |
| 0 | | |
| 0 | % |
| |
| | | |
| | |
Corporate Business Advisors, Inc.(4) | |
| 3,600,000 | | |
| 81.4 | % |
| |
| | | |
| | |
Dan Scott Burda | |
| | | |
| 441,930
10.0% | |
|
(1) |
Each
share of Class B Preferred Stock is entitled to 10 votes per share. As of April 10, 2015 there are 4,419,918 shares of Class
B Preferred Stock outstanding with each share of Class B Preferred Stock holding 10 voting rights, a total of 44,199,180 votes. |
|
|
|
|
(2) |
Ms.
Taylor is Director, Chief Executive Officer and President is the President of Hope4UsNow, Inc. Ms. Taylor has voting and dispositive
control over securities held by Hope4UsNow, Inc. |
|
|
|
|
(3) |
Ms.
Coleman is the Company’s Corporate Secretary and Principal Accounting Officer. |
|
|
|
|
(4) |
Ms.
Rachelle Hoffman who is the President of Corporate Business Advisors, Inc. has voting and dispositive control over securities
held by Corporate Business Advisors, Inc. |
|
|
|
Common
Stock
| |
Amount and Nature of | | |
Percentage of | |
Name
and Address of Stockholder | |
Beneficial
Ownership | | |
Common
(1) | |
Tammy Taylor(2) | |
| 566,666,667 | (2) | |
| 1.2 | % |
M.
Aimee Coleman(3) | |
| 600,000,000 | | |
| 1.3 | % |
| |
| | | |
| | |
All executive officers
and directors as a group (two persons) | |
| 1,166,666,667 | | |
| 2.5 | % |
| |
| | | |
| | |
Corporate Business Advisors, Inc.(4) | |
| 2,350,000,000 | | |
| 4.9 | % |
| |
| | | |
| | |
Dan Scott Burda | |
| 3,796,521,515 | | |
| 8.0% | |
|
(1) |
Amounts
based on 47,497,578,456 shares of Common Stock outstanding as of April 10, 2015. |
|
|
|
|
(2) |
Ms.
Taylor is Director, Chief Executive Officer and President who is Managing Director of Hope4UsNow, Inc. that owns 300,000,000
Common shares. Ms. Taylor has voting and dispositive control over securities held by Hope4UsNow, Inc. She is also partial
owner of The Kindness Wave, Inc. that purchased 266,666,667 Common shares. |
|
|
|
|
(3) |
Ms.
Coleman is the Corporate Secretary and Principal Accounting Officer. |
|
|
|
|
(4) |
Ms.
Rachelle Hoffman who is the President of Corporate Business Advisors, Inc. has voting and dispositive control over securities
held by Corporate Business Advisors, Inc. |
Item
13. Certain Relationships and Related Transactions, and Director Independence
On
November 1, 2009, the Company executed employment agreements with each of John Rossi and Igor Plahuta. Per each of the employment
agreements, each officer received a base salary of $20,000 per month, as well as an incentive bonus based on certain revenue and
profit metrics, and certain other perquisites. Each of the employment agreements terminated upon Messrs. Rossi’s and Plahuta’s
respective resignations.
On
August 21, 2013, the Company executed an employment agreement with Tammy Taylor. Ms. Taylor’s employment agreement includes
a base salary of $10,000 per month. The terms of employment for the length of employment service included in Ms. Taylor’s
employment agreement is open ended, at will for both parties, except for agreement violations’ remedies as specified.
On
August 28, 2013, the Company executed an employment agreement with M Aimee Coleman. Ms. Coleman’s employment agreement includes
starting part time at $250 per week, with hours over 10 hours a week at the hourly rate of $25 per hour. The terms of employment
for the length of employment service included in Ms. Coleman’s employment agreement is open ended, at will for both parties,
except for agreement violations’ remedies as specified.
Accounts
payable to related parties was $3,947 and $4,285 as of the years ended December 31, 2014 and 2013, respectively.
Notes
payable to related parties was $155,645 and $150,000 as of the years ended December 31, 2014 and 2013, respectively. (Also see
Note 10 – Notes Payable – Related Party)
Director
Independence
We
did not, during the fiscal year ended December 31, 2014, and currently, we do not, have any independent directors. Because our
common stock is not currently listed on a national securities exchange, we have used the definition of “independence”
of The NASDAQ Stock Market to make this determination.
The
former Company’s board of directors did not have a separately designated audit, nominating or compensation committee. We
do not currently have a separately designated nominating or compensation committee.
Item
14. Principal Accountant Fees and Services
The
following table shows the fees that were billed for the audit and other services for the fiscal years ended December 31, 2014
and December 31, 2013.
| |
2014 | | |
2013 | |
| |
| | |
| |
Audit Fees | |
$ | 32,700 | | |
$ | 40,800 | |
Audit-related Fees | |
| - | | |
| - | |
Tax Fees | |
| - | | |
| - | |
All other fees | |
| - | | |
| - | |
| |
| | | |
| | |
Total Fees | |
$ | 32,700 | | |
$ | 40,800 | |
Audit
Fees – This category includes the audit of our annual financial statements, review of financial statements included
in our quarterly reports and services that are normally provided by the independent registered public accounting firm in connection
with engagements for those years and services that are normally provided by our independent registered public accounting firm
in connection with statutory audits and Securities and Exchange Commission regulatory filings or engagements.
Audit-Related
Fees – This category consists of assurance and related services by the independent registered public accounting firm
that are reasonably related to the performance of the audit or review of our financial statements and are not reported above under
“Audit Fees”.
Tax
Fees – This category consists of professional services rendered by our independent registered public accounting firm
for tax compliance and tax advice. The services for the fees disclosed under this category include tax return preparation and
technical tax advice.
Other
Fees – This category consists of fees for the audits on the financial statements of our client companies and all other
miscellaneous items.
Pre-Approval
Policies and Procedure for Audit and Permitted Non-Audit Services
The
Company has not adopted any written pre-approval policies or procedures as described in paragraph (c)(7)(i) of Rule 2.01 of Regulation
S-X.
PART
IV
Item
15. Exhibits and Financial Statement Schedules
(a)(1)
Financial Statements
The
consolidated financial statements and Report of Independent Registered Public Accounting Firm are listed in the “Index to
Financial Statements” on page F-1 and included on pages F-2 through F-27.
(2)
Financial Statement Schedules
All
other schedules are omitted as the required information is either inapplicable or it is presented in the consolidated financial
statements and notes thereto.
(3)
Exhibits
The
Exhibits required by Item 601 of Regulation S-K are listed in paragraph (b) below.
(b)
Exhibits
The
following exhibits are filed or furnished herewith or are incorporated herein by reference to exhibits previously filed with the
SEC.
Exhibit |
|
|
|
|
No.
|
|
Description
|
|
Location
|
31.1 |
|
Rule
13a-14(a)/15d-14(a) Certification of Chief Executive Officer and Principal Financial Officer. |
|
Filed
herewith. |
|
|
|
|
|
31.2 |
|
Rule
13a-14(a)/15d-14(a) Certification of Principal Accounting Officer. |
|
Filed
herewith. |
|
|
|
|
|
32.1 |
|
Certification
of Chief Executive Officer, Principal Financial Officer and Principal Accounting Officer Pursuant to 18 U.S.C. Section 1350
as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
|
Furnished
herewith. |
|
|
|
|
|
101.INS |
|
XBRL
Instance Document
|
|
Furnished
herewith. |
101.SCH |
|
XBRL Taxonomy Extension Schema Document |
|
Furnished
herewith. |
101.CAL |
|
XBRL
Taxonomy Extension Calculation Linkbase Document
|
|
Furnished
herewith. |
101.DEF |
|
XBRL
Taxonomy Extension Label Linkbase Document
|
|
Furnished
herewith. |
101.LAB |
|
XBRL
Taxonomy Extension Label Linkbase Document
|
|
Furnished
herewith. |
101.PRE |
|
XBRL Taxonomy Extension Presentation Linkbase Document |
|
Furnished
herewith. |
(c) None.
SIGNATURES
Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly authorized.
|
GARB
OIL & POWER CORPORATION |
|
|
|
Date: April 15,
2015 |
By: |
/s/
Tammy Taylor |
|
|
Tammy Taylor,
Chief Executive Officer |
Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf
of the registrant and in the capacities and on the dates indicated.
Signature |
|
Title |
|
Date |
|
|
|
|
|
/s/
Tammy Taylor |
|
Chief
Executive Officer and Director (principal executive |
|
April
15, 2015 |
Tammy Taylor |
|
officer
and principal financial officer) |
|
|
|
|
|
|
|
/s/
M. Aimee Coleman |
|
Corporate
Secretary (principal accounting officer) |
|
April
15, 2015 |
M. Aimee Coleman |
|
|
|
|
Exhibit 31.1
Rule 13a-14(a)/15d-14(a)
Certification
I, Tammy Taylor, certify that:
1. I have reviewed this Annual Report on Form
10-K for the fiscal year ended December 31, 2014 of Garb Oil & Power Corporation (the “registrant”);
2. Based on my knowledge, this report does
not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in
light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements,
and other financial information included in this report, fairly present in all material respects the financial condition, results
of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying
officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act
Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))
for the registrant and have:
(a) Designed such disclosure
controls and procedures or caused such disclosure controls and procedures to be designed under our supervision, to ensure that
material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal
control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision,
to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness
of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness
of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this
report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s
most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially
affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying
officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s
auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies
and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to
adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether
or not material, that involves management or other employees who have a significant role in the registrant’s internal control
over financial reporting.
Date: April 15, 2015 |
|
|
|
By: |
/s/ Tammy Taylor |
|
|
Tammy Taylor, Chief Executive Officer |
|
|
(Principal Executive Officer and Principal Financial Officer) |
|
Exhibit 31.2
Rule 13a-14(a)/15d-14(a) Certification
I, M. Aimee Coleman, certify that:
1. I have reviewed this Annual Report on Form
10-K for the fiscal year ended December 31, 2014 of Garb Oil & Power Corporation (the “registrant”);
2. Based on my knowledge, this report does
not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in
light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements,
and other financial information included in this report, fairly present in all material respects the financial condition, results
of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying
officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act
Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))
for the registrant and have:
(a) Designed such disclosure
controls and procedures or caused such disclosure controls and procedures to be designed under our supervision, to ensure that
material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal
control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision,
to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness
of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness
of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this
report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s
most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially
affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying
officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s
auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies
and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to
adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether
or not material, that involves management or other employees who have a significant role in the registrant’s internal control
over financial reporting.
Date: April 15, 2015 |
|
|
|
By: |
/s/ M. Aimee Coleman |
|
|
M. Aimee Coleman, Corporate Secretary |
|
|
(Principal Accounting Officer) |
|
Exhibit 32.1
Section 1350 Certification
In connection with the Annual Report on Form
10-K of Garb Oil & Power Corporation (the “Company”) for the fiscal year ended December 31, 2014 as filed with
the Securities and Exchange Commission (the “Report”), I, Tammy Taylor, Chief Executive Officer and I, M. Aimee Coleman,
Corporate Secretary of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002, that to the best of our my knowledge:
1. | | The Report
fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange
Act of 1934; and |
| | |
2. | | The information contained in
the Report fairly presents, in all material respects, the financial condition and results
of operations of the Company. |
Date: April 15, 2015 |
/s/ Tammy Taylor |
|
Tammy Taylor, Chief Executive Officer |
|
(Principal Executive Officer and Principal Financial Officer) |
|
|
Date: April 15, 2015 |
/s/ M. Aimee Coleman |
|
M. Aimee Coleman, Corporate Secretary
(Principal Accounting Officer) |
A signed original of the written statements above required by Section 906 of the Sarbanes-Oxley
Act of 2002 has been provided to Garb Oil & Power Corporation and will be retained by Garb Oil & Power Corporation and
furnished to the U.S. Securities and Exchange Commission or its staff upon request. The forgoing certifications are being furnished
to the Securities and Exchange Commission as an exhibit to the Annual Report on Form 10-K for the year ended December 31, 2014,
and they shall not be considered filed as part of such report.
Garb Oil and Power (CE) (USOTC:GARB)
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