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):
As of March 21, 2017, the aggregate
market value of the voting and non-voting common equity held by non-affiliates of the registrant computed by reference to the price
at which the common equity was last sold based on the closing price on that date was approximately $17,600,000. On March 21,2017,
the registrant had outstanding 239,168,967 shares of Common Stock, $0.0001 par value per share.
PART I
Item 1. Business.
Introduction
UMED Holdings, Inc. (the "Company") was originally
incorporated as Dynalyst Manufacturing Corporation on March 13, 2002 and adopted a name change to Universal Media Corporation upon
completion of a reverse acquisition of Dynalyst Manufacturing Corporation in August of 2009. In March 2011, we changed our
name to UMED Holdings, Inc. ("UMED").
UMED is a diversified holding company that owns and operates
businesses in a variety of industries including energy and mining. Our focus is to acquire businesses as wholly-owned subsidiaries
that meet some key requirements: (1) solid management that will not have to be replaced in the near future, (2) the ability to
grow with steady growth to follow, and (3) an emphasis on emerging core industry markets, such as energy, metals and agriculture.
In this Form 10-K, we refer to ourselves as "UMED," "We," Us," "the Company," and "Our”.
Our executive offices are located at:
UMED Holdings, Inc., 8851 Camp Bowie Blvd. West, Suite 240, Fort Worth, Texas 76116 tel. voice: 817-346-6900. Our Web site is
www.umedholdings.com
Our growth is dependent on attaining
profit from our operations and our raising capital through the sale of stock or debt. There is no assurance that we will be able
to raise any equity financing or sell any of our products at a profit.
Our independent registered public accounting firm issued
a going concern qualification in their report dated April 17, 2017, which raises substantial doubt about our ability to continue
as a going concern.
Our stock is traded on the OTC QB and
our trading symbol is "UMED."
Corporate History
UMED Holdings, Inc. ("UMED," or the "company") was incorporated in Texas on March 13, 2002. UMED owns technology for converting
natural gas to liquids, primarily diesel and jet fuel ("GTL"), mining claims on federal Bureau of Land Management (BLM) in
Southwest Arizona, a mamaki tea farm on 25 acres located on the big island in Hawaii, and oil rig drilling data management
technology. The Company is in the process of seeking funding to operate the mamaki tea farm in Hawaii, secure clients for
the Logistix Technology for oil and gas drilling rigs technology software, build the GTL units, begin the mining operations
on the BLM land.
The Company staked the BLM placer mining claims on the 1,440 acres in Arizona in September 2011, and, since
then, has maintained the claims and will establish an exploration and development plan, when capital is available.
The Company
purchased 80% of Mamaki Tea & Extract of Hawaii, Inc. in May of 2012 (nka Mamaki of Hawaii, Inc. (and the remaining 20%
in December 2012), and, since then, has worked to bring the tea plant into production. The Company has begun to harvest some
tea leaves from its mamaki tea farm and place samples out with distribution chains to gage the desirability of our tea product.
The Company's current plan is to work the mamaki tea farm to produce revenues that can sustain the Company while it seeks
capital to launch the Logistic software, the mining on the BLM mining claims and GTL operations.
In August 2012, the Company
acquired 50% of Rig Support Services, Inc. (nka Logistix Technology Systems, Inc.), which is developing a unique and valuable
technology and asset management tool for the oil and gas industry. In February 2013, we acquired the remaining 50%. We believe
that this tool will not only provide independent rig owners and operating companies the ability to more accurately view and
report on drilling operations, it will also allow for a more streamlined approach to processing purchase orders and receiving
parts.
In August of 2012, the Company acquired Greenway Innovative Energy, Inc. Greenway Innovative Energy ("GIE") began work
in 2009 on its gas-to-liquids (GTL) system to economically covert natural gas into high-cetane liquid fuels while making no
wax product and avoiding the need for further refining. In 2011, Greenway Innovative Energy engaged Houston-based Commonwealth
Engineering to design a 1,500 barrel/day GTL system based on steam methane reforming (SMR). SMR proved to be too expensive
for commercialization. As a result, GIE embarked on a redesign of the reforming process. That redesigned process and methodology
led to the issuance of patents in 2013 as described below.
On February 15, 2013, GIE filed for a patent on its GTL technology.
U.S. Patent number 8,574,501 was issued on November 5, 2013.
ABSTRACT:
A method and apparatus for converting natural
gas from a source, such as a wellhead, pipeline, or a storage facility, into hydrocarbon liquid stable at room temperature, comprising
a skid or trailer mounted portable gas to liquids reactor. The reactor includes a preprocessor which desulfurizes and dehydrates
the natural gas, a first stage reactor which transforms the preprocessed natural gas into synthesis gas, and a liquid production
unit using a Fischer-Tropsch or similar polymerization process. The hydrocarbon liquid may be stored in a portable tank for later
transportation or further processed on site.
On November 4, 2013, GIE filed for a second patent covering other aspects
of the design.
Also, in November, 2013, GIE reinstated a Sponsored Research Agreement ("SRA") with the University of Texas
at Arlington ("UTA"). The original agreement was initiated in 2009 for GTL proof of concept, scalability, and portability.
Under the 2013 agreement, and based on the GIE's ideas and vision, UTA began research focused solely on catalyst studies for
the Fischer-Tropsch (FT) component of the GIE's GTL system design with a goal of developing a lab platform capable of running
24/7 catalyst testing for one week or longer to prove the viability and commerciality of the process. Under the agreement,
parametric studies were conducted for process conditions including reaction temperature and space velocity.
During 2013, GIE
and UTA worked closely together meeting weekly, and sometimes daily, to review FT catalyst alternatives, identifying those
most efficient and optimized to yield synthetic diesel without wax or other compounds that would require refining.
In 2014,
research conducted under the SRA established that a liquid product could be produced under the right combination of temperature,
pressure, and flow velocity. Deviations from the defined conditions resulted in either catalyst activity loss, an undesired
solid product (wax), or an undesired gaseous product (methane).
In 2014, GIE began work with Air Liquide on the development
of the reforming process and entered into a contract for oxygen and for future patent rights to certain aspects of reforming
process associated with GTL.
In 2014, the company engaged in unsuccessful exploratory work with Chicago Bridge & Iron to
develop a smaller, less expensive SMR system. Separately, the company sought assistance from Schlumberger on Sulphur removal
techniques in order to purify natural gas as part of the GTL process. Sulphur is detrimental to the system's catalysts.
Also,
in 2014, GIE worked with the University of Texas at Arlington (UTA), under its Sponsored Research Agreement (SRA), to develop
and enhance its patented GTL system with a goal of developing commercial GTL plants to convert natural gas into liquid fuels.
During
2014, the company continued to have weekly, and sometimes daily interactions with UTA to review results and modify research
objectives.
During 2015, under the SRA with UTA, the company refined requirements around FT catalyst longevity and the optimization
of syn-fuel productivity. In addition, research was conducted into the nature and purity of the water by-product from the
FT reaction as well as the impact of CO2 contamination in the production of synthesis gas.
Also, during 2015, under the SRA,
the Company launched a project to build a laboratory-scale GTL system at UTA for the purpose of refining and proving its proprietary
GTL technology and engaged Thermal Dynamics, an industrial manufacturer and fabricator, to build a laboratory-scale prototype
reformer in order to prove scalability and functionality. Numerous meetings were conducted with UTA, Air Liquide, and Thermal
Dynamics regarding the planning for the laboratory-scale prototype.
During 2016, under the SRA with UTA, GIE directed UTA to
conduct studies to evaluate the impact of the CO2 to syngas ratio in the reforming process. It was established that ratios
above a certain level would result in undesirable wax output. This finding was significant because it satisfied the requirement
of producing wax-less fuel.
During 2016, under the SRA, GIE continued moving forward on the prototype GTL system at UTA for
the purpose or refining and proving its proprietary GTL technology. The lab will be named the Conrad Greer Laboratory after
the patent-holder and co-founder of the company Mr. Conrad Greer. Numerous meetings were conducted with UTA, Air Liquide,
and Thermal Dynamics to refine and finalize plans for the laboratory-scale prototype.
During 2016, Greenway Innovative Energy personnel worked
closely with UTA personnel, under the SRA, to develop process design and flow diagrams as well as completing heat and material
calculations for the laboratory-scaled system. During the year, the company continued to have weekly, and sometimes daily interactions
with UTA to review and modify research objectives.
As shown in the accompanying consolidated financial statement,
the Company has incurred a cumulative deficit of $14,476,205 as of
December 31, 2016. The ability of the Company to continue
as a going concern is in doubt and dependent upon on the ability of the Company to obtain necessary capital and financing to fund
ongoing operations and achieving a profitable level of operations. UMED does not have the financial resources and does not have
any commitments for funding from unrelated parties or any other firm agreements that will provide working capital to its business
segments. We cannot give any assurance that UMED will locate any funding or enter into any agreements that will provide the required
operating capital. UMED has been depended on the sale of equity and advances from shareholders to provide it with working capital
to date.
UMED Strategy
UMED is a diversified holding company that owns and operates
businesses in a variety of industries including energy and mining. Our focus is to acquire businesses as wholly-owned subsidiaries
that meet some key requirements: (1) solid management that will not have to be replaced in the near future, (2) the ability to
grow with steady growth to follow, and (3) an emphasis on emerging core industry markets, such as energy and metals.
Operationally, the Company has completed a small-scale
model of its GTL Unit at UTA and is seeking financing for the initial GTL field production unit.
In parallel, the Company plans to build a laboratory-scale GTL system at UTA to further to develop and enhance its patented
GTL system with a goal of commercial deployment to profitably harvest natural gas in a variety of forms including pipeline,
flared, stranded, vented, coal-bed methane, or bio-mass.
Competition
Most of our competitors have greater
financial and other resources than we have, and there is no assurance that we will be able to successfully compete.
Currently, there is significant competition for personnel
and financial capital to be deployed in the oil and gas extraction industries and mining and mineral extraction industries. Therefore,
it is difficult for smaller companies such as UMED to attract investment for its various business activities. We cannot give
any assurances that we will be able to compete for capital funds, and without adequate financial resources management cannot assure
that the company will be able to compete in our business activities.
Intellectual Property
As of December 31, 2015, the Company's wholly-owned subsidiary Greenway Innovative Energy, Inc. (GIE) owns US Patents 8,574,501
and 8,795,597 B2 covering its mobile Gas-to-Liquids ("GTL") conversion unit for the purpose of converting natural gas to clean
synthetic fuels. U.S. Patent number 8,795,597 B2 was applied for on November 4, 2013. Patent number 9,795,597 B2 was issued
on August 5, 2014 covering other aspects of the design.
ABSTRACT covering both patents:
A method and apparatus for converting natural
gas from a source, such as a wellhead, pipeline, or a storage facility, into hydrocarbon liquid stable at room temperature, comprising
a skid or trailer mounted portable gas to liquids reactor. The reactor includes a preprocessor which desulfurizes and dehydrates
the natural gas, a first stage reactor which transforms the preprocessed natural gas into synthesis gas, and a liquid production
unit using a Fischer-Tropsch or similar polymerization process. The hydrocarbon liquid may be stored in a portable tank for later
transportation or further processed on site.
In the United States, a patent's term may be up to 21 years
if the earliest claimed filing date is that of a provisional application. Other legal provisions may, however, shorten or lengthen
a patent's term. In the United States, a patent's term may, in certain cases, be lengthened by patent term adjustment, which compensates
a patentee for administrative delays by the U.S. Patent and Trademark Office in examining and granting a patent. Alternatively,
a patent's term may be shortened if a patent is terminally disclaimed over a commonly owned patent or a patent naming a common
inventor and having an earlier expiration date.
Employees
We currently employ Ransom Jones as
President and Chief Financial Officer.
Greenway Innovative Energy, Inc. employees consist of Chief
Executive Officer, Conrad Greer, President Ray Wright and Vice President Pat Six, who work under agreements with Greenway. Greenway
plans to use outside consultants to perform the engineering and design work on the GTL Unit, until such time as capital funds are
available to hire in-house staff.
We do not have any other employees at this time. In the future,
when we need other persons for aspects of the exploratory work and other functions, we will hire persons under service agreements
as consultants, part-time and full time employees as necessary. We do not have any arrangements for the hiring of any persons at
this time.
The Company has Sponsored Research Agreements with UTA for
catalyst and heat exchange research and has contracted with UTA to build a small-scale GTL unit at the university.
Available Information about Us
The public may read and copy any materials
we file with the Securities and Exchange Commission ("SEC") at the SEC's Public Reference Room at 100 F Street, NE, Washington,
D.C. 20549, on official business days during the hours of 10:00 am to 3:00 pm. The public may obtain information on the operation
of the Public Reference Room by calling the Commission at 1-800-SEC-0330. The Commission maintains an Internet site that contains
reports, proxy and information statements, and other information regarding issuers that file electronically with the Commission
at (http://www.sec.gov). Our Internet site is www.umedholdings.com.
Item 1A. Risk Factors.
Disclosure is not required as a result
of our Company's status as a smaller reporting company.
Item 1B. Unresolved Staff Comments
None.
Item 2. Properties.
The Company's principal office is at 8851 Camp Bowie Blvd.
West, Suite 240, Fort Worth, Texas 76116, where it leases approximately 1,800 square feet of office space, at a rate of $2,417
per month.
The Company has staked 72 placer mining claims in Mohave
County, Arizona on BLM land (BLM file no. AMC 403533) covering approximately 1,440 acres in Mohave County southeast of Kingman,
Arizona.
Item 3. Legal Proceedings.
In the ordinary course of business,
we may be subject to legal proceedings involving contractual and employment relationships, liability claims and a variety of other
matters. Although the results of these other legal proceeding cannot be predicted with certainty, we do not believe that
the final outcome of these matters should have a material adverse effect on our business, results of operations, cash flows or
financial condition.
As of the date of this report, we are
not aware of any other asserted or unasserted claims. Management will seek to minimize further disputes but recognizes the
inevitability of legal action in today's business environment as an unfortunate price of conducting business.
Item 4. Mine Safety Disclosures.
Not applicable.
PART II
Item 5. Market for Registrant's Common
Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
Our stock is traded on the OTCQB and
our trading symbol is "UMED." The following table sets forth the quarterly high and low bid price per share for our common
stock. These bid and asked price quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission, and may
not represent actual prices. Our fiscal year ends December 31.
Common Stock Price Range
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
|
2015
|
|
|
|
HIGH
|
|
|
LOW
|
|
|
HIGH
|
|
|
LOW
|
|
First Quarter
|
|
$
|
0.0650
|
|
|
$
|
0.0650
|
|
|
$
|
0.2300
|
|
|
$
|
0.1201
|
|
Second Quarter
|
|
|
0.1000
|
|
|
|
0.0610
|
|
|
|
0.1875
|
|
|
|
0.1000
|
|
Third Quarter
|
|
|
0.2000
|
|
|
|
0.2000
|
|
|
|
0.2000
|
|
|
|
0.1001
|
|
Fourth Quarter
|
|
|
0.1400
|
|
|
|
0.1100
|
|
|
|
0.1400
|
|
|
|
0.0510
|
|
Common Stock
On March 21, 2017, we had outstanding 239,168,967 shares
of Common Stock, $0.0001 par value per share.
On March 21, 2017, the closing bid price of our stock was
$0.11 per share.
On March 1, 2017, we had approximately 477 shareholders of
record.
Our transfer agent is Transfer Online,
Inc. located at 512 SE Salmon St., Portland, Oregon.
We have not paid any cash dividends
and we do not expect to declare or pay any cash dividends in the foreseeable future. Payment of any cash dividends will depend
upon our future earnings, if any, our financial condition, and other factors as deemed relevant by the Board of Directors.
Sale of Unregistered Securities
During the three months ended December
31, 2016, the Company issued 1,476,667 shares of restricted class A common stock to thirteen individuals through private placements
for cash of $147,000 at average of $0.10 per share.
During the period from January 1, 2017
through March 21, 2017, the Company issued 12,217,500 shares of restricted class A common stock to 18 individuals for $977,400
at average price of $0.08 per share.
During the period from January 1, 2017
through March 21, 2017, the Company issued 1,750,000 shares of restricted class A common stock for consulting services at
average price of $0.12 per share.
Securities Authorized for Issuance under Equity Compensation
Plans
None
Employee Stock Option Plans
None
Item 6. Selected Financial Data.
Disclosure is not required as a result
of our Company's status as a smaller reporting company.
Item 7. Management's Discussion and
Analysis of Financial Condition and Results of Operations.
The following discussion and analysis
of the financial condition and results of operations of the Company should be read in conjunction with the financial statements
and the related notes and the discussions under "Application of Critical Accounting Policies," which describes key estimates
and assumptions we make in the preparation of our financial statements.
Overview
UMED Holdings, Inc. ("UMED") was originally incorporated
as Dynalyst Manufacturing Corporation ("Dynalyst") under the laws of the State of Texas on March 13, 2002. On
June 7, 2006, Dynalyst Manufacturing Corporation amended its Articles of Incorporation to increase its authorized number of common
shares from Twenty Million (20,000,000) to Seventy-Five Million (75,000,000) shares and authorized Twenty-Five (25,000,000) shares
of preferred stock.
In connection with the reorganization
with Universal Media Corporation ("UMC"), a Nevada corporation, on August 17, 2009, Dynalyst changed its name to Universal
Media Corporation. The transaction was accounted for as a reorganization, with UMC as the acquiring company on
the basis that UMC's senior management became the entire senior management of the merged entity and there was a change of control
of Dynalyst. The transaction is accounted for as recapitalization of Dyanlyst's capital structure. In connection with
the reorganization, Dynalyst issued 57,500,000 restricted class A common shares to stockholders of Universal Media Corporation for
100% of UMC.
On August 18, 2009, Dynalyst approved
the amendment of its Articles of Incorporation and filed with the Texas Secretary of State to change the Company's name to Universal
Media Corporation and approved the increase in authorized shares to 300,000,000 shares of class A common stock, par value $.0001
and 20,000,000 shares of class B stock, par value $.0001.
On March 23, 2011, UMC approved the amendment of its Articles
of Incorporation and filed with the Texas Secretary of State to change the Company's name to UMED Holdings, Inc.
UMED Holdings, Inc. a Texas corporation, (hereinafter "UMED"
or "the Company") is a holding company with present interest in energy and mining. The Company has established
its corporate offices at 8851 Camp Bowie Blvd. West, Suite 240, Fort Worth, Texas 76116 consisting of approximately 1,800
square feet.
Energy Interest
In August 2012, UMED acquired Greenway Innovative Energy, Inc. ("Greenway"), filed a patent application, and is conducting
research on Gas-to-Liquid ("GTL") technology. The Technology is based upon the Fischer-Tropsch ("FT") conversion system that
was originally developed in Germany and has been operational in various locations throughout the world since the early 1930s.
Thousands of FT systems have operated during the last 80 years. More recently, and for a more sustained period, FT has been
responsible for providing much of the motive energy required to meet the needs of the Republic of South Africa, a country
recognized as having pushed FT technology much further than any other nation since the development of the process.
Greenway's
research has been centered on developing a movable production-scale FT system ("the Portable Technology") to accommodate the
needs of smaller gas plays that are increasingly beginning to characterize natural gas production within the US and elsewhere.
Based on preliminary estimates with new, improved and more efficient technology than previously projected, the Company is
currently seeking funding of $50 - $55 million to manufacture the initial (2,000 barrel per day) GTL unit near an existing
pipeline to obtain the cleanest gas possible source of natural gas and to avoid desulfurization on the first unit. The GTL
Unit will be composed of the front end to produce the synthesis gas that will then be processed by the FT unit. The resulting
liquid will be separated into diesel, jet fuel and other products for sale to blending facilities.
The Company worked with
the University of Texas at Arlington (UTA), under its Sponsored Research Agreement (SRA), to develop and enhance its patented
GTL system. The Company continued to seek and obtain funding for the prototype GTL system for the planned Conrad Greer Laboratory.
Designs for various lab elements and components were completed. It expected that upon successful laboratory testing, the company
will be able to move from development to commercialization of its GTL technology.
During 2016, under the SRA with UTA, made
significant progress to advance its research. During the year, GIE directed UTA to conduct studies to evaluate the impact
of the CO2 to syngas ratio in the reforming process. It was established that ratios above a certain level would result in
undesirable wax output. This finding was significant because it satisfied the requirement of producing wax-less fuel.
GIE continued
moving forward on the prototype GTL system at UTA for the purpose or refining and proving its proprietary GTL technology.
The lab will be named the Conrad Greer Laboratory after the patent-holder and co-founder of the company Mr. Conrad Greer.
Numerous meetings were conducted with UTA, Air Liquide, and Thermal Dynamics to refine and finalize plans for the laboratory-scale
prototype.
Mining Interest
In December 2010, UMED acquired the rights to approximately
1,440 acres of placer mining claims in Mohave County, Arizona for 5,066,000 shares of restricted common stock. Actual
mining and processing will determine the ultimate value of the holdings. The Company's current expectations are that
it will need approximately $2,000,000 to begin certified assaying ($500,000), develop a mining plan with the BLM ($500,000) and
acquire exploration equipment ($1,000,000). The total requirement will not be known until reports from a consulting geologist
are received. Due to the Company not producing any revenues from its BLM mining leases since its acquisition of the leases,
achieving a position of producing cash flow levels to fund the development of its BLM mining leases and not having current resources
for an appraisal, we recognized an impairment charge of $100,000 during the year ended December 31, 2014.
Going Concern
We remain dependent on outside sources
of funding for continuation of our operations. Our independent registered public accounting firm issued a going concern qualification
in their report dated April 17, 2017, which raises substantial doubt about our ability to continue as a going concern.
During the years ended December 31,
2016 and 2015, we have been unable to generate cash flows sufficient to support our operations and have been dependent on debt
and equity raised from qualified individual investors and loans from a related party. We experienced negative financial results
as follows:
|
|
|
|
|
|
|
|
|
2016
|
|
|
2015
|
|
Net loss
|
|
$
|
(2,018,704
|
)
|
|
$
|
(4,028,702
|
)
|
Cash flow (negative) from operations
|
|
|
(1,845,765
|
)
|
|
|
(1,304,347
|
)
|
Negative working capital
|
|
|
(2,422,202
|
)
|
|
|
(2,271,303
|
)
|
Stockholders' deficit
|
|
|
(2,416,853
|
)
|
|
|
(2,270,559
|
)
|
These factors raise substantial doubt
about our ability to continue as a going concern. The financial statements contained herein do not include any adjustments relating
to the recoverability and classification of recorded asset amounts or amounts and classification of liabilities that might be necessary
should we be unable to continue in existence. Our ability to continue as a going concern is dependent upon our ability to generate
sufficient cash flows to meet our obligations on a timely basis, to obtain additional financing as may be required, and ultimately
to attain profitable operations. However, there is no assurance that profitable operations or sufficient cash flows will occur
in the future.
Our ability to achieve profitability
will depend upon our ability to manufacture and operate GTL units. Our growth is dependent on attaining profit from our operations
and our raising additional capital either through the sale of stock or borrowing. There is no assurance that we will be able to
raise any equity financing or sell any of our products at a profit.
Results of Operations
Revenues for consolidated operations for the years ended
December 2016 and 2015 were $0 and $0, respectively. We reported consolidated net losses during the years ended
December 31, 2016 and 2015 of $2,018,704 and $4,028,702, respectively.
The following table summarizes consolidated operating expenses
and other income and expenses for the year ended December 31, 2016 and 2015:
|
|
2016
|
|
|
2015
|
|
|
|
|
|
|
|
|
General and administrative
|
|
$
|
1,050,101
|
|
|
$
|
3,829,466
|
|
Research and development
|
|
|
967,348
|
|
|
|
766,726
|
|
Depreciation and amortization
|
|
|
396
|
|
|
|
396
|
|
Gain from debt forgiveness
|
|
|
30,076
|
|
|
|
518,300
|
|
Write-off Logistix software
|
|
|
0
|
|
|
|
73,500
|
|
Gain (loss) on derivative
|
|
|
(7,129
|
)
|
|
|
139,397
|
|
Net interest expense
|
|
|
14,676
|
|
|
|
218,105
|
|
Loss on debt settlement
|
|
|
8,500
|
|
|
|
0
|
|
Loss on discontinued operations
|
|
|
0
|
|
|
|
561,412
|
|
For the year ended December 31, 2016, consolidated general
and administrative costs of $1,050,101 consisted primarily of consulting fees of $200,460, management fees of $420,500, legal fees
of $236,771, rent expense of $45,191, auditing expense of $26,300, travel expenses of $23,153, transfer agent expenses of $9,421,
and Arizona mining lease of $11,160.
For the year ended December 31, 2015, consolidated general
and administrative costs of $3,829,466 consisted primarily of consulting fees of $193,250, management fees of $605,400, legal fees
of $95,230, rent expense of $57,362, auditing expense of $28,500, travel expenses of $9,021, transfer agent expenses of $12,111,
and stock based compensation of $2,991,677.
Consolidated net loss was $2,018,704
or $0.01 per basic and diluted earnings per share for the year ended December 31, 2016 compared to $4,028,475 or $0.02 per share
for the year ended December 31, 2015. The weighted-average number of shares used in the earnings per share for the basic and dilutive
computation was 202,062,054 for the year ended December 31, 2016 and 165,860,150 for the year ended December 31, 2015.
Liquidity and Capital
Resources
We do not currently have sufficient working capital to
fund our future operations. We cannot assure that we will be able to continue our operations without adequate funding. We had
$67,964 in cash, total assets of $86,789 and total liabilities of $2,503,642 as of December 31, 2016. Total stockholder's
deficit at December 31, 2016 was $14,476,205.
For the years ended December 31, 2016 and 2015, cash used
by operating activities was $1,845,765 and $1,304,347, respectively.
Cash provided by financing activities for the years ended
December 31, 2016 and 2015 was $1,913,729 and $1,270,852, respectively, primarily from the sale of common stock, issuance
of convertible note payable and advances by shareholders.
We project that approximately $55 - $60 million of capital
will be needed for all aspects of our business development. We project a need of $50 -$55 million to build the first
portable GTL Unit, $2 million for our mining exploration plan, and $3 million for general and administrative expenses. Further,
until there is a more complete assessment of the mining property, we cannot determine the necessary capital requirements and our
operating budgets, if it is decided to pursue full exploration and development. We also will be subject to environmental expenses
in connection with these activities. We will also have the expense of maintaining and defending any patents obtained, our
claims, and seeking further patents and claims to be able to garner sufficient area to make our operations more viable, once we
have shown appropriate mineral deposits present in our claims, if at all. After building the first GTL Unit and determining
the commercial viability of the mining claims, we will need substantial capital or financial partners to build additional GTL Units,
develop the mining claims, acquire plant and equipment and hire personnel.
We intend to seek debt, equity and revenue-sharing forms
of capital. We have no firm arrangements for any capital at this time. Additionally, equity capital for small companies generally
and small companies in the oil and gas and mining segments in particular, have a difficult time competing for investors and/or
debt financing because of the high risk at this stage of development and the fact that the investment could be long term. The
market for the transportation fuel and metals that the company believes may be derived from the GTL Units and from its mining claims
also influences investment decisions, such that if there is strong demand, then funds may be relatively more available, but if
market demand is not strong or the price of transportation fuels and the metals declines, funding may be unavailable. The
failure to obtain the necessary working capital would have a material adverse effect on the business prospects and, depending upon
the shortfall, the Company may have to curtail or cease its operations.
The accompanying consolidated financial statements have been
prepared on a going concern basis, which contemplates realization of assets and the satisfaction of liabilities in the normal course
of business. The general business strategy of the Company is to first develop the natural gas to liquid technology to maintain
the Company's viability, while seeking capital and then explore and research its existing mining leases properties. As
shown in the accompanying consolidated financial statement, the Company has incurred a cumulative deficit of $14,476,205 and $12,458,131
as of December 31, 2016 and 2015, respectively. The ability of the Company to continue as a going concern is in doubt and dependent
upon achieving a profitable level of operations and on the ability of the Company to obtain necessary financing to fund ongoing
operations.
Commitments
Employment Contracts
In May 2011, the Company entered into
employment agreements with Kevin Bentley, its chief executive officer, Richard Halden, its president and Randy Moseley, its chief
financial officer. The Agreements were for a term of 5 years, ending May 31, 2106. The employment agreements
also provide for the officers to receive 1,250,000 shares of restricted common stock annually for each year of the employment agreement. During
the years ended December 31, 2016 and 2015, the Company accrued a total of $150,000 and $360,000, respectively, as management fees.
Kevin Bentley resigned in April 2015 and relinquished his claim to receive $518,300 of deferred compensation. Richard Halden resigned
as President in January 2016 and Randy Moseley resigned as Chief Financial officer in November 2016.
In August 2012, the Company entered into employment agreements
with Raymond Wright, the president and Conrad Greer, the chairman of the board of Greenway for a term of 5 years with compensation
of $90,000 per year. In June of 2014, the president's employment agreement was amended to increase his annual pay to $180,000.
On March 1,2015, accrual on the Greenway chairman of the board agreement was ceased due to his absence from the company for more
than a year. During the years ended December 31, 2016 and 2015, respectively, the Company accrued $180,000 and $191,250 towards
the employment agreements.
Mining Leases
The Company's minimum commitment for 2017 is approximately
$11,160 in annual maintenance fees, which are due September 1, 2017. Once the company enters the production phase, royalties
owed to the BLM are equal to 10% of production.
Financing
The Company's financing has been provided by loans, advances
from shareholders and by issuing shares of its common stock in various private placements to related parties and individuals.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements that are
reasonably likely to have a current or future effect on our financial condition, revenues, and results of operations, liquidity
or capital expenditures.
Significant Accounting Policies
Critical Accounting Policies and
Estimates
Our discussion and analysis of our financial
condition and results of operations are based upon financial statements which have been prepared in accordance with generally accepted
accounting principles in the United States. The preparation of these financial statements requires us to make estimates and judgments
that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and
liabilities. On an ongoing basis, we evaluate these estimates. We base our estimates on historical experience and on assumptions
that are believed to be reasonable. These estimates and assumptions provide a basis for making judgments about the carrying values
of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under
different assumptions or conditions, and these differences may be material.
We believe that the following critical accounting policies
affect our more significant judgments and estimates used in the preparation of our financial statements.
Revenue Recognition
The Company will recognize revenue in accordance with Accounting
Standards Codification subtopic 605-10,
Revenue Recognition
("ASC 605-10") which requires that four basic criteria
must be met before revenue can be recognized: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred; (3)
the selling price is fixed and determinable; and (4) collectability is reasonably assured. Determination of criteria (3) and (4)
are based on management's judgments regarding the fixed nature of the selling prices of the products delivered and the collectability
of those amounts. Provisions for discounts and rebates to customers, estimated returns and allowances, and other adjustments are
provided for in the same period the related sales are recorded.
ASC 605-10 incorporates Accounting Standards Codification
subtopic 605-25,
Multiple-Element Arrangements
("ASC 605-25"). ASC 605-25 addresses accounting for arrangements
that may involve the delivery or performance of multiple products, services and/or rights to use assets. The effect of implementing
605-25 on the Company's financial position and results of operations was not significant.
Stock-Based Compensation
Accounting Standard 718, "Accounting
for Stock-Based Compensation" ("ASC 718") established financial accounting and reporting standards for stock-based
employee compensation plans. It defines a fair value based method of accounting for an employee stock option or similar equity
instrument. In January 2006, UMED implemented ASC 718, and accordingly, UMED accounts for compensation cost for stock option plans
in accordance with ASC 718.
The Company accounts for share based
payments to non-employees in accordance with ASC 505-50 "Accounting for Equity Instruments Issued to Non-Employees for Acquiring,
or in Conjunction with Selling, Goods or Services".
Use of Estimates
The preparation of the consolidated financial statements
in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amount of revenue and expenses during the reported period. Actual results could
differ materially from the estimates.
Mine Exploration and Development
Costs
The Company accounts for mine exploration costs in accordance
with Accounting Standards Codification 932,
Extractive Activities
. All exploration expenditures are expensed
as incurred. Mine development costs are capitalized until production, other than production incidental to the mine development
process, commences and are amortized on a units of production method based on the estimated proven and probable reserves. Mine
development costs represent costs incurred in establishing access to mineral reserves and include costs associated with sinking
or driving shafts and underground drifts, permanent excavations, roads and tunnels. The end of the development phase and the beginning
of the production phase takes place when construction of the mine for economic extraction is substantially complete. Amortization
of capitalized mine development is computed based on the estimated life of the mine and commences when production, other than production
incidental to the mine development process, begins. At December 31, 2016, the Company had not incurred any mine development costs.
Mining Properties
The Company accounts for mine properties in accordance with
Accounting Standard Codification 930,
Extractive Activities-Mining
. Costs of acquiring mine properties are capitalized
by project area upon purchase of the associated claims. Mine properties are periodically assessed for impairment of
value and any diminution in value. Due the Company not achieving a position of producing cash flow levels to fund the development
of its BLM mining leases and not having current resources for an appraisal, we recognized an impairment charge of $100,000 during
the year ended December 31, 2014.
Income Taxes
The Company has adopted Accounting Standards Codification
subtopic 740-10, ("ASC 740-10") which requires the recognition of deferred tax liabilities and assets for the expected
future tax consequences of events that have been included in the financial statement or tax returns. Under this method, deferred
tax liabilities and assets are determined based on the difference between financial statements and tax basis of assets and liabilities
using enacted tax rates in effect for the year in which the differences are expected to reverse. Temporary differences
between taxable income reported for financial reporting purposes and income tax purposes consist primarily of timing differences
such as deferred officers' compensation and stock compensation accounting versus tax differences.
Net Loss Per Share, basic and diluted
The Company has adopted Accounting Standards
Codification Subtopic 260-10,
Earnings Per Share
("ASC 260-10), specifying the computation, presentation and disclosure
requirements of earning per share information. Basic loss per share has been computed by dividing net loss available to common
shareholders by the weighted average number of common shares outstanding for the period. Shares issuable upon conversion of the
notes payable and exercise of warrants has been excluded as a common stock equivalent in the diluted loss per share because their
effect is anti-dilutive on the computation.
Derivative Financial Instruments
The Company does not use derivative
instruments to hedge exposures to cash flow, market, or foreign currency risks. UMED evaluates all of it financial instruments
to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial
instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then
re-valued at each reporting date, with changes in the fair value reported as charges or credits to income. For option-based derivative
financial instruments, UMED uses the Black-Scholes option-pricing model to value the derivative instruments at inception and subsequent
valuation dates. The classification of derivative instruments, including whether such instruments should be recorded as liabilities
or as equity, is re-assessed at the end of each reporting period. Derivative instrument liabilities are classified in the balance
sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument could be required within
12 months of the balance sheet date.
Concentration and Credit Risk
Financial instruments and related items, which potentially
subject the Company to concentrations of credit risk, consist primarily of cash, cash equivalents and trade receivables. The Company
places its cash and temporary cash investments with high credit quality institutions. At times, such investments may
be in excess of the FDIC insurance limit.
Impact of New Accounting Standards
The Company has reviewed all other recently issued, but not
yet adopted, accounting standards in order to determine their effects, if any, on its results of operation, financial position
or cash flows. Based on that review, the Company believes that none of these pronouncements are expected to have a significant
effect on its consolidated financial statements.
Item 7A. Quantitative and Qualitative
Disclosures about Market Risk
Pursuant to Item 305(e) of Regulation S-K (§ 229.305(e)),
the Company is not required to provide the information required by this Item as it is a "smaller reporting company,"
as defined by Rule 229.10(f)(1).
Item 8. Financial Statements and
Supplementary Data.
See Financial Statements beginning on page F-1.
Item 9. Changes in and Disagreements
with Accountants on Accounting and Financial Disclosure.
None
Item 9A. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our
Principal Executive Officer and Principal Financial Officer, evaluated the effectiveness of our disclosure controls and
procedures (as defined in the Securities Exchange Act of 1934 Rules 13a-15(e) and 15d-15(e)) as of the end of the period
covered by this Annual Report on Form 10-K. In designing and evaluating the disclosure controls and procedures, management
recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance
of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the
fact that there are resource constraints and that management is required to apply its judgment in evaluating the benefits of
possible controls and procedures relative to their costs.
Based on our evaluation, our Principal Executive Officer
and Principal Financial Officer, after considering the existence of material weaknesses identified, determined that our internal
control over financial reporting disclosure controls and procedures were not effective as of December 31, 2016.
Management's Annual Report on Internal Control over Financial
Reporting
Our management is responsible for establishing and maintaining
adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act
of 1934, as amended. Our internal control over financial reporting is designed to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S.
generally accepted accounting principles.
Our internal control over financial reporting includes
those policies and procedures that: (i) pertain to the maintenance of records that in reasonable detail accurately and fairly
reflect the transactions and dispositions of our assets, (ii) provide reasonable assurance that transactions are recorded as
necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that
our receipts and expenditures are being made only in accordance with authorizations of our management and directors, and
(iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition
of our assets that could have a material effect on our financial statements.
Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods
are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.
Management, including our Principal Executive Officer and
Principal Financial Officer, assessed the effectiveness of our internal control over financial reporting as of December 31,
2016. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the
Treadway Commission (COSOII) in Internal Control over Financial Reporting - Guidance for Smaller Public Companies.
We identified the following deficiencies which together constitute
a material weakness in our assessment of the effectiveness of internal control over financial reporting as of December 31, 2016;
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O
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The Company has inadequate segregation of duties within its cash disbursement control design.
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During the year ended December 31, 2016, the Company internally performed all aspects of its financial reporting process, including, but not limited to the underlying accounting records and record journal entries and responsibility for the preparation of the financial statement due to the fact these duties were performed often times by the same people, a lack of review was created over the financial reporting process that might result in a failure to detect errors in spreadsheets, calculations, or assumptions used to compile the financial statements and related disclosures as filed with the SEC. These control deficiencies could result in a material misstatement to our interim or annual financial statements that would not be prevented or detected.
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The Company does not have a sufficient number of independent directors for its board and audit committee. We currently have two independent directors on our board, which is comprised of seven directors, and we do not have a functioning audit committee. As a publicly-traded company, we should strive to have a majority of our Board of Directors be independent.
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The Company is continuing the process of remediating its
control deficiencies. However, the material weakness in internal control over financial reporting that has been identified will
not be remediated until numerous internal controls are implemented and operate for a period of time, are tested, and the Company
is able to conclude that such internal controls are operating effectively. The Company cannot provide assurance that these procedures
will be successful in identifying material errors that may exist in the financial statements. The Company cannot make assurances
that it will not identify additional material weaknesses in its internal control over financial reporting in the future. Management
plans, as capital becomes available to the Company, to increase the accounting and financial reporting staff and provide future
investments in the continuing education and public company accounting training of our accounting and financial professionals.
It should be noted that any system of controls, however well designed and
operated, can provide only reasonable, and not absolute, assurance that the objectives of the system are
met. In addition, the design of any control system is based in part upon certain assumptions about the likelihood of future events. Because
of these and other inherent limitations of control system, there can be no assurance that any design will succeed in achieving
its stated goals under all potential future conditions, regardless of how remote.
This annual report does not include an attestation report
of the Company's registered public accounting firm regarding internal control over financial reporting. Management's report was
not subject to attestation by the Company's registered public accounting firm pursuant to rules of the Securities and Exchange
Commission that permit us to provide only management's report in this annual report.
Changes in Internal Controls over
Financial Reporting
We regularly review our system of internal
control over financial reporting to ensure we continue to work towards an effective internal control environment. There were
no changes that occurred during the fourth quarter of the fiscal year covered by the Annual Report on Form 10-K that have materially
affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.
Item 9B. Other Information.
None.
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS
December 31, 2016
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations
UMED Holdings, Inc. ("UMED"
or the "Company") was organized on March 13, 2002 under the laws of the State of Texas as Dynalyst Manufacturing Corporation. On
August 18, 2009, in connection with a merger with Universal Media Corporation, a privately held Nevada company, the Company changed
its name to Universal Media Corporation ("UMC"). The company changed its name to UMED Holdings, Inc. on March
23, 2011.
UMED's mission is to operate as a holding
company through the acquisition of businesses as wholly-owned subsidiaries that meet some key requirements: (1) solid management
that will not have to be replaced in the near future (2) the ability to grow with steady growth to follow and (3) an emphasis on
emerging core industry markets, such as energy and metals. It is the Company's intention to add experienced personnel
and select strategic partners to manage and operate the acquired business units.
In May 2012, the Company acquired 80%
of Mamaki Tea & Extract of Hawaii, Inc. (nka Mamaki of Hawaii, Inc.) which owns and operates Wood Valley Plantation a 25 acre
Mamaki Tea plantation located in the Kau district of the Island of Hawaii and lies at the foot of Mauna Loa, the Earth's largest
volcano. On December 31, 2012, the Company acquired the remaining 20% for 500,000 shares of restricted common
stock and $127,800 of cash. Mamaki of Hawaii, Inc. was sold in October 2015 as discussed further in Notes 3, 4 and 12.
In August 2012, the Company acquired
100% of Greenway Innovative Energy, Inc., which owns patents and proprietary technology that is capable of converting natural gas
to diesel and jet fuels.
NOTE 2 - BASIS OF PRESENTATION AND GOING CONCERN UNCERTAINTIES
Principles of Consolidation
The accompanying consolidated financial
statements include the financial statements of UMED and its wholly-owned subsidiaries. The Company's investment in Jet Regulators
is accounted for at cost due to its lack of significant influence. All significant inter-company accounts and transactions
were eliminated in consolidation.
The accompanying consolidated financial
statements include the accounts of the following entities:
Name of Entity
|
%
|
|
Entity
|
Incorporation
|
Relationship
|
UMED Holdings, Inc.
|
|
|
Corporation
|
Texas
|
Parent
|
Universal Media Corporation
|
100
|
%
|
Corporation
|
Wyoming
|
Subsidiary
|
Greenway Innovative Energy, Inc.
|
100
|
%
|
Corporation
|
Nevada
|
Subsidiary
|
Logistix Technology Systems, Inc.
|
100
|
%
|
Corporation
|
Texas
|
Subsidiary
|
Going Concern Uncertainties
The accompanying consolidated financial
statements have been prepared on a going concern basis, which contemplates realization of assets and the satisfaction of liabilities
in the normal course of business. As shown in the accompanying consolidated financial statements, the Company sustained a loss
of $2 million for the year ended December 31, 2016 and has a deficit of $14.5 million at December 31, 2016. The ability of the
Company to continue as a going concern is in doubt and dependent upon achieving a profitable level of operations or on the ability
of the Company to obtain necessary financing to fund ongoing operations. Management believes that its current and future plans
enable it to continue as a going concern for the next twelve months.
To meet these objectives, the Company
continues to seek other sources of financing in order to support existing operations and expand the range and scope of its business.
However, there are no assurances that any such financing can be obtained on acceptable terms and timely manner, if at all. The
failure to obtain the necessary working capital would have a material adverse effect on the business prospects and, depending upon
the shortfall, the Company may have to curtail or cease its operations.
The accompanying consolidated financial
statements do not include any adjustment to the recorded assets or liabilities that might be necessary should the Company have
to curtail operations or be unable to continue in existence.
NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
A summary of significant accounting
policies applied in the presentation of the consolidated financial statements are as follows:
Property & Equipment
Property and equipment is recorded at
cost. Major additions and improvements are capitalized. The cost and related accumulated depreciation of equipment retired or sold
are removed from the accounts and any differences between the undepreciated amount and the proceeds from the sale are recorded
as a gain or loss on sale of equipment. Depreciation is computed using the straight-line method over the estimated useful life
of the assets as follows.
Impairment of Long-Lived Assets
The Company assesses the impairment
of long-lived assets whenever events or changes in circumstances indicate that the carrying amount may not be recoverable, in accordance
with ASC Topic 360, "Property, Plant and Equipment." An asset or asset group is considered impaired if its
carrying amount exceeds the undiscounted future net cash flow the asset or asset group is expected to generate. If an
asset or asset group is considered impaired, the impairment to be recognized is measured by the amount by which the carrying amount
of the assets exceeds its fair value. If estimated fair value is less than the book value, the asset is written down
to the estimated fair value and an impairment loss is recognized.
Discontinued Operations
On November 2, 2015, the Company consummated the sale of
its wholly owned subsidiary, Mamaki of Hawaii, Inc. ("Mamaki") to Hawaiian Beverages, Inc. ("HBI").
Under the agreement, HBI acquired 100% of the common stock of Mamaki in exchange for seven hundred thousand dollars ($700,000)
and the assumption of eighty-four thousand two hundred seventy-five thousand dollars ($84,275) of UMED debts. HBI has paid
so far two hundred forty-five thousand five hundred dollars ($245,400) of the two hundred fifty thousand dollars ($250,000) due
at closing and pay three installments of one hundred fifty thousand dollars ($150,000) on each of thirty, sixty and ninety-day
from the closing date. The Company has not received any payment on the $454,600 and has determined that the account is doubtful
and wrote it off, as of December 31, 2015, as a deduction from the gain calculated on the sale.
The results of Mamaki are presented as a separate line item
in the consolidated statements of operations and the consolidated balance sheets entitled "Assets/Liabilities sold relating
to discontinued operations" and "Assets/Liabilities related to discontinued operations". In accordance with EITF
87-24, "Allocation of Interest to Discontinued Operations", the Company elected to not allocate consolidated interest
expense to discontinued operations where the debt is not directly attributable to or related to discontinued operations. All of
the financial information in the consolidated financial statements and notes to the consolidated financial statements has been
revised to reflect only the results of continued operations. (See Note 11).
Revenue Recognition
The Company has not, to date, generated
significant revenues. The Company plans to recognize revenue in accordance with Accounting Standards Codification subtopic
605-10, Revenue Recognition ("ASC 605-10") which requires that four basic criteria must be met before revenue can be
recognized: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred; (3) the selling price is fixed and determinable;
and (4) collectability is reasonably assured. Determination of criteria (3) and (4) are based on management's judgments regarding
the fixed nature of the selling prices of the products delivered and the collectability of those amounts. Provisions for discounts
and rebates to customers, estimated returns and allowances, and other adjustments are provided for in the same period the related
sales are recorded.
ASC 605-10 incorporates Accounting Standards
Codification subtopic 605-25,
Multiple-Element Arraignments
("ASC 605-25"). ASC 605-25 addresses accounting for
arrangements that may involve the delivery or performance of multiple products, services and/or rights to use assets. The effect
of implementing 605-25 on the Company's financial position and results of operations was not significant.
Use of Estimates
The preparation of the financial statements
in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amount of revenue and expenses during the reported period. Actual results could
differ materially from the estimates.
Cash and Cash Equivalent
The Company considers all highly liquid
investments purchased with an original maturity of three months or less to be cash equivalents. There were no cash equivalents
at December 31, 2016 and 2015, respectively.
Segment Information
ASC 280, "
Segment Reporting
" requires use of the "
management approach
" model for segment reporting. The management approach
model is based on the way a company's management organizes segments within the company for making operating decisions and assessing
performance. During 2015, the Company had one operating segment, Mamaki of Hawaii, Inc., in addition to its corporate activities,
which is presented as discontinued operations.
Mine Exploration and Development
Costs
The Company plans to account for mine
exploration costs in accordance with Accounting Standards Codification 932,
Extractive Activities.
All exploration
expenditures are expensed as incurred. Mine development costs are capitalized until production, other than production incidental
to the mine development process, commences and are amortized on a units of production method based on the estimated proven and
probable reserves. Mine development costs represent costs incurred in establishing access to mineral reserves and include costs
associated with sinking or driving shafts and underground drifts, permanent excavations, roads and tunnels. The end of the development
phase and the beginning of the production phase takes place when construction of the mine for economic extraction is substantially
complete. Coal extracted during the development phase is incidental to the mine's production capacity and is not considered to
shift the mine into the production phase. Amortization of capitalized mine development is computed based on the estimated life
of the mine and commences when production, other than production incidental to the mine development process, begins.
Due to the Company not producing any revenues from its BLM mining leases since its acquisition of the leases, achieving a position
of producing cash flow levels to fund the development of its BLM mining leases in December of 2010 and not having current resources
for an appraisal, we recognized an impairment charge of $100,000 during the year ended December 31, 2014. During the year
ended 2016, the Company did not incur any mine development costs. During the year ended December 31, 2015, the Company incurred
$9,166 in costs of obtaining surface samples.
Mine Properties
The Company will account for mine properties
in accordance with Accounting Standard Codification 930,
Extractive Activities-Mining.
Costs of acquiring mine properties
are capitalized by project area upon purchase of the associated claims. Mine properties are periodically assessed for
impairment of value and any diminution in value. The Company had 1,440 acres of placer mining claims at December 31, 2015, which
were acquired in December 2010 in exchange for 5,066,000 shares of common stock valued at $100,000. During 2014, we recognized
an impairment charge of $100,000.
Income Taxes
The Company accounts for income taxes
in accordance with FASB ASC 740, "Income Taxes," which requires that the Company recognize deferred tax liabilities and
assets based on the differences between the financial statement carrying amounts and the tax bases of assets and liabilities, using
enacted tax rates in effect in the years the differences are expected to reverse. Deferred income tax benefit (expense) results
from the change in net deferred tax assets or deferred tax liabilities. A valuation allowance is recorded when it is more likely
than not that some or all deferred tax assets will not be realized.
The Company has adopted the provisions
of FASB ASC 740-10-05
Accounting for Uncertainty in Income Taxes
. The ASC clarifies the accounting for uncertainty in income
taxes recognized in an enterprise's financial statements. The ASC prescribes a recognition threshold and measurement
attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The
ASC provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure and
transition. Open tax-years subject to IRS examination include 2010 – 2015.
Net Loss Per Share, basic and
diluted
Basic loss per share has been computed
by dividing net loss available to common shareholders by the weighted average number of common shares outstanding for the period.
Shares issuable upon the exercise of warrants (520,487) have been excluded as a common stock equivalent in the diluted loss per
share because their effect is anti-dilutive.
Derivative Instruments
The Company accounts for derivative
instruments in accordance with Accounting Standards Codification 815,
Derivatives and Hedging ("ASC 815"),
which
establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in
other contracts, and for hedging activities. They require that an entity recognize all derivatives as either assets
or liabilities in the balance sheet and measure those instruments at fair value.
If certain conditions are met, a derivative
may be specifically designated as a hedge, the objective of which is to match the timing of gain or loss recognition on the hedging
derivative with the recognition of (i) the changes in the fair value of the hedged asset or liability that are attributable to
the hedged risk or (ii) the earnings effect of the hedged forecasted transaction. For a derivative not designated as a hedging
instrument, the gain or loss is recognized in income in the period of change.
See Note7 below for discussion regarding
convertible notes payable and a warrant agreement.
Fair Value of Financial Instruments
Effective January 1, 2008, fair value
measurements are determined by the Company's adoption of authoritative guidance issued by the FASB, with the exception of the application
of the statement to non-recurring, non-financial assets and liabilities, as permitted. Fair value is defined in the authoritative
guidance as the price that would be received to sell an asset or paid to transfer a liability in the principal or most advantageous
market for the asset or liability in an orderly transaction between market participants at the measurement date. A fair value hierarchy
was established, which prioritizes the inputs used in measuring fair value into three broad levels as follows:
Level 1 – Valuation based on unadjusted
quoted market prices in active markets for identical assets or liabilities.
Level 2 – Valuation based on,
observable inputs (other than level one prices), quoted market prices for similar assets such as at the measurement date; quoted
prices in the market that are not active; or other inputs that are observable, either directly or indirectly.
Level 3 – Valuation based on unobservable
inputs that are supported by little or no market activity, therefore requiring management's best estimate of what market participants
would use as fair value.
Original Issue Discount
For certain convertible debt issued,
the Company provides the debt holder with an original issue discount ("OID"). An OID is the difference between
the original cash proceeds and the amount of the note upon maturity. The Note is originally recorded for the total amount payable.
The OID is amortized into interest expense pro-rata over the term of the Note.
In instances where the determination
of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value
hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair
value measurement in its entirety. The Company's assessment of the significance of a particular input to the fair value measurement
in its entirety requires judgment, and considers factors specific to the asset or liability. The valuation of the Company's notes
recorded at fair value is determined using Level 3 inputs, which consider (i) time value, (ii) current market and (iii) contractual
prices.
The carrying amounts of financial assets
and liabilities, such as cash and cash equivalents, receivables, accounts payable, notes payable and other payables, approximate
their fair values because of the short maturity of these instruments.
The following table represents the Company's
assets and liabilities by level measured at fair value on a recurring basis at December 31, 2016:
Description
|
|
Level 1
|
|
|
Level 2
|
|
Level 3
|
|
Derivative Liabilities
|
|
$
|
|
|
|
$
|
|
|
|
$
|
56,057
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following assets and liabilities
are measured on the balance sheets at fair value on a recurring basis utilizing significant unobservable inputs or Level 3 assumptions
in their valuation. The following tables provide a reconciliation of the beginning and ending balances of the liabilities:
The change in the notes payable at fair
value for the nine-month period ended December 31, 2016 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value
|
|
Change in
|
|
New
|
|
|
|
Fair Value
|
|
|
January 1, 2016
|
|
Fair
Value
|
|
Convertible
Notes
|
|
Conversions
|
|
December 31, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative Liabilities
|
|
$
|
60,164
|
|
|
$
|
7,129
|
|
|
$
|
51,829
|
|
|
$
|
(63,065)
|
|
|
$
|
56,057
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All gains and losses on assets and liabilities
measured at fair value on a recurring basis and classified as Level 3 within the fair value hierarchy are recognized in other interest
income and expense in the accompanying financial statements.
The significant unobservable inputs
used in the fair value measurement of the liabilities described above are as follows;
|
|
Commitment Date
|
|
Expected dividends
|
|
|
0%
|
|
Expected volatility
|
|
|
188%
|
|
Expected term: conversion feature
|
|
3 months
|
|
Risk free interest rate
|
|
|
0.51%
|
|
Stock Based Compensation
The Company follows Accounting Standards
Codification subtopic 718-10,
Compensation
("ASC 718-10") which requires that all share-based payments to both
employees and non-employees be recognized in the income statement based on their fair values.
At December 31, 2016, the Company did
not have any issued or outstanding stock options.
Concentration and Credit Risk
Financial instruments and related items,
which potentially subject the Company to concentrations of credit risk, consist primarily of cash. The Company places its cash
with high credit quality institutions. At times, such deposits may be in excess of the FDIC insurance limit.
Research and Development
The Company accounts for research and
development costs in accordance with Accounting Standards Codification subtopic 730-10,
Research and Development
("ASC
730-10"). Under ASC 730-10, all research and development costs must be charged to expense as incurred. Accordingly, internal
research and development costs are expensed as incurred. Third-party research and development costs are expensed when the contracted
work has been performed or as milestone results have been achieved as defined under the applicable agreement. Company-sponsored
research and development costs related to both present and future products are expensed in the period incurred. The Company
incurred research and development expenses of $967,348 and $766,726 during the years ended December 31, 2016 and 2015, respectively.
Issuance of Common Stock
The issuance of common stock for other than cash is recorded
by the Company at market values.
Impact of New Accounting Standards
Management does not believe that any other recently issued,
but not yet effective accounting pronouncements, if adopted, would have a material effect on the accompanying consolidated financial
statements.
NOTE 4 – CONTRACT RECEIVABLE
In November 2015, the Company completed the sale (entered
into on October 1, 2015) of its wholly owned subsidiary, Mamaki of Hawaii, Inc., ("Mamaki") to Hawaiian Beverages, Inc.
("HBI"). Under the agreement, HBI acquired 100% of the common stock of Mamaki in exchange for seven hundred thousand
dollars ($700,000) and the assumption of eighty-four thousand two hundred seventy- five thousand dollars ($84,275) of UMED debts.
HBI paid two hundred forty-five thousand five hundred dollars ($245,400) at closing towards the first installment due of two hundred
fifty thousand ($250,000), resulting in a receivable of $454,600 at December 31, 2015. The Company has not received any payment
on the $454,600 and has determined that collection is doubtful and wrote the account off at December 31, 2015 as a reduction to
the gain calculated on the sale.
NOTE 5 – PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment, their estimated useful lives,
and related accumulated depreciation at December 31, 2016 and 2015, respectively, are summarized as follows:
|
|
Range of
|
|
|
|
|
|
|
|
|
|
Lives in
|
|
|
|
|
|
|
Years
|
|
|
2016
|
|
|
2015
|
|
Equipment
|
|
|
5
|
|
|
|
2,032
|
|
|
|
2,032
|
|
Furniture and fixtures
|
|
|
5
|
|
|
|
1,983
|
|
|
|
1,983
|
|
|
|
|
|
|
|
|
4,015
|
|
|
|
4,015
|
|
Less accumulate depreciation
|
|
|
|
|
|
|
(3,666
|
)
|
|
|
(3,271
|
)
|
|
|
|
|
|
|
$
|
349
|
|
|
|
744
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation expense for the year ended
|
|
|
|
|
|
$
|
396
|
|
|
$
|
396
|
|
During the year ended December 31, 2015, the Company wrote-off
the balance of its Logistix software and $11,188
of fully depreciated assets.
NOTE 6 – TERM NOTES PAYABLE
Term notes payable consisted of the following at December
31, 2016:
|
|
|
|
2016
|
|
|
|
|
|
|
|
Unsecured note payable dated March 8, 2016 to an individual
|
|
|
|
|
|
at 5.0% interest, payable upon the Company's availability of cash
|
|
|
|
$
|
13,500
|
|
|
|
|
|
|
|
|
The Company negotiated a $15,500 reduction of the note
in November 2016 for 200,000 shares of common stock valued at $0.12 per share of $24,000. The Company recognized a $8,500
loss on the settlement.
NOTE 7 – CONVERTIBLE PROMISSORY NOTE
At December 31, 2016, the Company had convertible debentures
outstanding as follows;
|
|
Outstanding Balance of Convertible Debenture
|
|
|
Unamortized Discounts
|
|
|
|
|
|
|
|
|
May 4, 2016 Convertible Promissory Note
|
|
$
|
134,400
|
|
|
$
|
13,647
|
|
|
|
|
|
|
|
|
|
|
May 2016 Convertible Note
The Company issued a $224,000 convertible
promissory note bearing interest at 10.0% per annum to an accredited investor, payable beginning November 10, 2016, in monthly
installments of $44,800 plus accrued interest and a cash premium equal to 10.0% of the installment amount. The
holder has the right under certain circumstances to convert the note into common stock of the Company at a conversion price equal
to 70% of the average of the 3 lowest volume weighted average trading prices during the 20-day period ending on the latest complete
trading day prior to the conversion date.
The Company evaluated the terms of the
convertible note in accordance with ASC 815-40, Contracts in Entity's Own Equity, and concluded that the Convertible Note resulted
in a derivative. The Company evaluated the terms of the convertible note and concluded that there was a beneficial conversion feature
since the convertible note was convertible into shares of common stock at a discount to the market value of the common stock. The
discount related to the beneficial conversion feature on the note was valued at $224,000 based on the Black Scholes Model. The
discount related to the beneficial conversion feature ($51,826) is being amortized over the term of the debt (10 months). For
the year ended December 31, 2016, the Company recognized interest expense of $42,499 related to the amortization of the discount.
In connection with the issuance of the
$224,000 note, the Company recorded debt issue cost and discount as follows:
|
●
|
$20,000 original issue discount and $4,000 debt issue cost, which are being amortized over 10 months, with amortization of $19,680 for the year ended December 31, 2016.
|
·
|
The derivative for the 2016 beneficial conversion interest was $35,237 at December 31, 2016 and was computed using the following variables.
|
|
|
Commitment Date
|
|
Expected dividends
|
|
|
0%
|
|
Expected volatility
|
|
|
188%
|
|
Expected term: conversion feature
|
|
3 months
|
|
Risk free interest rate
|
|
|
0.51%
|
|
|
|
|
|
|
|
|
|
September 2014 Convertible Note
On September 18, 2014, the Company issued
a $158,000 convertible promissory note bearing interest at 10.0% per annum to an accredited investor, payable July 23, 2015, in
monthly installments of $31,600 plus accrued interest beginning 6 months after the date of the promissory note. The
note was paid in full on July 22, 2015. The holder had the right under certain circumstances to convert the note into
common stock of the Company at a conversion price equal to 70% of the average of the 3 lowest volume weighted average trading prices
during the 20-day period ending on the latest complete trading day prior to the conversion date.
The Company evaluated the terms of the
convertible note in accordance with ASC 815-40, Contracts in Entity's Own Equity, and concluded that the Convertible Note did result
in a derivative. The Company evaluated the terms of the convertible note and concluded that there was a beneficial conversion feature
since the convertible note was convertible into shares of common stock at a discount to the market value of the common stock.
In connection with the issuance of the
$158,000 note, the Company recorded warrants as follows:
|
●
|
Warrants – recorded at fair value ($79,537) upon issuance, and marked -to-market on the balance sheet at $20,820 as of December 31, 2016 and $60,164 at December 31, 2015, which was computed as follows;
|
|
|
Commitment Date
|
|
Expected dividends
|
|
|
0%
|
|
Expected volatility
|
|
|
188%
|
|
Expected term: conversion feature
|
|
2.75 years
|
|
Risk free interest rate
|
|
|
0.51%
|
|
NOTE 8 – ACCRUED EXPENSES
Accrued expenses consisted of the following at December 31,
2016 and 2015;
|
|
2016
|
|
|
2015
|
|
|
|
|
|
|
|
|
Accrued consulting fees
|
|
$
|
249,500
|
|
|
$
|
229,000
|
|
Bank overdraft
|
|
|
0
|
|
|
|
763
|
|
Accrued interest expense
|
|
|
1,022
|
|
|
|
0
|
|
Total accrued expenses
|
|
$
|
250,522
|
|
|
$
|
229,763
|
|
NOTE 9– CAPITAL STRUCTURE
The Company is authorized to issue 300,000,000
shares of class A common stock with a par value of $.0001 per share and 20,000,000 shares of class B stock with a par value of
$.0001 per share. Each common stock share has one voting right and the right to dividends, if and when declared by the
Board of Directors.
Class A Common Stock
At December 31, 2016, there were 231,118,372
shares of class A common stock issued and outstanding.
During the year ended December 31, 2016,
the Company issued 31,055,955 shares of restricted class A common stock to forty-two individuals through private placements for
cash of $1,770,393 at average of $0.057 per share.
During the year ended December 31, 2016,
the Company issued 400,000 shares of restricted common stock for consulting services of $32,800 at average of $.082 per share.
During the year ended December 31, 2016,
the Company issued 106,000 shares of restricted common stock to a creditor for rent expense of $8,480 at average of $.08 per share.
During the year ended December 31, 2016,
the Company issued 664,285 shares of restricted common stock for conversion of $51,500 in advances by shareholder at average of
$.0775 per share.
During the year ended December 31, 2016,
the Company issued 200,000 shares of restricted common stock in partial settlement of a note payable.
During the year ended December 31, 2016,
the Company issued 15,000,000 shares of class A stock in exchange for 15,000,000 class B shares.
During the year ended December 31, 2015,
the Company issued 10,915,101 shares of restricted class A common stock to eighteen individuals through private placements for
cash of $1,082,593 at average of $0.099 per share.
During the year ended December 31, 2015,
the Company issued 3,035,110 shares of restricted common stock for consulting services of $399,837 at average of $.132 per share.
During the year ended December 31, 2015,
the Company issued 1,817,746 shares of restricted common stock for conversion of $314,517 in advances by shareholder at average
of $.173 per share.
During the year ended December 31, 2015,
the Company issued 9,179,340 shares of class A stock in exchange for 611,956 class B shares on terms set by the Company's predecessor,
Dynalyst Manufacturing Corporation.
During the year ended December 31, 2015,
the Company issued a total of 13,125,000 shares of restricted class A common stock to its former CEO, its President and Chief Financial
Officer per their employment agreements. The shares were valued at an average of $0.15 per share based on market value.
During the year ended December 31, 2015,
the Company issued 250,000 shares of restricted class A common stock to its former CEO as set out in his separation agreement.
The shares were valued at $0.138 per share based on market value.
Class B Stock
At December 31, 2016, there were 126,938
shares of class B stock issued and outstanding. Each class B share is convertible, at the option of the shareholder, into common
stock on a one for one basis.
During the year ended December 31, 2016,
15,000,000 the Company issued 15,000,000 shares of class A shares in exchange for 15,000,000 class B shares.
During the year ended December 31, 2015,
the Company issued 9,179,340 shares of class A stock in exchange for 611,956 class B shares on terms set by the Company's predecessor,
Dynalyst Manufacturing Corporation.
Stock options, warrants and other rights
At December 31, 2016, the Company has not adopted any employee
stock option plans.
On October 1, 2015, the Company issued 4,000,000 warrants
for legal work. The warrants are exercisable at $.20 per share for a period of five years from the date of issue. The Company valued
the warrants as of December 31, 2015 at $386,549 using the Black-Scholes Model with expected dividend rate of 0%, expected volatility
rate of 189%, expected conversion term of 4.75 years and risk free interest rate of 1.75%.
NOTE 10 - RELATED PARTY TRANSACTIONS
Shareholders have made advances to the Company in the amounts
of $141,040 and $383,878 during the years ended December 31, 2016 and 2015, respectively. The shareholders have elected to
convert advances of $51,500 and $314,517 to shares of class A, common stock at an average value of $0.0775 and $0.173 per share
and received repayments of $151,000 and $79,058 during the years ended December 31, 2016 and 2015, respectively. Shareholders forgave
$30,077 of advances.
In April 2015, the Company's then Chief Executive Officer
resigned and in his settlement agreement gave up claims to receive deferred compensation, which amounted to $518,300 and treated
as debt forgiveness.
In May 2015, the Company issued 13,125,000
shares of restricted class A common stock to its former CEO, its President and Chief Financial Officer per their employment agreements.
The shares were valued at an average of $0.15 per share based on market value.
In July 2015, the Company issued a total
of 9,179,340 shares of restricted class A common stock to its President and Chief Financial Officer for the conversion of 611,956
shares of class B stock at the rate of fifteen shares of restricted common stock for each share of Class B stock, on terms set
by the Company's predecessor, Dynalyst Manufacturing Corporation.
NOTE 11 – INCOME TAXES
At December 31, 2016 and 2015, the Company
had approximately $5.5 million and $4.0 million, respectively, of net operating losses ("NOL") carry forwards for federal
and state income tax purposes. These losses are available for future years and expire through 2034. Utilization
of these losses may be severely or completely limited if the Company undergoes an ownership change pursuant to Internal Revenue
Code Section 382.
The provision for income taxes for continuing operations
consists of the following components for the years ended December 31, 2016 and 2015:
|
2016
|
|
2015
|
|
|
|
|
|
|
Current
|
|
$
|
-
|
|
|
$
|
-
|
|
Deferred
|
|
|
-
|
|
|
|
-
|
|
Total tax provision for (benefit from) income taxes
|
|
$
|
-
|
|
|
$
|
-
|
|
A comparison of the provision for income tax expense at the
federal statutory rate of 34% for the years ended December 31, 2015 and 2014 the Company's effective rate is as follows:
|
|
2016
|
|
|
2015
|
|
|
|
|
|
|
|
|
Federal statutory rate
|
|
|
(34.0
|
) %
|
|
|
(34.0
|
) %
|
State tax, net of federal benefit
|
|
|
(0.0
|
)
|
|
|
(0.0
|
)
|
Permanent differences and other including surtax exemption
|
|
|
0.0
|
|
|
|
0.0
|
|
Valuation allowance
|
|
|
34.0
|
|
|
|
34.0
|
|
Effective tax rate
|
|
|
0.0
|
%
|
|
|
0.0
|
%
|
The net deferred tax assets and liabilities included in the
financial statements consist of the following amounts at December 31, 2016 and December 31, 2015:
|
|
2016
|
|
|
2015
|
|
Deferred tax assets
|
|
|
|
|
|
|
Net operating loss carry forwards
|
|
$
|
5,602,576
|
|
|
$
|
4,028,702
|
|
Deferred compensation
|
|
|
2,570,198
|
|
|
|
2,409,213
|
|
Stock based compensation
|
|
|
5,165,124
|
|
|
|
4,898,968
|
|
Other
|
|
|
1,138,307
|
|
|
|
1,121,248
|
|
Total
|
|
|
14,476,205
|
|
|
|
12,458,131
|
|
Less valuation allowance
|
|
|
(14,476,205
|
)
|
|
|
(12,458,131
|
)
|
Deferred tax asset
|
|
|
-
|
|
|
|
-
|
|
Deferred tax liabilities
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
$
|
-
|
|
|
$
|
-
|
|
Net long-term deferred tax asset
|
|
$
|
-
|
|
|
$
|
-
|
|
The change in the valuation allowance
was $1,935,510 and $4,028,702 for the years ended December 31, 2016 and 2015, respectively. The Company has recorded a 100%
valuation allowance related to the deferred tax asset for the loss from operations, interest expense, interest income and other
income subsequent to the change in ownership, which amounted to $14,393,641 and $12,458,131 at December 31, 2016 and 2015, respectively.
The ultimate realization of deferred tax assets is dependent
upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management
considers the scheduled reversal of deferred tax liabilities, historical taxable income including available net operating loss
carry forwards to offset taxable income, and projected future taxable income in making this assessment.
NOTE 12 – DISCONTINUED OPERATIONS
In November 2015, the Company completed the sale (entered
into on October 1, 2015) of its wholly owned subsidiary, Mamaki of Hawaii, Inc., ("Mamaki") to Hawaiian Beverages, Inc.
("HBI"). Under the agreement, HBI acquired 100% of the common stock of Mamaki in exchange for seven hundred thousand
dollars ($700,000) and the assumption of eighty-four thousand two hundred seventy- five thousand
dollars ($84,275) of UMED debts. HBI paid two hundred
forty-five thousand five hundred dollars ($245,400) at closing towards the first installment due of two hundred fifty thousand
($250,000) and with three installments of one hundred fifty thousand dollars ($150,000) on each due thirty, sixty and ninety days
from the closing date. The Company has not received any payment on the $454,600 and has determined that the collection is
doubtful and wrote the receivable off at December 31, 2015 against the gain calculated on the sale.
The following is a summary of the calculation of the gain
from the sale of Mamaki of Hawaii, Inc.:
|
|
|
|
Mamaki of Hawaii historical operations
|
|
$
|
2,008,794
|
|
Contract receivable from Hawaiian Beverages
|
|
|
700,000
|
|
UMED note payable assumed by Hawaiian Beverages
|
|
|
64,697
|
|
Write off Mamaki of Hawaii Intercompany receivable
|
|
|
(777,255
|
)
|
Write off UMED investment in Mamaki of Hawaii stock
|
|
|
(778,430
|
)
|
Write off contract receivable
|
|
|
(454,600
|
)
|
Gain from discontinued operations for 2015
|
|
$
|
763,206
|
|
The following statements of the discontinued operations (Mamaki
of Hawaii, Inc.) for the year ended December 31, 2015:
|
|
2015
|
|
Sales
|
|
$
|
47,275
|
|
Cost of sales
|
|
|
8,407
|
|
Gross profit
|
|
|
38,868
|
|
|
|
|
|
|
Operating Expenses:
|
|
|
|
|
General and administrative expenses
|
|
|
395,824
|
|
Depreciation
|
|
|
89,218
|
|
Total Operating Expenses
|
|
|
485,042
|
|
Operating Loss
|
|
|
(446,174
|
)
|
|
|
|
|
|
Other Income (Expense)
|
|
|
|
|
Interest expense
|
|
|
(115,238
|
)
|
|
|
|
|
|
Loss from discontinued operations
|
|
$
|
(561,412
|
)
|
Loss per share – discontinued operations
|
|
$
|
(0.00
|
)
|
|
|
|
|
|
NOTE 13 – COMMITMENTS
Employment Agreements
In May 2011, the Company entered into
employment agreements with its chief executive officer, president and chief financial officer. The Agreements were for
a term of 5 years, ending on May 31, 2106. The employment agreements also provide for the officers to receive 1,250,000
shares of restricted common stock annually for each year of the employment agreement. During the years ended December
31, 2016 and 2015, the Company accrued a total of $150,000 and $405,000, respectively, as management fees in accordance with the
terms of these agreements. Kevin Bentley resigned as Chief Executive Officer in April 2015 and relinquished his claim to
receive $518,300 of deferred compensation, which the Company treated as debt forgiveness. Richard Halden resigned as President
in January 2016 and Randy Moseley resigned as Chief Financial Officer in November 2016.
In August 2012, the Company entered into employment agreements
with the president and chairman of the board of Greenway Innovative Energy, Inc. for a term of 5 years with compensation of $90,000
per year. In June of 2014, the president's employment agreement was amended to increase his annual pay to $180,000. On March
1,2015, accrual on the Greenway chairman of the board agreement was ceased due to his absence from the company for more than a
year. During the years ended December 31, 2016 and 2015, respectively, the Company accrued $180,000 and $191,250 towards the employment
agreements.
Leases
In July 2015, the Company reduced its
office lease space from 3,500 to 1,800 square feet on a month-to-month basis at $3,200 per month. In October 2015, the Company
signed a new two-year lease for new office space of approximately 1,800 square feet at the rate of $2,417 for the first twelve
months and $2,495 for the second twelve months. During the years ended December 31, 2016 and 2015, the Company expensed $33,512
and $55,836, respectively, in rent expense.
The Company pays approximately
$11,600 in annual maintenance fees on its Arizona BLM mining leases, in addition to 10% royalties based on production.
Legal
From time to time, the Company may become
involved in various lawsuits and legal proceedings which arise in the ordinary course of business. However, litigation is subject
to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business.
The Company currently is not aware of any such legal proceedings that we believe will have, individually or in the aggregate, a
material adverse effect on its business, financial condition or operating results.
NOTE 14-SUBSEQUENT EVENTS
During the period from January 1,
2017 through April 17, 2017, the Company issued 12,217,500 shares of restricted class A common stock to 18 individuals for
$977,400 at average price of $0.08 per share.
During the period from January 1,
2017 through April 17, 2017, the Company issued 1,750,000 shares of restricted class A common stock for consulting
services at average price of $0.12 per share.
During the period from January 1,
2017 through April 17, 2017, the Company canceled 15,000,000 of common stock that had been reserved against a convertible note
payable that was paid March 10, 2017.
During the period from January 1,
2017 through April 17, 2017, the Company canceled 5,205,000 of common stock that had been returned to the Company by its
previous Chief Financial Officer in conjunction with his separation agreement.
During the period from January 1, 2017
through April 17, 2017, the Company canceled 300,000 of common stock that had been returned to the Company.