UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C.D.C. 20549
FORM 10-K
ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 20152019
Commission file number 333-141907000-55721
TAUTACHROME, INC. |
(Name of Small Business Issuer in Its Charter) |
DELAWARE | | 20-503478084-2340972
|
(State or other jurisdiction of incorporation or organization) | | (Employer Identification No.) |
1846 EE. Innovation Park Drive,
Oro Valley, Arizona 85755
(Address of principal executive offices, including zip code.)
(520) 318-5578
(Registrant's telephone number, including area code)
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
Title of Each Class | | Trading Symbol(s) | | Name of Each Exchange on Which Registered |
None | | N/A | | N/A |
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
Title of Class
Common Stock, $0.00 par value
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ¨ No x
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ¨ No x
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No ¨
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant'sregistrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ¨
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 definitions of "large“large accelerated filer," "accelerated filer"” “accelerated filer” and "smaller“smaller reporting company"company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer | ¨ | Accelerated filer | ¨ |
Non-accelerated filer | ¨ | Smaller reporting company | x |
(Do not check if a smaller reporting company) | | | |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) Yes ¨ No x
The aggregate market value of 619,552,098 sharesthe voting and non-voting common equity held by non-affiliates of the registrant as of December 31, 2015 is $6,195,521, basedJune 30, 2019, the last business day of the Registrant’s most recently completed second fiscal quarter, was approximately $44,431,000 (based on the closing price of our stock$0.0202 on June 30, 2015.2019 on the OTC Markets).
As of June 30, 2016,March 22, 2020, the registrant had 2,987,633,4303,504,460,889 shares of its common stock outstanding.
Documents Incorporated by reference: None.
TAUTACHROME, INC.
FORM 10-K
For the YearYears Ended December 31, 20152019 and 2018
TABLE OF CONTENTS
PART 1I – FINANCIAL INFORMATION
Cautionary Note Regarding Forward-Looking Statements
This report contains forward-looking statements that involve risks and uncertainties. We generally use words such as "believe," "may," "could," "will," "intend," "expect," "anticipate," "plan," and similar expressions to identify forward-looking statements. You should not place undue reliance on these forward-looking statements. Our actual results could differ materially from those anticipated in the forward-looking statements for many reasons, including the risks described below and elsewhere in this report. Although the forward-looking statements herein reflect our focused actual intentions, and although we believe the expectations reflected in the forward-looking statements are reasonable, they relate only to events as of the date on which the statements are made, and our future results, levels of activity, performance or achievements may not meet these expectations. We do not intend to update any of the forward-looking statements after the date of this document to conform these statements to actual results or to changes in our expectations, except as required by law.
All references in this Annual Report to the "Company," "we," "us" or "our" are to Roadships Holdings,Tautachrome, Inc. and our wholly owned subsidiaries.subsidiary(ies).
Since its public announcement on September 25, 2017 (via SEC form 8-K) that it would be using its Twitter site (@Tautachrome_Inc) (http://twitter.com/tautachrome_inc) to post important Company information, and finding this method of publicizing important Company information both fast and effective, the Company has continued to use this means of public communication almost exclusively, supplemented occasionally with Current Reports via SEC Form 8-Ks. Shareholders are advised to follow us on Twitter to be current on the Company’s disclosures in conformity with Regulation FD.
Item 1. Business Factors
History
Tautachrome, Inc. (formerly Roadships Holdings, Inc.)The Company was formed in Delaware on June 5, 2006 as Caddystats, Inc. (Tautachrome, Inc. and hereinafter be collectively referred to as "Tautachrome", the "Company", "we' or "us").
TheOn March 3, 2009, the Company adoptedacquired all of the accounting acquirer's year end, December 31.voting shares of Roadships Holdings, Inc., a Florida Corporation, and Roadships America, Inc., also a Florida Corporation in exchange for an aggregate of 16,025,000 shares of the Company’s common stock. On March 4, 2009, the Company changed its name to Roadships Holdings, Inc.
On May 26, 2015, the Company acquired all the voting shares of Click Evidence Inc., an Arizona corporation. Effective November 2, 2015, the Company changed its name to Tautachrome Inc.
Our Business
Tautachrome operates in the internet applications space, a large business space we believe to be uniquely able to embracemake possible fast growing and novel business. The iPhone, Google, Facebook, Amazon, Twitter, Android, Uber and numerous other examples are reminders of the ability of the internet applications business space to surprise us with the arrival of wholly new business universes seemingly from out“out of nowhere.” A recent arrival in the internet applications space is blockchain technology, a technology empowering entities to create ecosystems of trade based on self-introduced and globally useable secure trading currencies. Blockchain technology has added a significant element to Tautachrome’s business plans and activities. In addition, the subsequent development of a new patent pending technology dubbed ARknet technology that exploits augmented reality in a new solution to the purchasing interaction between global consumers and providers has been licensed by the Company for development.
Tautachrome is currently pursuing three main avenues of business activity:activity based on our patented activated imaging technology, our blockchain trading currency, and the ARknet patent pending technology (together banded “KlickZie” technology):
| 1. | KlickZie technology-basedARknet technology businessdevelopment and monetization, our high focus flagship: Our licensed activity to revolutionize smartphone-based picturedevelop and video interactionmonetize a new ugmented reality (“AR”) technology called “ARknet technology which permits goods and services providers to establish geolocated augmented reality interfaces, called ARks, allowing consumers to interact with inside info on the web provider’s products, specials and discounts with live purchasing provided. A provider’s ARk may be located anywhere on earth, at a store location, or anywhere else the provider may desire. The ARknet is a fintech platform connecting consumers to providers in the global $48 trillion household purchasing market, using augmented reality as the medium of interaction. |
| | |
| 2. | Smartphone app development and digital designKlickZie’s blockchain trading currency ecosystem: , our recently added activity to developcreate our own KlickZie blockchain and monetize important in-house appstrading currency to incentivize consumer usage of the ARknet paltform, and to generate digital design revenue, an activity carried out by our wholly owned subsidiary Polybia Studios, Pty Ltd of Mermaid Beach, Queensland Australia
|
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| 3. | KlickZie Activated Digital Imagery business: our longstanding flagship activity to develop and monetize downloadable apps based on our patented KlickZie trusted imaging technology and based on our patented trusted image-based social interactions using the pictures and videos that smartphone users generate on the web using their KlickZie imaging app. |
1. ARk Business Activity
3.On October 17, 2018, the Company licensed and is now developing the ARknet technology, a Fintech patent pending technology aimed at the global household goods and services market. ARks are floating interactive pictures (ARk Symbols) only visible around you in the Augmented Reality view provided by the ARknet app using the camera imager in your smartphone. ARks are intended for goods and service providers as a way to draw attention to customers in the vicinity of a provider’s ARk Symbol. Shoppers and buyers seeing a Symbol can interact with the provider’s goods or services via the ARk Symbol. The picture above is a shopping mall scene, where two stores, Claire’s on your right, and rue 21 etc! on your left, are shown displaying interactive ARk symbols. Claire’s ARk is a “standard” ARk symbol, while rue 21 etc! uses a picture of their “etc. Gold” perfume product as their ARk symbol. Either way, using their smartphone imager an ARknet app users can touch the store’s ARk Symbol and on their smartphone access the provider’s Ark page containing interest-grabbing information, including pictures or videos of today’s specials, in-ARk purchase and checkout features, reviews, links, menus, social media profiles or anything else the store wants to advertise.
| Acquisition of revenue generating smartphone apps, an activity carried out by our new Appquisitions Division in the hands of our Chief Advancement Officer, Michael Nugent.
|
Arks may be mobile ARks, using the app user’s mobile device to mobilize the ARk location, or stationary ARks, using a set geo location determined by coordinates or determined by fixing the ARk location by moving the ARk owner’s mobile device to a desired location and setting the stationary ARk’s location there.
Providers may create their ARks, decide on their ARk Symbol, choose their Symbol geolocations and provide for license payment to the Company, using features in the ARk app.
We intend the ARk app to be free to consumers and other users wishing to use the app to survey their environ for the presence of ARk symbols.
We envision a KlickZie ARknet with billions of users and ARks connecting humanity, commerce, information, crypto currency, and innovation in useful ways. Plus, we want to return the ownership of users’ information and valuable items such as images and video, back to where it rightfully belongs, the individual user.
For additional information, visit http://myarknet.io.
2. KlickZie blockchain trading currency
1.In late 2017 we formed a development team of providers to develop a KlickZie blockchain (branded the “zChain”) to handle transactions using a cryptographically secured trading currency designated the “KLK” currency. The KLK is intended to be the currency of the imagery trading ecosystem allowing KlickZie users to monetize their pictures and videos and thereby enabling the ability to conduct widescale buying, selling and licensing of KlickZie pictures and videos.
Our development team consists of individuals from the blockchain development company Kelecorix, Inc., and individuals from the image storage company Honeycomb Digital, LLC. The team has developed the software and architecture for the implementation of a simple KlickZie app that seeks to implement the ownership properties of KlickZie imaging.
Like other blockchains, the zChain is intended to run in a decentralized manner. “Smart contracts” residing on the zChain would implement the buying, selling licensing and other trading features on the zChain. Such smart contracts would implement a commission on zChain transactions that involve participation by the Company to complete (for instance the certification of the validity of KlickZie imagery when requested).
Because KlickZie users own the imagery they create, the use of KlickZie imagery by others, including advertisers, could be done through the execution of a smart contract on the zChain transferring KLK currency from the advertiser to the user.
3. KlickZie technology-based business activity
Tautachrome's patent pendingTautachrome’s KlickZie technology addresses two major new needsfeatures of the internet age. age that create a new need and a new opportunity. The first is the need for a way to trust the pictures and videos you see on the web. Right now the trillions of pictures and frames of video on the web are so easily and so often falsified that you can't trust anytrustability of it. Thereinternet imagery is a giant need foressentially zero. For this reason we believe that a universally available, downloadable system that turns the everyday pictures and videos we take from our smartphones into somethingimagery that is completelycan be trustable to any third partyothers seeing it. With such a systemit, will have substantial value . We would like to see only two kinds of imagery will suddenly appearcome to exist on the web: On the one hand imagery whose trustworthiness everybody can be absolutely certain of, and on the other hand all the rest of the imagery for which nobody has any ideathe notion of its trust worthiness.is meaningless. The KlickZie system aims to satisfy this fundamental needthe requirement of for universal trustability. trustability for the ordinary imagery it produces.
Solving the need
The technology required for trustability also solves a more subtle need that opens the door to an enormousa new opportunity. This is the need foropportunity to enable people to be able to use KlickZie pictures and videos on the web to readily and safely interact with each other via the imagery itself. itIt is frequently the case that when you run across interesting imagery on the web you won'tcannot know anything about it, including who the author is, who else may have seen it, or what others may think or know about it. By allowing people to interact with interesting or important pictures or videos by using the imagery itself as the portal of communication, the KlickZie system can add the viewpoints and the information offerings of interacting people to the richness of the pictures and videos. This can be carried by the system into the future along with the imagery, as an evolving tapestryinformation structure of interaction and imagery.
How KlickZie technology works: The KlickZie Activationimaging PlatformConsumers
Users will download KlickZie'sKlickZie’s free camera upgrade software into their mobile device (iPhone, Android or other smartphone) which thereafter activates. The software, an upgrade to the smartphone’s camera software, will activate the pictures and videos taken by their device using proprietary KlickZie marking technology. Behind the scenes, the powerful and secure KlickZie software will capture the imagery and all available metadata related to the imaging event, and mark the imagery and its metadata with advanced highly undetectableand invisible KlickZie watermarkingmarking technology.
KlickZie Activation
KlickZie activation addsseeks to add a new world of usefulnessutility to ordinary pictures and videos. PeopleOther KlickZie users who come across an activated picture can communicate with the author of the picture, or with amenable others who have seen the picture or with the data stored in the picture by merely clicking or touching the picture ("touch-to-comm"(“touch-to-comm”). TheWe intend the picture itself makesby click or touch to make the communication happen. It does nothappen no matter where or how you come across an activated picture, you can engage it, interact with it, or share it, just by touching or clicking it.picture..
What happens to an activated picture from its creation onward gets invisiblyis intended to be added to the picture'spicture’s data and can be trackedfor tracking into the future. Activated pictures canseek to answer many questions. For example, in a group photo you could ask: Have any of the people in my contacts list interacted with this picture? Are any of them engaging it right now? Who else besides my contacts have already engaged this picture in some way? Who took it? Where? When?
KlickZie's activated pictures and videos will also possess the power to be completely trustable in the sense that any third party can be absolutely confident of the authenticity of the imagery because KlickZie pictures and videos will be secured in the KlickZie cloud at their creation where they remain until their creator or owner deletes them.
The upshot is that activation allowsseeks to allow effective touch to comm with the authors and viewers of smartphone pictures and videos, from every source, and to ensure that activated pictures and videos can be completely trusted imagery.trusted.
KlickZie Product Rollout
| · | Phase 1: Build the minimal testable KlickZie system –including the Arknet app and trusted imaging app and the service cloud. |
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| · | Phase 2: Release the KlickZie system into a limited audience to optimize user experience and user interfaces, to set up the KlickZie cloud for global scale up, and to plan global rollout. |
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| · | Phase 3: Roll out the KlickZie system of ARks, trusted imaging, and the KLK trading currency, culture by culture and language by language, adding support staff and services as rollout moves forward. |
Monetizing
As presently conceived, the KlickZie product aims at revenues from four primary sources:
| · | ARk licensing fees paid by ARk-using providers |
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| · | Well behaved advertising. |
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| · | User premium service fees. |
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| · | Enterprise revenuepaid by entities licensing our technologies for enterprise usages. |
Funding
We plan to continue raising funds to finance KlickZie product rollout.
Ongoing financing is currently being accomplished by equity sale, by incurring debt, and by other innovative means. There can be no assurances given that any of our funding efforts will be successful.
First KlickZie revenues
Our Plan of Operations for KlickZie based revenue looks for first revenues from ARk business app users coming on line within the first year after the receipt of funding sufficient to round out the KlickZie team. Preparations for other KlickZie revenue are geared for the two year and out timeframe.
Shelved business activity
General app development and digital design activities that were being carried out under our wholly-owned Polybia Studios subsidiary, and our acquisition activities that were being carried out under our Appquisitions Division have been shelved for the time being. Work on our PhotoSweep app has also been shelved for the time being.in preference to a strict focusing on the KlickZie business activity.
Competition
Competition
With regard to the internet applications in general, competition is intense. For example, accordingAccording to Statista by mid-2015 there were more than three million differentare millions of smartphone applications available to users. In spaces that are this crowded thethe principal matter of competition is about capturing user mind space, which for a given product consists of elements such as degree of product exposure to users, degree of product apparent desirability, pleasure of product usage, and persisting necessity for the product in a user'suser’s life. These elements of competition are well known to our competitors which include the internet giants Google, Apple, Facebook and Amazon, all of whom have financial resources and operating staffs substantially larger than those of the Company, and all of whom can focus on the optimization of their products towards the same consumer and business arenas upon which we intend to focus.
With regard to KlickZie'sthe ARknet augmented reality space, while there is no direct competition in the space at the moment, that could change in a heartbeat with an interest taken by any of the internet giants mentioned above.
With regard to KlickZie’s technology for marking, storing and tracking digital imagery, there are many firms who mark, store and track digital imagery. Among these arehave been Digimarc, BatchPhoto, and hirdlightThirdlight who markethave marketed such processes for purposes of protecting intellectual property. Although toTo our knowledge no firm is turningnone of these has turned the smartphone into a generally trustable imager or an advanced image-based communicator as envisioned here, whichhere. This requires substantially more talent and development activity than required for marking, storing and tracking digital imagery,imagery. However, there is nothing stopping any firm, particularly the internet giants, from entering into similar activity. Moreover Truepic, which entered the arena of smartphone trusted imagery, also has patents related to trusted imagery. We have reviewed Truepic’s patent claims and believe that our planned applications do not infringe their claims.
Employees
Intangible Properties: issued and pending patents
Roadships Holdings,
The proprietary nature of, and protection for, our technologies, processes, and know-how are important to our business. Our success could substantially depend upon our ability to protect the proprietary nature of our technologies and know-how, to protect our technology from infringement, misappropriation, discovery and duplication, and to operate without infringing the proprietary rights of others.
We seek patent protection for our technologies. Our policy is to patent the technology, inventions and improvements that we consider important to the development of our business. We cannot be sure that any of our pending patent applications will be granted, or that any patents or licenses which we own or obtain in the future will fully protect our position. Our patent rights and the patent rights of technology companies in general, are highly uncertain and include complex legal and factual issues. We believe that our existing technology licensing, and the patents which we hold and for which we have applied, do not infringe anyone else's patent rights. We believe our technology and patent rights will provide meaningful protection against others duplicating our proprietary technologies. We cannot be sure of this, however, because of the complexity of the legal and scientific issues that could arise in litigation over these issues.
Despite these measures, any of our intellectual property and proprietary rights could be challenged, invalidated, circumvented, infringed or misappropriated, or such intellectual property and proprietary rights may not be sufficient to permit us to take advantage of current market trends or otherwise to provide competitive advantages.
As of the date of this annual report, our patent portfolio includes the patents and applications issued by and filed with the USPTO and the purchase technology licensing as described in the following table:
Title | | Status | | Patent or Application Number | | | Grant or Application Date | |
License to commercialize the patent: Exploitation Of Augmented Reality And Cryptotoken Economics In An Information-Centric Network Of Smartphone Users And Other Imaging Cyborgs | | Patent pending owned by Arknet Inc & licensed to Tautachrome | | | 62/755589 | | | 11/05/18 | |
Authentication And Validation Of Smartphone Imagery | | Patent granted to & owned by Tautachrome | | | 9582843 | | | 02/28/17 | |
Authentication And Validation Of Smartphone Imagery | | Patent granted to & owned by Tautachrome | | | 10019774 | | | 07/10/18 | |
Authentication And Validation Of Smartphone Imagery | | Patent granted to & owned by Tautachrome | | | 10019773 | | | 07/10/18 | |
System And Method For Creating, Processing, And Distributing Images That Serve As Portals Enabling Communication With Persons Who Have Interacted With The Images | | Patent granted to & owned by Tautachrome | | | 9928352 | | | 03/27/18 | |
System And Method For Creating, Processing, And Distributing Images That Serve As Portals Enabling Communication With Persons Who Have Interacted With The Images | | Patent granted to & owned by Tautachrome | | | 15/888381 | | | 02/05/18 | |
We rely upon unpatented trade secrets, know-how, and continuing technological innovation to develop and maintain our competitive position. We seek to protect our ownership of know-how and trade secrets through an active program of legal mechanism including assignments, confidentiality agreements, material transfer agreements, research collaborations, and licenses.
Employees
Tautachrome, Inc. has 3no employees. (Polybia Studios Pty Ltd). Other servicesServices are currently provided through independent contractors.
Item 1A. Risk Factors
We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"“Exchange Act”), and are not required to provide the information required under this item.
Item 1B. Unresolved Staff Comments
Not applicable.
Item 2. Properties
Our principal business and corporate address is 1846 E Innovation Park Drive, Oro Valley, Arizona 85755 (Telephone: 520 288 1908)318 5578). The space is being provided by management on a rent free basis. We have no intention of finding, in the near future, another office space to rent during the emerging growth stage of the Company.
We do not currently have any investments or interests in any real estate, nor do we have investments or anany interest in any real estate mortgages or securities of personsentities engaged in real estate activities.
Item 3. Legal Proceedings
None.United States District Court
On October 10, 2017, the Company received a letter from the lawyer of Eric L McRae (“McRae”) a person whose association with the Company was terminated by the Company on June 16, 2017. The letter demanded payment of 850,000,000 unrestricted Tautachrome common shares to forestall his filing a laundry list of complaints in a variety of government agencies including with the US District Court in Kansas with complaints of contract breaches and fraud by silence, with the EEOC with complaints of termination by racial discrimination, with the OSHA with complains of termination for reasons of his being a whistleblower under Sarbanes-Oxley provisions, and with various regulatory agencies with accusations of an unspecified nature.
On October 12, 2017, McRae filed a complaint, later amended twice, against the Company in the US District Court in Kansas. The amended complaint alleges 1) that the Company breached a written agreement in an alleged employment by failing to pay him 35,000,000 shares of the Company’s common stock and terminating his association with the Company on June 16, 2017 without proper notice. The complaint goes on to allege 2) that the Company committed fraud by silence for failing to inform him of an intent to receive the benefit of his services while harboring an intent to not compensate him, 3) that the Company breached an unwritten agreement with him to provide him with 185,000,000 shares of the Company’s common stock, and 4) that the Company breached a convertible promissory note by failing and refusing to repay him the principal and accrued interest thereunder. Complaint number 4 is now moot in the belief of the Company since after the lawsuit was filed the Company continued to repay McRae’s convertible promissory note on schedule with interest due until paid in full on October 1, 2018, thus extinguishing the note and making the matter moot. These matters remain before the Court.
On December 12, 2017, McRae brought the Company before the Kansas Human Rights Commission and the U.S. Equal Employment Opportunity Commission (EEOC) alleging that on June 16, 2017 he was terminated from an alleged employment by the Company on the basis of race and for retaliation, and that the Company discriminated against him in the terms of this alleged employment because of race. The Kansas Human Rights Commission dismissed this claim.
On December 8, 2017, McRae filed a complaint with the Occupational Safety and Health Administration (the “OSHA”), alleging that his “investigation and reporting” to the Company’s CEO was a contributing factor in the termination of his alleged employment by the Company in violation of the Sarbanes-Oxley Act whistleblower’s provisions. On January 2, 2018, the Company delivered its response to the complaint, denying each of McRae’s allegations and providing its own presentation of the facts. McRae dismissed the OSHA claim with prejudice, and the matter cannot be brought again.
The Company, believing that allegations made by McRae are completely fabricated and aimed at doing harm, has been vigorously defending itself and believes it will prevail in every instance. Despite this belief, to save legal expense on October 17, 2018 the Company made a good faith settlement offer to McRae, offering him 50,000,000 shares in settlement of all outstanding legal actions against us. McRae declined the offer. However, we re-evaluated the liability on these lawsuits from $49,000 to $250,000 based on the closing price of our common stock on the date of the offer. We recognized a loss on litigation of $201,000 in so doing during 2018.
Although discovery closed on February 28, 2019 McRae involved the Company in a protracted discovery dispute regarding documents contained in the CEO’s laptop computer and in his personal e-mail account. That dispute has been substantively resolved. However, two motions have been filed by McRae. The first seeks sanctions from Tautachrome arising out of the discovery dispute. The second seeks leave to amend the complaint to include CEO personally as a party to McRae’s fraud claims. Tautachrome has opposed both motions.
On January 14, 2020, Eric McRae died unexpectedly, according to his attorney while undergoing a surgical procedure. As a result, the Court has stayed the case in its entirety and denied both pending motions without prejudice. The matter is set for a status conference on April 22nd to determine when and how the litigation will proceed.
Item 4. Mine Safety Disclosures
Not applicable.
PART II - OTHER INFORMATION
Item 5. Market for Common Equity and Related Stockholder Matters
Market Information
Our shares trade on the OTCQBOTC PINK under the symbol "RDSH"“TTCM”. The following table sets forth the high and low closing bid prices of our common stock for the last two calendar years, as reported by OTC Markets Group Inc. and represents inter dealer quotations, without retail mark-up, mark-down or commission and may not be reflective of actual transactions:
Quarter Ended | | High | | | Low | |
| | | | | | |
Dec 31, 2015 | | $ | 0.04000 | | | $ | 0.00990 | |
Sep 30, 2015 | | | 0.01350 | | | | 0.00460 | |
Jun 30, 2015 | | | 0.01000 | | | | 0.00050 | |
Mar 31, 2015 | | | 0.00080 | | | | 0.00030 | |
| | | | | | | | |
Dec 31, 2014 | | $ | 0.00040 | | | $ | 0.00010 | |
Sep 30, 2014 | | | 0.00030 | | | | 0.00020 | |
Jun 30, 2014 | | | 0.00030 | | | | 0.00020 | |
Mar 31, 2014 | | | 0.00050 | | | | 0.00020 | |
Quarter Ended | | High | | | Low | |
December 31, 2019 | | $ | 0.0129 | | | $ | 0.0041 | |
September 30, 2019 | | | 0.0289 | | | | 0.0047 | |
June 30, 2019 | | | 0.0088 | | | | 0.0004 | |
March 31, 2019 | | | 0.0016 | | | | 0.0004 | |
December 31, 2018 | | $ | 0.0080 | | | $ | 0.0010 | |
September 30, 2018 | | | 0.0090 | | | | 0.0035 | |
June 30, 2018 | | | 0.0100 | | | | 0.0076 | |
March 31, 2018 | | | 0.0220 | | | | 0.0075 | |
At December 31, 2015, there were 2,987,633,430 shares of our common stock issued and outstanding.
Holders
On June 30, 2016,December 31, 2019, the Company had approximately 564584 stockholders of record. The number of record, holders was determined from the records of our transfer agent and does not includeapproximately 4,691 beneficial owners of shares of common stock whose shares are held in the names of various security brokers, dealers, and registered clearing agencies.agencies, for a total of approximately 5,275 beneficial owners of shares of common stock.
Dividends
We have not declared or paid cash dividends on our common stock since inception and do not anticipate paying such dividends in the foreseeable future. The payment of dividends may be made at the discretion of the Board of Directors and will depend upon, among other factors, our operations, capital requirements, and overall financial condition.
Recent Sales of Equity Securities
| · | We issued 1,551,562,038 shares in conversion of outstanding convertible promissory notes. |
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| · | We issued 3,623,055 shares to a certain Australian individual who made baseless claims against the Company other than two existing convertible promissory notes which the Company acknowledged. |
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| · | We issued 12,500,000 shares to a previous supplier to retire trade debts in the amount of $35,000. |
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| · | We issued 4,291,886 shares to a consultant to reduce our stock payable. |
Securities Authorized for Issuance under Equity Compensation Plans
None.
Item 6. Selected Financial Data
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information required under this item.
Item 7. Management'sManagement’s Discussion and Analysis or Plan of Operation
The following discussionManagement’s Discussion and analysisAnalysis of our planFinancial Condition and Results of operationOperations (“MD&A”) provides information for the year ended December 31, 2019 and December 31, 2018. This MD&A should be read in conjunctiontogether with theour audited consolidated financial statements and the related notes. accompanying notes for the fiscal years ended December 31, 2019 and December 31, 2018.
This discussion contains forward-looking statements based upon current expectations that involve certain risks and uncertainties, such as our plans, objectives, expectations and intentions. Our actual results and the timing of certain events could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including those set forth under "Description of Business" anduncertainties. See “Forward-Looking Statements” elsewhere in this annual report.
OverviewOverall Performance
Critical Accounting Policies, EstimatesWe are an early stage internet applications company, engaged in advanced technology and New Accounting Pronouncementsbusiness development in the internet applications space. We have incurred general and administrative costs, marketing expenses and research and development costs since we commenced our current operations in May 2015, against very little revenue.
Management's discussion and analysis of its financial condition and plan of operations is based upon ourThe Company’s audited consolidated financial statements whichand the accompanying notes for the years ended December 31, 2019 and December 31, 2018, have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires that we make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. At each balance sheet date, management evaluates its estimates. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions. The estimates and critical accounting policies that are most important in fully understanding and evaluating our financial condition and results of operations include those stated in our financial statements and those listed below:
Going Concern
The accompanying financial statements have been prepared assuminga going concern basis which assumes that the Company will continue as a going concern. As shownbe able to realize its assets and discharge its liabilities in the accompanying financial statements, wenormal course of business. We had negative cash flows from operations of $366,403$1,014,724 and $23,249$635,027 for the years ended December 31, 20152019 and 2014,2018, respectively, with recurring losses and negative working capital of $4,329,297 and $2,589,561 as at December 31, 20152019 and 2014.2018, respectively. These conditions raise substantial doubt as to our ability to continue as a going concern. The financial statements do not include any adjustments that might be necessary if we are unable to continue as a going concern.
The continuing operations of the Company are dependent upon our ability to raise adequate financing and to commence profitable operations in the future. The Company may raise additional capital through the sale of its equity securities, through an offering of debt securities, or through borrowingsloans from financial institutions or related parties. Management believesWe believe that actions presently being taken to obtain additional funding may provide the opportunity for the Company to continue as a going concern. There is no guarantee, however, that the Company will be successful in achieving these objectives.
Results of Operations – Comparison of for the Years Endedended December 31, 2015 Versus 20142019, and 2018
Net Comprehensive Loss
NetThe Company realized a net comprehensive loss of $3,388,979 for the year ended December 31, 2019 compared to a net comprehensive loss of $4,103,126 for the year ended December 31, 2018.
Revenue
The Company recognized $206 in revenue for the year ended December 31, 2019 versus none in 2018.
Operating Expenses
The Company’s total operating expenses for the year ended December 31, 2019 were $1,171,816 compared to $2,619,916 for the year ended December 31, 2018, a decrease of $1,448,100 (55%).
For the year ended December 31, 2019, the Company incurred general and administrative expenses of $1,171,816 compared to $2,619,916 for the year ended December 31, 2018, a decrease of $1,448,100 (55%) primarily attributable to increased software development activity offset by decreases in consulting costs . The following table sets out the material components of the Company’s general and administrative expenses for the years ended December 31, 20152019 and 2014 was $995,385 and $234,337, respectively with components of those discussed below.2018.
| | Year Ended December 31, | |
Category of General and Administrative Expense | | 2019 | | | 2018 | |
Legal and accounting fees | | $ | 272,447 | | | | 280,578 | |
Consulting | | | 75,000 | | | | 1,896,741 | |
Other professional services | | | 166,842 | | | | 221,792 | |
Software research and development | | | 553,939 | | | | 136,973 | |
Office and occupancy costs | | | 19,603 | | | | 30,272 | |
Advertising and promotion | | | 49,967 | | | | 22,343 | |
Other | | | 34,018 | | | | 31,217 | |
Total | | $ | 1,171,816 | | | $ | 2,619,916 | |
Other Expenses
Revenues
There were no revenues earned during the years ended both December 31, 2015 and 2014.
General and Administrative Expenses
Our general and administrative expenses were $524,892Company obtained default judgment for $2,377,915 in damages against a former subsidiary of the Company. The Company recorded the default judgment plus $4,459 in accrued interest as a litigation loss of $2,382,374 for the year ended December 31, 2015 versus $232,417 for2016. On October 25, 2017, the default judgment was set aside and a new hearing on damages was ordered in the same periodproceeding, resulting in 2014. The principal reason for the increase is the increase in activity surrounding the developmenta litigation gain of the KlickZie technology.
Depreciation Expense
Depreciation expense$2,426,668 for the year ended December 31, 2015 was $807 versus $02017. Additionally, during the same periodyear ended December 31, 2017, we accrued $54,000 for the Morgan and McRae lawsuits.
On October 17, 2018, we offered McRae 50 million shares in 2014.settlement of all outstanding legal actions against us. McRae declined the offer. However, we re-evaluated the liability on these lawsuits from $49,000 to $250,000 based on the closing price of our common stock on the date of the offer. We recognized a loss on litigation of $201,000 in so doing.
During the year ended December 31, 2018, we recorded a loss on the settlement to Morgan of $55,000.
During the year ended December 31, 2018, we recorded losses of $41,278 on conversions of debt to equity. During the year ended December 31, 2019, we had certain capital items begin depreciated$127,031 of such losses.
The Company recorded interest expense of $1,363,437 during the early part of the year which were subsequently fully reserved.
Interest Expense
Interest expense was $451,804ended December 31, 2018 compared to $568,828 for the year ended December 31, 2015 versus $1,920 for the same period in 2014.2019, a decrease of $794,609 (58%). The increasedecrease is due to higherconvertible promissory notes issued in 2018 which contained initial derivatives which we accounted for as debt levelsdiscounts and the inclusion of beneficial conversion features as described in Notes 5 and 7are amortizing to the Financial Statements .interest expense.
Foreign Exchange Effect and Net Comprehensive Loss
The foreign exchange effect is the effect of translating Australian Dollar balances and activities into US Dollars. Items in the Consolidated Balance Sheets in Australian Dollars are translated to US Dollars at 1.37285 USD/AUD whereas the balances in the Statement of Operations are translated at 1.32018 USD/AUD. This results in a valuation of equity in the Balance Sheet line item "Other Comprehensive Income" (it is the only item affecting that Balance Sheet item).
The Consolidated Balance Sheet amount for this item at December 31, 2014 is zero because our predecessor, Click Evidence, Inc. (since renamed to Tautachrome, Inc.) had no foreign operations. ForDuring the year ended December 31, 2015, that item amounts2019, we recorded loss on changes in the value of our derivative liabilities in the amount of $1,426,354 compared to a net comprehensive lossgain of $81,302.
Change in Fair Value of Derivatives
Certain of our debt instruments contain embedded derivatives at December 31, 2015 which we did not have during$96,843 for the year ended December 31, 2014. As discussed in Note 7 to the Financial Statements, these instruments are carried at the fair values at the balance sheet date, causing a revaluation of those carrying values. This item is the net result of the revaluation.2018.
We issued 3,623,055 shares to a certain Australian individual who made baseless claims against the Company other than two existing convertible promissory notes which the Company acknowledged. Rather than engage in a prolonged international legal matter, we issued these shares in complete satisfaction of any and all claims against the Company. We valued the shares at their grant date fair value of $3,623, reduced unpaid principal and interest in the amount of $4,258 and $695, respectively, and recorded a $1,330 gain on this settlement.
On July 31, 2019, we settled an outstanding trade account payable of $83,343 by agreeing to a cash payment of $35,000. We paid the $35,000 on July 31, 2019 and realized a gain of $48,343.
We issued 12,500,000 shares to a previous supplier to retire trade debts in the amount of $35,000. We valued the shares at the grant date fair value of $185,000 and recorded a reduction of accounts payable of $35,000 and a loss on settlement of $150,000.
During the year ended December 31, 2019, the company entered into an arrangement with a related party whereby the holder of the $100,000 Crypto-note was paid in common shares of a related party (See Note 6 to the financial statements). We reclassified the Crypto-note to an advance by the Company to the related party and recognized a gain of $3,333.
Other Comprehensive Loss
At each balance sheet date, transactions and balances that are denominated in a currency other than U.S. dollars are adjusted to reflect the current exchange rate which may give rise to a foreign currency translation adjustment accounted for as a separate component of stockholders’ equity and included in other comprehensive income. The Company recorded a translation gain of $80,662 for the year ended December 31, 2018, compared to a gain of $1,837 for the year ended December 31, 2019. These amounts are included in the Company’s statement of operations as foreign currency gain (loss) for the respective years.
Liquidity and Capital Resources
Our financial statements
As of the date of this report, the Company has generated only $206 in revenue and is not profitable. The Company’s operations to date have been prepared on a going concern basis that contemplates the realizationfunded primarily by private placements of assetscommon stock and the settlement of liabilitiesconvertible notes, as well as by loans from its management and commitments in the normal course of business.controlling stockholders.
AtAs at December 31, 2015, we2019, the Company had $15,428$31,366 in cash and $740,283$4,361,066 in current liabilities resulting in negativea working capital deficit of $724,855. At December 31, 2014, we had $23,705 in cash and $28,516 in current liabilities resulting in negative working capital of $4,811 for an increase in negative working capital of $720,044.
Currently, we are$4,329,297. The Company is not currently able to maintain our existingits operations through theits existing cash balances and internally generated cash flows. Moreover, we have determined that our existingthe current capital structure of the Company is not adequate to fund ourits planned growth.
We intend to finance our growth by issuingsecure additional capital to fund the Company’s operations through the issuance of common stock, convertible debt instruments and through loans from our shareholders.management. There can be no assurance that we will be successful in procuringobtaining the financing we are seeking.capital the Company requires to achieve its business objectives, or that such capital will be available on acceptable terms. Future cash flows are subject to a number of variables, including technology development costs, technology product rollout and support expense the procurement of vessels, and the demand for ourthe Company’s products and services. There can be no assurance that we will obtain the capital we need to achieve our goals.
Plan of OperationsOperating Activities
Tautachrome operatesDuring the year ended December 31, 2019, the Company used net cash of $1,014,724 in operating activities compared to $635,027 for the year ended December 31, 2018. The increase was primarily attributable to increased software development costs.
The Company’s average monthly cash burn rate was $84,560 during the year ended December 31, 2019, compared to $52,919 for the year ended December 31, 2018. Subject to the success of the Company’s financing activities, we expect to increase operating activities in the internet applications space,coming year with a space uniquely able to embrace fast growing and novel business. The iPhone, Google, Facebook, Amazon, Twitter, Android, Uber and numerous other examples are reminders ofconcomitant increase in the ability of the internet applications space to surprise us with the arrival of wholly new business universes seemingly from out of nowhere.
Tautachrome is currently pursuing three avenues of business activity:
| 1. | KlickZie technology-based business development and monetization, our high focus flagship activity to revolutionize smartphone-based picture and video interaction on the web
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| 2. | Smartphone app development and digital design, our activity to develop and monetize important in-house apps and to generate digital design revenue, an activity carried out by our wholly owned subsidiary Polybia Studios, Pty Ltd of Mermaid Beach, Queensland Australia
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| 3. | Acquisition of revenue generating smartphone apps, an activity carried out by our new Appquisitions Division in the hands of our Chief Advancement Officer, Michael Nugent.
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1. KlickZie technology-based business activity
Tautachrome's patent pending KlickZie technology addresses two major new needs of the internet age.
The first is the need for a way to trust the pictures and videos you see on the web. Right now the trillions of pictures and frames of video on the web are so easily and so often falsified that you can't trust any of it.
There is a giant need for a universally available, downloadable system that turns the everyday pictures and videos we take from our smartphones into something that is completely trustable to any third party seeing it. With such a system two kinds of imageryCompany’s monthly burn rate. We will suddenly appear on the web: On the one hand imagery whose trustworthiness everybody can be absolutely certain of, and on the other hand all the rest of the imagery which nobody has any idea of its trust worthiness. The KlickZie system aims to satisfy this fundamental need for universal trustability.
Solving the need for trustability also solves a more subtle need that opens the door to an enormous new opportunity. This is the need for people tonot be able to use pictures and videos onpredict the webincrease to readily and safely interact with each other viaour burn rate until we have determined the imagery itself. it is frequently the case that when you run across interesting imagery on the web you won't know anything about it, including who the author is, who else may have seen it, or what others may think or know about it. By allowing people to interact with interesting or important pictures or videos by using the imagery itself as the portaloutcomes of communication, the system can add the viewpoints and the information offerings of interacting people to the richness of the pictures and videos. This can be carried by the system into the future along with the imagery, as an evolving tapestry of interaction and imagery.our financing activities.
How KlickZie technology works: The KlickZie Activation Platform Consumers will download KlickZie's free camera upgrade software into their mobile device (iPhone, Android or other smartphone) which thereafter activates the pictures and videos taken by their device using proprietary KlickZie technology. Behind the scenes, the powerful and secure KlickZie software will capture the imagery and all available metadata related to the imaging event, and mark the imagery and its metadata with advanced, highly undetectable KlickZie watermarking technology.
KlickZie Activation KlickZie activation adds a new world of usefulness to ordinary pictures and videos. People who come across an activated picture can communicate with the author of the picture, or with amenable others who have seen the picture or with the data stored in the picture by merely clicking or touching the picture ("touch-to-comm"). The picture itself makes the communication happen. It does not matter where or how you come across an activated picture, you can engage it, interact with it, or share it, just by touching or clicking it.
What happens to an activated picture from its creation onward gets invisibly added to the picture's data and can be tracked into the future. Activated pictures can answer many questions. For example, in a group photo you could ask: Have any of the people in my contacts list interacted with this picture? Are any of them engaging it right now? Who else besides my contacts have already engaged this picture in some way? Who took it? Where? When?
KlickZie's activated pictures and videos will also possess the power to be completely trustable in the sense that any third party can be absolutely confident of the authenticity of the imagery because KlickZie pictures and videos will be secured in the KlickZie cloud at their creation where they remain until their creator or owner deletes them.
The upshot is that activation allows effective touch to comm with the authors and viewers of smartphone pictures and videos from every source, and activated pictures and videos can be completely trusted imagery.
KlickZie Product Rollout. Rolling out KlickZie requires hiring activity to round out the Click Technical Team. Additional required technical staff include: cloud architects, database engineers, image processing engineers, full stack software engineers, steganography software developers, app development software engineers, and smartphone code defense software engineers.
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| Phase 1: Build the minimal testable KlickZie system –including the smartphone imaging engine and the service cloud (Rev 1 KlickZie system), identifying and fixing functionality deficiencies and user experience and interface hiccups, building a loyal base of early adopters and defining Rev 2.
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| Phase 2: Build and release Rev 2 into a limited audience to optimize user experience and user interfaces, to define, build, test and finalize viral growth methodology, to finalize the smartphone imaging engine, to test/finalize the cloud subsystem for global scale up, to build a seed population of 200,000 contented users, and to plan global rollout.
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| Phase 3: Roll out KlickZie system globally, culture by culture and language by language, adding support staff and services as rollout moves forward.
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Monetizing. As presently conceived, the KlickZie product aims at revenues from four primary sources:
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| Advertising Using pictures and videos as portals of communication allows the presentation of these communications in a framework of the Company's choice, enabling advertisers to place paid ads within this framework (as is done by Google.)
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| User premium service fees KlickZie is intended to be free to consumers. Since KlickZie is handling user imagery and user imagery-based communications, opportunities for users to gain extra KlickZie service are intended to be provided for a fee-based premium user membership.
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| App Developer Revenue As conceived, the KlickZie imaging engine is a powerful tool for generating trustable imagery. The KlickZie cloud is intended to allow developers access to this powerful engine along with KlickZie-provided developer tools enabling them to develop apps of their own invention, access being granted under a revenue sharing arrangement.
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| Enterprise Revenue Because as conceived the KlickZie imaging engine is a powerful tool for generating trustable imagery, it is able to support the needs of business and industrial enterprises for which trustable imagery from employees, customers or partners is mission critical. Are plans are to license our engine to enterprises on a license fee basis.
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Funding The KlickZie product rollout requires substantial funding. We plan on, and are now, seeking funds to finance KlickZie product rollout. Financing may be accomplished by incurring debt, by equity sale or through other means. There can be no assurances given that our funding efforts will be successful.
First KlickZie revenues. Our Plan of Operations is prepared for first revenues from enterprise users coming on line within the first year after the receipt of funding sufficient to round out the KlickZie team. Preparations for other KlickZie revenue are geared for the two year and out timeframe.
2. Smartphone app development and digital design business activity
This activity will be conducted by Polybia Studios, a wholly owned enterprise that has been fully active on its own since late in 2014. Recent work by Polybia includes:
| n | Development of the internal software systems, database servers and branding for the SafeDate App, a mobile security application used by dating women.
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| n | Development of the app and branding for PEOBI, a new service for the exchange of business information.
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| n | Development of the websites and branding for companies such as Novagen Ingenium, Renegade Engines, and Ronna Burton.
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In addition, Polybia will play an important role in the development of the KlickZie Platform by providing the embedded software development for KlickZie's advanced image capture, marking and securitization of code for smartphones, tablets, PCs, and other state of the art social sharing platforms. Polybia will also lead the company's graphic, branding and web design optimization for the mobile user.
Polybia is located in Mermaid Beach, Queensland, Australia. Polybia's management team consists of recent internet technology graduates of Bond University in Queensland, Australia. For more about Polybia please visit www.polybiastudios.com.
3. Acquisition of revenue generating smartphone apps business activity
Tautachrome's Appquisitions Division was created as a vehicle to acquire revenue-generating smartphone apps. In the hands of our Chief Advancement Officer, Michael Nugent, the new Appquisitions Division is expected to create revenue that is independent of our other activities. PhotoSweep, an app that lets users select photos from their smartphone photo albums and have them printed and sent to addresses of their choosing, is the first app to be acquired by our Appquisitions Division. The app is compatible with both Apple and Android devices. PhotoSweep makes the process of handing physical prints easy and convenient, and by its nature creates repeat customers. PhotoSweep's world headquarters are currently located in Biggera Waters, Queensland Australia. For more about PhotoSweep please visit www.photosweep.com.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
A smaller reporting company is not required to provide the information required by this item.
Item 8. Financial Statements and Supplemental Data
INDEX TO FINANCIAL STATEMENTS
Investing Activities
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors
Tautachrome, Inc.
We have audited the accompanying consolidated balance sheets of Tautachrome, Inc. (the "Company") as of December 31, 2015 and 2014 and the related consolidated statements of operations, changes in stockholders' deficit, andThe Company did not use any net cash flows for investing activities during the years ended December 31, 20152019 and 2014. These consolidated financial statements2018.
Financing Activities
The Company received net cash of $1,038,010 from financing activities during the year ended December 31, 2019, consisting primarily from the issuance of convertible notes. We expect to continue our financing activities to fund our operations until such time as the Company’s technologies are the responsibility of the Company's management. Our responsibility is to express an opinioncommercialized and we generate revenue on these consolidated financial statements based on our audit.a profitable basis.
Off Balance Sheet Arrangements
We conductedcurrently have no off-balance sheet arrangements that have or are reasonably likely to have a current or future material effect on our auditsfinancial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.
Critical Accounting Policies
The discussion and analysis of the Company’s financial condition and results of operations is based upon its financial statements, which have been prepared in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Tautachrome, Inc. and consolidated subsidiaries as of December 31, 2015 and 2014, and the results of its operations, and cash flows for the periods described above in conformity with accounting principles generally accepted in the United States of America.
The accompanying consolidated Preparing financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 3 to the consolidated financial statements, the Company suffered a net loss from operations and has a net capital deficiency, which raises substantial doubt about its ability to continue as a going concern. Management's plans regarding those matters also are described in Note 3. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ M&K CPAS, PLLC
Houston, Texas
www.mkacpas.com
June 30, 2016
TAUTACRHOME, INC.
AND CONSOLIDATED SUBSIDIARIES
Consolidated Balance Sheets
| | 12/31/15 | | | 12/31/14 | |
ASSETS | | | | | | |
| | | | | | |
Current assets: | | | | | | |
Cash | | $ | 15,428 | | | $ | 23,705 | |
Total current assets | | | 15,428 | | | | 23,705 | |
| | | | | | | | |
TOTAL ASSETS | | $ | 15,428 | | | $ | 23,705 | |
| | | | | | | | |
LIABILITIES | | | | | | | | |
Accounts payable and accrued expenses | | $ | 181,275 | | | $ | 5,016 | |
Bank overdraft | | | 89 | | | | - | |
Accounts payable – related party | | | 722 | | | | - | |
Accrued interest – related party | | | 6,637 | | | | - | |
Loans from related parties | | | 80,108 | | | | - | |
Convertible notes payable, related party | | | 22,160 | | | | 23,500 | |
Short-term convertible notes payable | | | 409,456 | | | | - | |
Short-term notes payable | | | 16,025 | | | | - | |
Derivative liability | | | 23,812 | | | | - | |
Total current liabilities | | | 740,284 | | | | 28,516 | |
| | | | | | | | |
Long-term convertible notes payable, net of discounts of $5,052 and zero, respectively | | | 104,948 | | | | - | |
Total non-current liabilities | | | 104,948 | | | | - | |
| | | | | | | | |
TOTAL LIABILITIES | | | 845,232 | | | | 28,516 | |
| | | | | | | | |
STOCKHOLDERS' DEFICIT | | | | | | | | |
Common stock, $0.00001 par value. Four billion shares authorized. 2,987,633,430 and 1,184,906,041 issued and outstanding at December 31, 2015 and 2014 | | | 29,876 | | | | 11,848 | |
Additional paid in capital | | | 1,539,442 | | | | 1,441,712 | |
Accumulated deficit | | | (2,480,423 | ) | | | 26,667 | |
Effect of foreign currency translation | | | 81,301 | | | | (1,485,038 | ) |
TOTAL STOCKHOLDERS' DEFICIT | | | (829,804 | ) | | | (4,811 | ) |
| | | | | | | | |
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT | | $ | 15,428 | | | $ | 23,705 | |
The accompanying notes are an integral part of these financial statements.
TAUTACHROME, INC.
AND CONSOLIDATED SUBSIDIARIES
Consolidated Statements of Operations
| | Year Ended December 31, | |
| | 2015 | | | 2014 | |
| | Successor | | | Predecessor | |
| | | | | | |
OPERATING EXPENSES | | | | | | |
General and administrative | | $ | 524,892 | | | $ | 232,417 | |
Depreciation | | | 807 | | | | - | |
Total operating expenses | | | 525,699 | | | | 232,417 | |
| | | | | | | | |
Operating loss | | | (525,699 | ) | | | (232,417 | ) |
| | | | | | | | |
OTHER INCOME / (EXPENSE) | | | | | | | | |
Interest expense | | | (451,804 | ) | | | (1,920 | ) |
Change in fair value of derivative | | | (17,882 | ) | | | - | |
Total other | | | (469,686 | ) | | | (1,920 | ) |
| | | | | | | | |
Net loss | | $ | (995,385 | ) | | $ | (234,337 | ) |
| | | | | | | | |
Effect of foreign currency exchange | | | 81,301 | | | | - | |
| | | | | | | | |
Net comprehensive loss | | $ | (914,084 | ) | | $ | (234,337 | ) |
| | | | | | | | |
Net loss per common share - basic and diluted | | $ | (0.00 | ) | | $ | (0.00 | ) |
| | | | | | | | |
Weighted average shares outstanding | | | 2,987,633,430 | | | | 1,167,382,296 | |
The accompanying notes are an integral part of these financial statements.
TAUTACHROME, INC.
AND CONSOLIDATED SUBSIDIARIES
Consolidated Statement of Changes in Stockholders' Equity (Deficit)
From December 31, 2013 to December 31, 2015
| | Common Stock | | | Additional
Paid in | | | Other
Comprehensive Income | | | Stock | | | Accumulated | | | Total
Stockholders' Equity | |
| | Shares | | | Amount | | | Capital | | | (Loss) | | | Payable | | | Deficit | | | (Deficit) | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Balances, December 31, 2013 | | | 1,114,155,564 | | | $ | 11,140 | | | $ | 1,236,870 | | | $ | - | | | $ | 650 | | | $ | (1,250,701 | ) | | $ | (2,041 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Shares issued for cash, net of issue costs | | | 1,463,765 | | | | 15 | | | | 24,610 | | | | | | | | | | | | | | | | 24,625 | |
Accrual of stock for services | | | - | | | | - | | | | - | | | | | | | | 26,667 | | | | | | | | 26,667 | |
Shares issued for services | | | 69,286,712 | | | | 693 | | | | 178,312 | | | | | | | | (650 | ) | | | | | | | 178,355 | |
Imputed interest | | | - | | | | - | | | | 1,920 | | | | | | | | | | | | | | | | 1,920 | |
Net loss | | | - | | | | - | | | | - | | | | | | | | | | | | (234,337 | ) | | | (234,337 | ) |
Balances, December 31, 2014 | | | 1,184,906,041 | | | | 11,848 | | | | 1,441,712 | | | | - | | | | 26,667 | | | | (1,485,038 | ) | | | (4,811 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Shares issued for services | | | 6,156,179 | | | | 62 | | | | 73,539 | | | | - | | | | (26,667 | ) | | | - | | | | 46,934 | |
Effect of reverse merger, May 21, 2015 | | | 1,796,571,210 | | | | 17,966 | | | | (389,267 | ) | | | - | | | | - | | | | - | | | | (371,301 | ) |
Imputed interest | | | - | | | | - | | | | 7,504 | | | | - | | | | - | | | | - | | | | 7,504 | |
Effect of foreign currency exchange | | | - | | | | - | | | | - | | | | 81,301 | | | | - | | | | - | | | | 81,301 | |
Beneficial conversion feature of convertible notes | | | - | | | | - | | | | 405,954 | | | | - | | | | - | | | | - | | | | 405,954 | |
Net loss | | | | | | | | | | | | | | | | | | | | | | | (995,385 | ) | | | (995,385 | ) |
Balances, December 31, 2015 | | | 2,987,633,430 | | | $ | 29,876 | | | $ | 1,539,442 | | | $ | 81,301 | | | $ | - | | | $ | (2,480,423 | ) | | $ | (829,804 | ) |
The accompanying notes are an integral part of these financial statements.
TAUTACHROME, INC.
AND CONSOLIDATED SUBSIDIARIES
Consolidated Statements of Cash Flows
| | Year Ended December 31, | |
| | 2015 | | | 2014 | |
| | | | | | |
CASH FLOWS FROM OPERATING ACTIVITIES | | | | | | |
Net Loss | | $ | (995,385 | ) | | $ | (234,337 | ) |
Depreciation expense | | | 807 | | | | - | |
Stock-based compensation | | | 46,934 | | | | 205,022 | |
Change in fair value of derivative | | | 17,882 | | | | - | |
Amortization of discounts on convertible notes | | | 405,954 | | | | - | |
Imputed interest | | | 7,504 | | | | 1,920 | |
| | | | | | | | |
Changes in operating assets and liabilities: | | | | | | | | |
Accounts payable and accrued expenses | | | 149,901 | | | | 4,146 | |
Net cash used in operating activities | | | (366,403 | ) | | | (23,249 | ) |
| | | | | | | | |
CASH FLOWS FROM INVESTING ACTIVITIES | | | | | | | | |
Property, plant and equipment disposals | | | 1,806 | | | | - | |
Cash acquired in reverse merger | | | 38,720 | | | | - | |
Net cash used in investing activities | | | 40,526 | | | | - | |
| | | | | | | | |
CASH FLOWS FROM FINANCING ACTIVITIES | | | | | | | | |
Proceeds from the sale of common stock | | | - | | | | 24,625 | |
Proceeds from convertible notes payable | | | 336,215 | | | | - | |
Proceeds from notes payable, related parties | | | 160 | | | | - | |
Principal payments on notes payable, related parties | | | (1,500 | ) | | | | |
Proceeds from notes payable | | | 65,842 | | | | | |
Principal payments on related-party loans | | | (164,418 | ) | | | (1,000 | ) |
Net cash provided by financing activities | | | 236,299 | | | | 23,625 | |
| | | | | | | | |
Effect of foreign exchange transactions | | | 81,301 | | | | | |
| | | | | | | | |
Net increase/(decrease) in cash | | | (8,277 | ) | | | 376 | |
Cash and equivalents - beginning of period | | | 23,705 | | | | 23,329 | |
Cash and equivalents - end of period | | $ | 15,428 | | | $ | 23,705 | |
| | | | | | | | |
SUPPLEMENTARY INFORMATION | | | | | | | | |
Cash paid for interest | | | 1,571 | | | | - | |
Cash paid for income taxes | | | - | | | | - | |
| | | | | | | | |
SUPPLEMENTAL DISCLOSURES OF NON-CASH FINANCING TRANSACTIONS | | | | | | | | |
Discount due to derivative | | $ | 5,930 | | | $ | 650 | |
Beneficial conversion feature | | | 405,954 | | | | - | |
The accompanying notes are an integral part of these financial statements.
TAUTACHROME, INC.
AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements
Note 1 - Organization and Nature of Business
History
Tautachrome, Inc. (formerly Roadships Holdings, Inc.) was formed in Delaware on June 5, 2006 as Caddystats, Inc. (Tautachrome, Inc. and hereinafter be collectively referred to as "Tautachrome", the "Company", "we' or "us").
The Company adopted the accounting acquirer's year end, December 31.
Our Business
The Division operates in the internet applications space, a space uniquely able to embrace fast growing and novel business. The iPhone, Google, Facebook, Amazon, Twitter, Android, Uber and numerous other examples are reminders of the ability of the internet applications space to surprise us with the arrival –seemingly from out of nowhere- of wholly new business universes.
Click is developing a system branded "KlickZie" aimed at turning smartphones, including iPhones, Android phones and other smartphones, into trustable imagers and advanced communicators. Trustable imagers means that the pictures and videos can be trusted to be the original, untampered, un-Photoshopped pictures and videos made by the smartphone. Advanced communicators means that the pictures and videos can be used as living, trusted portals to communicate with others.
The KlickZie system concept consists of downloadable software able to securitize the imaging process in the smartphone, together with an advanced cloud system to authenticate KlickZie pictures and videos and to make possible imagery based communication among people who happen upon KlickZie pictures and videos.
Note 2 - Basis of Presentation and Summary of Significant Accounting Policies
Basis of Presentation
The Company's financial statements are presented in accordance with accounting principles generally accepted (GAAP) in the United States. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the periods presented have been reflected herein.
Principles of Consolidation
Our consolidated financial statements include Roadships Holdings, Inc. and its wholly owned subsidiaries. All significant inter-company accounts and transactions have been eliminated in consolidation.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses. These estimates and assumptions are affected by management’s application of accounting policies. We believe that understanding the basis and nature of the estimates and assumptions involved with the following aspects of the Company’s financial statements is critical to an understanding of its financial statements.
We adopted ASC 606 effective January 1, 2018 using the modified retrospective method. Under this method, the Company follows the five-step model provided by ASC Topic 606 in order to recognize revenue in the following manner: 1) Identify the contract; 2) Identify the performance obligations of the contract; 3) Determine the transaction price of the contract; 4) Allocate the transaction price to the performance obligations; and 5) Recognize revenue. An entity recognizes revenue for the transfer of promised goods or services to customers in an amount that reflects the consideration for which the entity expects to be entitled in exchange for those goods or services. The Company’s revenue recognition policies remained substantially unchanged as a result of the adoption of ASC 606, and there were no significant changes in business processes or systems.
In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-02, “Leases (Topic 842)” and subsequent amendments, which replaced existing lease accounting guidance in GAAP and requires lessees to recognize right-of-use assets and corresponding lease liabilities on the balance sheet for all in-scope leases with a term of greater than 12 months and requires disclosure of certain quantitative and qualitative information pertaining to an entity’s leasing arrangements. The Company adopted the standard as of January 1, 2019. The adoption of the standard did not have a material impact on the Company’s consolidated statements of operations or consolidated statements of cash flows.
Use of Estimates
The preparation of these financial statements in conformity with generally accepted accounting principles in the United States requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities theand disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenuerevenues and expenseexpenses during the reporting period. Actual amounts couldWe regularly evaluate estimates and assumptions related to the recoverability of long-lived assets, valuation of convertible debentures, assumptions used to determine the fair value of stock-based compensation and derivative liabilities, and deferred income tax asset valuation allowances. We base our estimates and assumptions on current facts, historical experience and various other factors that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ significantlymaterially and adversely from theseour estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected.
Cash and Cash Equivalents
The Company considers all highly liquid investments with an initial maturity of 3 months or less to be cash equivalents. The Company maintains its deposits with high quality financial institutions and, accordingly, believes its credit risk exposure associated with cash is remote. There were no cash equivalents as of December 31, 2015 and 2014.
Property, Plant and Equipment
We record our property plant and equipment at historical cost. The estimated useful lives of these assets range from three to seven years and are depreciated using the straight-line method over the asset's useful life.
Foreign Currency Risk
We currently have two subsidiaries operating in Australia. At December 31, 2015 and 2014, we had $3,648 and $500 Australian Dollars, respectively ($2,657 and $407 US Dollars, respectively) deposited into Australian banks.
Earnings Per Share
Basic earnings per common share is computed by dividing net earnings or loss (the numerator) by the weighted average number of common shares outstanding during each period (the denominator). Diluted earnings per common share is similar to the computation for basic earnings per share, except that the denominator is increased by the dilutive effect of stock options outstanding and unvested restricted shares and share units, computed using the treasury stock method. There are currently no common stock equivalents.
Fair Value of Financial Instruments
We adopted the Financial Accounting Standards Board'sBoard’s (FASB) Accounting Codification Standard No. 820 ("(“ASC 820), Fair Value Measurements and Disclosures. ASC 820 defines fair value, establishes a framework for measuring fair value and expands disclosure of fair value measurements. ASC 820 applies under other accounting pronouncements that require or permit fair value measurements and accordingly, does not require any new fair value measurements. ASC 820 clarifies that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, ASC 820 established a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:
Level 1 - Observable inputs such as quoted prices in active markets;
Level 2 - Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and
Level 3 - Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.
The Company’s financial instruments consist principally of cash, amounts receivable, accounts payable, and accrued liabilities, due to related parties and convertible notes. Pursuant to ASC 820, the fair value of the Company’s cash is determined based on “Level 1” inputs, which consist of quoted prices in active markets for identical assets. We believe that the recorded values of all of the Company’s other financial instruments approximate their current fair values because of their nature and respective maturity dates or durations.
Recent Accounting Pronouncements
We have reviewed the FASB issue Accounting Standards Update, (“ASU”) accounting pronouncements and interpretations thereof that have effectiveness dates during the period reported and in future periods. The Company has carefully considered the new pronouncements that alter previous generally accepted accounting principles and does not believe that any new or modified principles will have a material impact on the corporation’s reported financial position or operations in the near term. The applicability of any standard is subject to the formal review of our financial management and certain standards are under consideration.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
A smaller reporting company is not required to provide the information required by this item.
Item 8. Financial Statements and Supplemental Data
INDEX TO FINANCIAL STATEMENTS
To the Board of Directors and
Stockholders of Tautachrome, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Tautachrome, Inc. (the Company) as of December 31, 2019 and 2018, and the related consolidated statements of operations, changes in stockholders’ deficit, and cash flows for each of the years in the two-year period ended December 31, 2019, and the related notes (collectively referred to as the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2019 and 2018, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2019, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
The accompanying financial statements have been prepared assuming that the Company will continues as a going concern. As discussed in Note 3 to the financial statements, the Company has suffered a net loss from operations and has a net capital deficiency, which raises substantial doubt about its ability to continue as a going concern. Management’s plans regarding those matters are discussed in Note 3. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ M&K CPAS, PLLC
We have served as the Company’s auditor since 2008.
Houston, TX
March 30, 2020
TAUTACRHOME, INC. AND CONSOLIDATED SUBSIDIARIES
Consolidated Balance Sheets
| | 12/31/2019 | | | 12/31/2018 | |
ASSETS | | | | | | |
Current assets: | | | | | | |
Cash | | $ | 31,366 | | | $ | 6,243 | |
Prepaid expenses | | | 403 | | | | - | |
Total current assets | | | 31,769 | | | | 6,243 | |
| | | | | | | | |
TOTAL ASSETS | | $ | 31,769 | | | $ | 6,243 | |
| | | | | | | | |
LIABILITIES | | | | | | | | |
Accounts payable and accrued expenses | | $ | 411,236 | | | $ | 615,847 | |
Accounts payable - related party | | | 257,282 | | | | 114,052 | |
Loans from related parties | | | 103,032 | | | | 103,074 | |
Convertible notes payable - related party | | | 111,999 | | | | 81,340 | |
Short-term convertible notes payable, net | | | 814,685 | | | | 627,928 | |
Convertible notes payable in default | | | 32,000 | | | | 422,565 | |
Short-term notes payable | | | 15,465 | | | | 15,501 | |
Derivative liability | | | 2,365,367 | | | | 365,497 | |
Court judgment liability | | | 250,000 | | | | 250,000 | |
Total current liabilities | | | 4,361,066 | | | | 2,595,804 | |
| | | | | | | | |
Long-term convertible notes payable, net | | | 158,156 | | | | 25,000 | |
Long-term convertible notes payable, related party, net | | | 84,091 | | | | 32,825 | |
Crypto-currency notes payable | | | - | | | | 100,000 | |
Total non-current liabilities | | | 242,247 | | | | 157,825 | |
TOTAL LIABILITIES | | | 4,603,313 | | | | 2,753,629 | |
STOCKHOLDERS' EQUITY (DEFICIT) | | | | | | | | |
Series D Convertible Preferred, par value $0.0001. 13,795,104 shares authorized, 13,795,104 shares issued and outstanding at December 31, 2019 and 2018 | | | 1,380 | | | | 1,380 | |
Common stock, $0.00001 par value. Six billion shares authorized. 3,504,460,889 and 1,932,483,910 shares issued and outstanding at December 31, 2019 and December 31, 2018, respectively | | | 35,045 | | | | 19,325 | |
Additional paid in capital | | | 6,095,053 | | | | 4,692,609 | |
Common stock payable | | | 2,066,584 | | | | 1,919,927 | |
Accumulated deficit | | | (12,867,645 | ) | | | (9,476,829 | ) |
Effect of foreign currency exchange | | | 98,039 | | | | 96,202 | |
TOTAL STOCKHOLDERS' DEFICIT | | | (4,571,544 | ) | | | (2,747,386 | ) |
| | | | | | | | |
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | | $ | 31,769 | | | $ | 6,243 | |
The accompanying notes are an integral part of these financial statements.
TAUTACHROME, INC. AND CONSOLIDATED SUBSIDIARIES
Consolidated Statements of Operations
| | Year Ended December 31, | |
| | 2019 | | | 2018 | |
REVENUES | | | | | | |
Product sales | | $ | 206 | | | $ | - | |
Net sales | | | 206 | | | | - | |
| | | | | | | | |
OPERATING EXPENSES | | | | | | | | |
General and administrative | | $ | 1,171,816 | | | $ | 2,619,916 | |
Total operating expenses | | | 1,171,816 | | | | 2,619,916 | |
Operating loss | | | (1,171,610 | ) | | | (2,619,916 | ) |
| | | | | | | | |
OTHER INCOME / (EXPENSE) | | | | | | | | |
Gain or (loss) on litigation | | | - | | | | (256,000 | ) |
Gain (loss) on settlement of debt | | | (96,993 | ) | | | - | |
Interest expense | | | (568,828 | ) | | | (1,363,437 | ) |
Change in value of derivatives | | | (1,426,354 | ) | | | 96,843 | |
Loss on conversion of debt | | | (127,031 | ) | | | (41,278 | ) |
Total other | | | (2,219,206 | ) | | | (1,563,872 | ) |
Net loss | | $ | (3,390,816 | ) | | $ | (4,183,788 | ) |
| | | | | | | | |
OTHER COMPREHENSIVE INCOME (LOSS) | | | | | | | | |
Effect of foreign currency exchange | | | 1,837 | | | | 80,662 | |
Net comprehensive income or (loss) | | $ | (3,388,979 | ) | | $ | (4,103,126 | ) |
| | | | | | | | |
Net (loss) or income per common share | | | | | | | | |
Basic and diluted | | $ | (0.00 | ) | | $ | (0.00 | ) |
| | | | | | | | |
Weighted average shares outstanding | | | | | | | | |
Basic and diluted | | | 3,125,254,373 | | | | 1,744,862,020 | |
The accompanying notes are an integral part of these financial statements.
TAUTACHROME, INC. AND CONSOLIDATED SUBSIDIARIES
Consolidated Statement of Changes in Stockholders’ Deficit
From December 31, 2017 to December 31, 2019
| | Common Stock | | | Preferred Stock Series D | | | Additional Paid in | | | Stock | | | Other Comprehensive Income | | | Accumulated | | | Total Stockholders' Equity / | |
| | Shares | | | Amount | | | Shares | | | Amount | | | Capital | | | Payable | | | (Loss) | | | Deficit | | | (Deficit) | |
Balance, 12/31/17 | | | 1,685,941,636 | | | $ | 16,860 | | | | 13,795,104 | | | $ | 1,380 | | | $ | 3,787,675 | | | $ | 23,186 | | | $ | 15,540 | | | $ | (5,293,041 | ) | | $ | (1,448,400 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Shares issued with convertible note payable | | | 15,000,000 | | | | 150 | | | | - | | | | - | | | | 127,350 | | | | - | | | | - | | | | - | | | | 127,500 | |
Preferred Series E shares accrued to ARkNet | | | - | | | | - | | | | - | | | | - | | | | - | | | | 1,837,000 | | | | - | | | | - | | | | 1,837,000 | |
Shares issued for conversion of debt | | | 221,542,274 | | | | 2,215 | | | | - | | | | - | | | | 373,414 | | | | - | | | | - | | | | - | | | | 375,629 | |
Shares issued to settle lawsuit | | | 10,000,000 | | | | 100 | | | | - | | | | - | | | | 59,900 | | | | - | | | | - | | | | - | | | | 60,000 | |
Derivative associated with early debt retirement | | | - | | | | - | | | | - | | | | - | | | | 326,339 | | | | - | | | | - | | | | - | | | | 326,339 | |
Shares earned by consultants | | | - | | | | - | | | | - | | | | - | | | | - | | | | 59,741 | | | | - | | | | - | | | | 59,741 | |
Imputed interest | | | - | | | | - | | | | - | | | | - | | | | 17,931 | | | | - | | | | - | | | | - | | | | 17,931 | |
Effect of foreign currency exchange | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | 80,662 | | | | - | | | | 80,662 | |
Net loss | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | (4,183,788 | ) | | | (4,183,788 | ) |
Balance, 12/31/18 | | | 1,932,483,910 | | | $ | 19,325 | | | | 13,795,104 | | | $ | 1,380 | | | $ | 4,692,609 | | | $ | 1,919,927 | | | $ | 96,202 | | | $ | (9,476,829 | ) | | $ | (2,747,386 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Shares issued for conversion of debt | | | 1,551,562,038 | | | | 15,516 | | | | - | | | | - | | | | 686,054 | | | | - | | | | - | | | | - | | | | 701,570 | |
Shares issued to settle claims | | | 16,123,055 | | | | 161 | | | | - | | | | - | | | | 188,462 | | | | - | | | | - | | | | - | | | | 188,623 | |
Shares issued for stock payable | | | 4,291,886 | | | | 43 | | | | - | | | | - | | | | 26,238 | | | | (26,281 | ) | | | - | | | | - | | | | - | |
Shares earned by consultants | | | - | | | | - | | | | - | | | | - | | | | - | | | | 172,938 | | | | - | | | | - | | | | 172,938 | |
Capital contributed | | | - | | | | - | | | | - | | | | - | | | | 13,750 | | | | - | | | | - | | | | - | | | | 13,750 | |
Derivative associated with early debt retirement | | | - | | | | - | | | | - | | | | - | | | | 471,233 | | | | - | | | | - | | | | - | | | | 471,233 | |
Imputed interest | | | - | | | | - | | | | - | | | | - | | | | 16,707 | | | | - | | | | - | | | | - | | | | 16,707 | |
Effect of foreign currency exchange | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | 1,837 | | | | - | | | | 1,837 | |
Net loss | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | (3,390,816 | ) | | | (3,390,816 | ) |
Balance, 12/31/19 | | | 3,504,460,889 | | | $ | 35,045 | | | | 13,795,104 | | | $ | 1,380 | | | $ | 6,095,053 | | | $ | 2,066,584 | | | $ | 98,039 | | | $ | (12,867,645 | ) | | $ | (4,571,544 | ) |
The accompanying notes are an integral part of these financial statements.
TAUTACHROME, INC. AND CONSOLIDATED SUBSIDIARIES
Consolidated Statements of Cash Flows
| | Year Ended December 31, | |
| | 2019 | | | 2018 | |
CASH FLOWS FROM OPERATING ACTIVITIES | | | | | | |
Net Loss | | $ | (3,390,816 | ) | | $ | (4,183,788 | ) |
Stock-based compensation | | | 172,938 | | | | 1,896,741 | |
Loss on conversions | | | 127,031 | | | | 41,278 | |
Loss on litigation | | | - | | | | 256,000 | |
Capital contributed | | | 13,750 | | | | - | |
Change in fair value of derivative | | | 1,426,354 | | | | (96,843 | ) |
Gains and losses on debt settlements | | | 96,993 | | | | - | |
Amortization of discounts on notes payable | | | 575,602 | | | | 1,088,875 | |
Imputed interest | | | 16,707 | | | | 17,931 | |
| | | | | | | | |
Changes in operating assets and liabilities: | | | | | | | | |
Prepaid expenses | | | (403 | ) | | | - | |
Accounts payable and accrued expenses | | | (87,880 | ) | | | 244,779 | |
Accrued compensation | | | 35,000 | | | | 100,000 | |
Net cash used in operating activities | | | (1,014,724 | ) | | | (635,027 | ) |
| | | | | | | | |
CASH FLOWS FROM FINANCING ACTIVITIES | | | | | | | | |
Proceeds from convertible notes payable | | | 1,092,700 | | | | 600,175 | |
Proceeds from convertible notes payable, related party | | | 123,476 | | | | 27,825 | |
Proceeds from crypto-currency notes payable | | | - | | | | 100,000 | |
Principal payments on convertible notes payable | | | (176,000 | ) | | | (162,298 | ) |
Proceeds from related-party loans | | | 26,000 | | | | 7,130 | |
Principal payments on related-party loans | | | (28,166 | ) | | | (21,950 | ) |
Net cash provided by financing activities | | | 1,038,010 | | | | 550,882 | |
| | | | | | | | |
Effect of exchange rate changes on cash and cash equivalents | | | 1,837 | | | | 80,662 | |
Net increase/(decrease) in cash | | | 25,123 | | | | (3,483 | ) |
Cash and equivalents - beginning of period | | | 6,243 | | | | 9,726 | |
Cash and equivalents - end of period | | $ | 31,366 | | | $ | 6,243 | |
| | | | | | | | |
SUPPLEMENTARY INFORMATION | | | | | | | | |
Cash paid for interest | | $ | 40,781 | | | $ | 8,021 | |
Cash paid for income taxes | | $ | - | | | $ | - | |
| | | | | | | | |
SUPPLEMENTAL DISCLOSURES OF NON-CASH FINANCING TRANSACTIONS | | | | | | | | |
Discounts on convertible notes | | $ | 1,044,749 | | | $ | 664,688 | |
Conversion of debt to common stock | | $ | 574,539 | | | $ | 334,351 | |
Settlement of derivative liability | | $ | 471,233 | | | $ | 326,339 | |
Shares issued for settlement of lawsuit | | $ | - | | | $ | 5,000 | |
Shares issued for settlement of trade debts | | $ | 38,623 | | | $ | - | |
Shares issued for stock payable | | $ | 26,281 | | | $ | - | |
The accompanying notes are an integral part of these financial statements.
TAUTACHROME, INC. AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements
Note 1 - Basis of Presentation and Summary of Significant Accounting Policies
Organization and Nature of Business
History
Tautachrome, Inc. was formed in Delaware on June 5, 2006 as Caddystats, Inc. and hereinafter collectively referred to as “Tautachrome”, the “Company”, “we’ or “us”).
The Company adopted the accounting acquirer’s year end, December 31.
Our Business
Tautachrome operates in the internet applications space, uniquely exploiting the technologies of the Augmented Reality sector, the blockchain/cryptocurrency sector and the smartphone picture and video technology sector. We have high-speed blockchain concepts under development aiming to couple with the Company’s revolutionary patents and licensing in augmented reality, smartphone-image authentication and imagery-based social networking interaction.
Tautachrome is currently pursuing three main avenues of business activity based on our patented activated imaging technology, our blockchain cryptocurrency products, and our licensing of the patent pending ARk technology (together banded “KlickZie” technology):
| 1. | KlickZie ARk technology business: The Company has licensed and is developing a new KlickZie augmented reality (“AR”) platform branded ARknet. ARknet enables goods and services providers to establish geolocated augmented reality interfaces, called ARks, allowing consumers to purchase the provider’s products and take advantage of is specials and discounts, using the ARk. A provider’s ARk may be located anywhere in the world, from a store location to anyplace else the provider may desire. The ARknet is a fintech platform connecting consumers to providers in the global $48 trillion household goods market, using augmented reality as the medium of interaction. |
| | |
| 2. | KlickZie’s blockchain cryptocurrency-based ecosystem: The Company has developed its own digital currency (“KLK”), smart contracts using KLKs, and high speed blockchain concepts aimed at supporting fast frictionless transactions within the ARknet as well as incentivizing user download and use of KlickZie products. |
| | |
| 3. | KlickZie Activated Digital Imagery business: The Company is developing downloadable apps based on our patented KlickZie trusted imaging technology and based on our patented trusted image-based social interactions using the pictures and videos that smartphone users create. Trusted imagery and user imagery-based interaction is expected to be widely used within the ARknet. |
Basis of Presentation
The Company’s financial statements are presented in accordance with accounting principles generally accepted (GAAP) in the United States. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the periods presented have been reflected herein.
Principles of Consolidation
Our consolidated financial statements include Tautachrome, Inc. and its wholly owned subsidiaries. All significant inter-company accounts and transactions have been eliminated in consolidation.
Use of Estimates
The preparation of these financial statements in conformity with generally accepted accounting principles in the United States requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. We regularly evaluate estimates and assumptions related to the recoverability of long-lived assets, valuation of convertible debentures, assumptions used to determine the fair value of stock-based compensation and derivative liabilities, and deferred income tax asset valuation allowances. We base our estimates and assumptions on current facts, historical experience and various other factors that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from our estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected.
Cash and Cash Equivalents
The Company considers all highly liquid investments with an initial maturity of 3 months or less to be cash equivalents. The Company maintains its deposits with high quality financial institutions and, accordingly, believes its credit risk exposure associated with cash is remote. There were no cash equivalents as of December 31, 2019 and 2018.
Earnings Per Share
Basic earnings per common share is computed by dividing net earnings or loss (the numerator) by the weighted average number of common shares outstanding during each period (the denominator). Diluted earnings per common share is similar to the computation for basic earnings per share, except that the denominator is increased by the dilutive effect of stock options outstanding and unvested restricted shares and share units, computed using the treasury stock method. There are currently no common stock equivalents.
Fair Value of Financial Instruments
We adopted the Financial Accounting Standards Board’s (FASB) Accounting Codification Standard No. 820 (“ASC 820), Fair Value Measurements and Disclosures. ASC 820 defines fair value, establishes a framework for measuring fair value and expands disclosure of fair value measurements. ASC 820 applies under other accounting pronouncements that require or permit fair value measurements and accordingly, does not require any new fair value measurements. ASC 820 clarifies that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, ASC 820 established a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:
Level 1 - Observable inputs such as quoted prices in active markets;
Level 2 - Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and
Level 3 - Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.
The following table presents assets and liabilities that were measured and recognized at fair value as of December 31, 20152019 on a recurring basis:
| | Level 1 | | Level 2 | | Level 3 | | Total Gains
(Losses) | | |
| | | Level 1 | | | Level 2 | | | Level 3 | | | Total Gains (Losses) | |
Accounts payable and accrued expenses | | $ | 181,275 | | $ | - | | $ | - | | $ | - | | | $ | 411,236 | | $ | - | | $ | - | | $ | - | |
Bank overdraft | | 89 | | - | | - | | - | | |
Accounts payable - related party | | 722 | | - | | - | | - | | | 257,282 | | - | | - | | - | |
Accrued interest - related party | | 6,637 | | - | | - | | - | | |
Loans from related parties | | 80,108 | | - | | - | | - | | | 103,032 | | - | | - | | - | |
Convertible note payable, related party | | 22,160 | | - | | - | | - | | |
Short-term convertible notes payable | | 409,456 | | - | | - | | - | | |
Convertible notes payable - related party | | | 111,999 | | - | | - | | - | |
Short-term convertible notes payable, net | | | 814,685 | | - | | - | | - | |
Convertible notes payable in default | | | 32,000 | | | | | | | |
Short-term notes payable | | 16,025 | | - | | - | | - | | | 15,465 | | - | | - | | - | |
Derivative liability | | - | | - | | 23,812 | | (17,882 | ) | | - | | - | | 2,365,367 | | - | |
Long-term convertible notes payable | | 110,000 | | - | | - | | - | | |
Discounts on long-term convertible notes payable | | | (5,052 | ) | | | | | | | | | | | | | |
Court judgment liability | | | 250,000 | | - | | - | | - | |
Long-term convertible notes payable, net | | | 158,156 | | - | | - | | - | |
Long-term convertible notes payable – related party, net | | | 84,091 | | | | | | | |
Crypto-currency notes payable | | | - | | - | | - | | - | |
TOTAL LIABILITIES | | $ | 821,420 | | | $ | - | | | $ | 23,812 | | | $ | (17,882 | ) | | $ | 2,237,946 | | | $ | - | | | $ | 2,365,367 | | | $ | - | |
The following table presents assets and liabilities that were measured and recognized at fair value as of December 31, 20142018 on a recurring basis:
| | Level 1 | | | Level 2 | | | Level 3 | | | Total Gains (Losses) | |
Accounts payable and accrued expenses | | $ | 615,847 | | | $ | - | | | $ | - | | | $ | - | |
Accounts payable - related party | | | 114,052 | | | | - | | | | - | | | | - | |
Loans from related parties | | | 103,074 | | | | - | | | | - | | | | - | |
Convertible notes payable - related party | | | 81,340 | | | | - | | | | - | | | | - | |
Short-term convertible notes payable, net | | | 627,928 | | | | - | | | | - | | | | - | |
Convertible notes payable in default | | | 422,565 | | | | - | | | | - | | | | - | |
Short-term notes payable | | | 15,501 | | | | - | | | | - | | | | - | |
Derivative liability | | | - | | | | - | | | | 365,497 | | | | | |
Court judgment liability | | | 250,000 | | | | - | | | | - | | | | (256,000 | ) |
Long-term convertible notes payable, net | | | 25,000 | | | | - | | | | | | | | - | |
Long-term convertible notes payable – related party, net | | | 32,825 | | | | - | | | | - | | | | - | |
Crypto-currency notes payable | | | 100,000 | | | | - | | | | - | | | | - | |
TOTAL LIABILITIES | | $ | 2,388,132 | | | $ | - | | | $ | 365,497 | | | $ | (256,000 | ) |
| | Level 1 | | | Level 2 | | | Level 3 | | | Total Gains (Losses) | |
| | | | | | | | | | | | | | | | |
Accounts payable and accrued expenses | | $ | 5,016 | | | $ | - | | | $ | - | | | $ | - | |
Convertible note payable, related party | | | 23,500 | | | | - | | | | - | | | | - | |
TOTAL LIABILITIES | | $ | 28,516 | | | $ | - | | | $ | - | | | $ | - | |
Income Taxes
We recognize deferred tax assets and liabilities based on differences between the financial reporting and tax bases of assets and liabilities using the enacted tax rates that are expected to be in effect when the differences are expected to be recovered. We provide a valuation allowance for deferred tax assets for which we do not consider realization of such assets to be more likely than not.
See Note 79 for our reconciliation of income tax expense and deferred income taxes as of and for the years ended December 31, 20152019 and 2014.2018.
Recent Accounting Pronouncements
OnIn November 2014, The Financial Accounting Standards Board (FASB) issued Accounting Standard Update No. 2014-16—Derivatives and Hedging (Topic 815): Determining Whether the Host Contract in a Hybrid Financial Instrument Issued in the Form of a Share Is More Akin to Debt or to Equity (a consensus of the FASB Emerging Issues Task Force). The amendments in this Update do not change the current criteria in GAAP for determining when separation of certain embedded derivative features in a hybrid financial instrument is required. That is, an entity will continue to evaluate whether the economic characteristics and risks of the embedded derivative feature are clearly and closely related to those of the host contract, among other relevant criteria. The amendments clarify how current GAAP should be interpreted in evaluating the economic characteristics and risks of a host contract in a hybrid financial instrument that is issued in the form of a share. The effects of initially adopting the amendments in this Update should be applied on a modified retrospective basis to existing hybrid financial instruments issued in the form of a share as of the beginning of the fiscal year for which the amendments are effective. Retrospective application is permitted to all relevant prior periods.
On November 2014, The Financial Accounting Standards Board (FASB) issued Accounting Standard Update No. 2014-17—Business Combinations (Topic 805): Pushdown Accounting (a consensus of the FASB Emerging Issues Task Force). The amendments in this Update provide an acquired entity with an option to apply pushdown accounting in its separate financial statements upon occurrence of an event in which an acquirer obtains control of the acquired entity. The amendments in this Update are effective on November 18, 2014. After the effective date, an acquired entity can make an election to apply the guidance to future change-in-control events or to its most recent change-in-control event. However, if the financial statements for the period in which the most recent change-in-control event occurred already have been issued or made available to be issued, the application of this guidance would be a change in accounting principle.
On August 2014, The Financial Accounting Standards Board (FASB) issued Accounting Standard Update No. 2014-15, Presentation of Financial Statements – Going Concerns (Subtopic 205-40): Disclosures of Uncertainties about an Entity's Ability to Continue as a Going Concern. The amendments require management to assess an entity's ability to continue as a going concern by incorporating and expanding upon certain principles that are currently in U.S. auditing standards. Specifically, the amendments (1) provide a definition of the term substantial doubt, (2) require an evaluation every reporting period including interim periods, (3) provide principles for considering the mitigating effect of management's plans, (4) require certain disclosures when substantial doubt is alleviated as a result of consideration of management's plans, (5) require an express statement and other disclosures when substantial doubt is not alleviated, and (6) require an assessment for a period of one year after the date that the financial statements are issued (or available to be issued). The amendments in this Update are effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. Early application is permitted.
In June 2014,2018, the Financial Accounting Standards Board ("FASB")(the FASB) issued Accounting Standards Update ("ASU") 2014-10 - Development Stage EntitiesASU No. 2018-18, Collaborative Arrangements (Topic 808): Clarifying the Interaction between Topic 808 and Topic 606 (ASU 2018-18). The amendmentsASU 2018-18 clarifies that certain transactions between collaborative arrangement participants should be accounted for as revenue under Topic 606 when the counterparty is a customer for a distinct good or service (i.e. a unit of account). For units of account that are in this update remove the definitionscope of a development stage entity from the Master GlossaryTopic 606, all of the guidance in Topic 606 should be applied, including the guidance on recognition, measurement, presentation and disclosure. ASU 2018-18 also adds a reference in Topic 808 to the unit of account guidance in ASC thereby removing606 and requires that it be applied only to assess whether transactions in a collaborative arrangement are in the financial reporting distinction between development stage entities and other reportingscope of Topic 606. ASU 2018-18 will preclude entities from U.S. GAAP. In addition, the amendments eliminate the requirements for development stage entitiespresenting amounts related to (1) present inception-to-date informationtransactions with a counterparty in the statements of income, cash flows, and shareholder equity, (2) label the financial statementsa collaborative arrangement that is not a customer as those of a development stage entity, (3) disclose a description of the development stage activities in which the entity is engaged, and (4) disclose in the first year in which the entity is no longer a development stage entity that in prior years it had been in the development stage. The amendments in this update are applied retrospectively. The adoption ofrevenue from contracts with customers. ASU 2014-10 removed the development stage entity financial reporting requirements from the Company.
In June 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2014-12, Compensation – Stock Compensation (Topic 718): Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period. The new guidance requires that share-based compensation that require a specific performance target to be achieved in order for employees to become eligible to vest in the awards and that could be achieved after an employee completes the requisite service period be treated as a performance condition. As such, the performance target should not be reflected in estimating the grant-date fair value of the award. Compensation costs should be recognized in the period in which it becomes probable that the performance target will be achieved and should represent the compensation cost attributable to the period(s) for which the requisite service has already been rendered. If the performance target becomes probable of being achieved before the end of the requisite service period, the remaining unrecognized compensation cost should be recognized prospectively over the remaining requisite service period. The total amount of compensation cost recognized during and after the requisite service period should reflect the number of awards that are expected to vest and should be adjusted to reflect those awards that ultimately vest. The requisite service period ends when the employee can cease rendering service and still be eligible to vest in the award if the performance target is achieved. This new guidance2018-18 is effective for fiscal yearsthe Company for all interim and interim periods within those years beginning after December 15, 2015. Early adoption is permitted. Entities may apply the amendments in this Update either (a) prospectively to all awards granted or modified after the effective date or (b) retrospectively to all awards with performance targets that are outstanding as of the beginning of the earliest annual period presented in the financial statements and to all new or modified awards thereafter. The adoption of ASU 2014-12 is not expected to have a material impact on our financial position or results of operations.In June 2014, the FASB issued ASU No. 2014-10: Development Stage Entities (Topic 915): Elimination of Certain Financial Reporting Requirements, Including an Amendment to Variable Interest Entities Guidance in Topic 810, Consolidation , to improve financial reporting by reducing the cost and complexity associated with the incremental reporting requirements of development stage entities. The amendments in this update remove all incremental financial reporting requirements from U.S. GAAP for development stage entities, thereby improving financial reporting by eliminating the cost and complexity associated with providing that information. The amendments in this Update also eliminate an exception provided to development stage entities in Topic 810, Consolidation, for determining whether an entity is a variable interest entity on the basis of the amount of investment equity that is at risk. The amendments to eliminate that exception simplify U.S. GAAP by reducing avoidable complexity in existing accounting literature and improve the relevance of information provided to financial statement users by requiring the application of the same consolidation guidance by all reporting entities. The elimination of the exception may change the consolidation analysis, consolidation decision, and disclosure requirements for a reporting entity that has an interest in an entity in the development stage. The amendments related to the elimination of inception-to-date information and the other remaining disclosure requirements of Topic 915 should be applied retrospectively except for the clarification to Topic 275, which shall be applied prospectively. For public companies, those amendments are effective for annual reporting periods beginning after December 15, 2014, and interim periods therein.2019. Early adoption is permitted. The Company adopted the standard effective January 1, 2020. The Company does not expect the adoption of this standard to have a material effect on its financial statements.
In August 2018, the FASB issued Accounting Standards Update (“ASU”) No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement, which eliminates certain disclosure requirements for fair value measurements for all entities, requires public entities to disclose certain new information and modifies some disclosure requirements. This standard is effective for fiscal years beginning after December 15, 2019, including interim reporting periods within those years, with early adoption permitted. The Company does not expect the adoption of this standard to have a material effect on its financial statements.
In January 2017, the FASB issued ASU No. 2017-04, Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment, (ASU 2017-04). ASU 2017-04 eliminated Step 2 from the goodwill impairment test. Instead, under the amendments in ASU 2017-04, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. Additionally, an entity should consider income tax effects from any tax deductible goodwill on the carrying amount of the reporting unit when measuring the goodwill impairment loss, if applicable. ASU 2017-04 is effective for all interim and annual reporting periods beginning after December 15, 2019. Early adoption is permitted. The Company does not expect the adoption of ASU 2014-10 is not expected2017-04 to have a material impact on ourits financial position or results of operations.statements.
In June 2016, the FASB issued Accounting Standards Update No. 2016-13 (ASU 2016-13) “Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments.” ASU 2016-13 requires measurement and recognition of expected credit losses for financial assets. This standard is effective for fiscal years beginning after December 15, 2019, including interim reporting periods within those years and must be adopted using a modified retrospective approach, with certain exceptions. Early adoption is permitted. The Company does not expect the adoption of this standard to have a material effect on its financial statements.
In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-02, “Leases (Topic 842)” and subsequent amendments, which replaced existing lease accounting guidance in GAAP and requires lessees to recognize right-of-use assets and corresponding lease liabilities on the balance sheet for all in-scope leases with a term of greater than 12 months and requires disclosure of certain quantitative and qualitative information pertaining to an entity’s leasing arrangements. The Company adopted the standard as of February 3, 2019. The adoption of these standards isthe standard did not have a material impact on the Company’s consolidated statements of operations or consolidated statements of cash flows.
There are no other recently issued accounting pronouncements that the Company has yet to adopt that are expected to have a material impacteffect on ourits financial position, or results of operations.operations, or cash flows.
Note 2 - Cancellation of plans to fund raise with the sale of registered KLK currency
In 2019, the Company cancelled its plans to raise funds through selling KLK trading currency in an offering to be registered with the SEC.
Note 3 – Going Concern
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As shown in the accompanying financial statements, we had negative cash flows from operations of $366,403$1,014,724 and $23,249$635,027 for the years ended December 31, 20152019 and 2014,2018, respectively, and have experienced recurring losses, and negative working capital at December 31, 20152019 and 2014.2018. These conditions raise substantial doubt as to our ability to continue as a going concern. The financial statements do not include any adjustments that might be necessary if we are unable to continue as a going concern.
The Company may raise additional capital through the sale of its equity securities, through an offering of debt securities, or through borrowings from financial institutions or related parties. Management believes that actions presently being taken to obtain additional funding may provide the opportunity for the Company to continue as a going concern. There is no guarantee the Company will be successful in achieving these objectives.
Note 4 – Related Party Transactions
For the yearsyear ended December 31, 2015 and 2014,2019, we hadaccrued $4,848 of interest to the following transactions with the Twenty Second22nd Trust (the "Trust"“Trust”), the trustee of whom is TamaraSonny Nugent, the wifeson of our major shareholder and former Chief Executive Officer, Micheal Nugent:Nugent. The outstanding balances of unpaid principal and interest at December 31, 2019 and 2018 were $123,393 and $121,359, respectively.
| ·
| We received $5,408 and $68,023, respectively, in cash loans to pay operating expenses and repaid $162,918 and $11,844, respectively, in principal.
|
| ·
| We accrued $4,329 and $1,819, respectively, in interest payable to the Trust and paid $1,571 and $1,796, respectively, in interest payments.
|
| ·
| On April 20, 2015, the Registrant and Tamara Nugent, as trustee for Twenty Second Trust, entered into a Common Stock Repurchase Agreement whereby the Trust agreed to sell 1,796,571,210 shares of the our common stock to the Company in exchange for the sum of $17,966 in the form a promissory note.
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Additionally, we owe the Trust $20,885 in expense advances made in previous fiscal years which are not accruing interest.
According to our agreement with Mr. Nugent, we accrue interest on all unpaid amounts at 5%. Principal and interest are callable at any time. If principal and interest are called and not repaid, the loan is considered in default after which interest is accrued at 10%.
The outstanding balance at December 31, 2015 is $80,108On July 11, 2019, our CEO and $6,637, respectively, for principal and interestBoard Chairman contributed $13,750 to the Twenty Second Trust,company which includes the $98,281was accounted for as additional paid in the following paragraph and the related interest payable.capital.
On December 9, 2014,October 17, 2018, we redeemed 39,312 sharessigned an agreement with Arknet to license certain technologies related to the Klickzie ArK.. The initial license fee is $100,000.
The annual maintenance fees are:
| · | $200,000 for the calendar years 2020 and 2021 |
| | |
| · | $300,000 for the calendar years 2022 and 2023 and |
| | |
| · | $400,000 for the calendar year 2024 and each subsequent calendar year during the term of the agreement. |
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| · | 7.5% of net sales. |
As of Series B Convertible Preferred Stock issued in 2013 to our then Chief Executive Officer, by issuing a promissory note in the amount of $98,281. The promissory note is due December 31, 2015 and bears interest at 5% (see Note 5). Through December 31, 2015,2019, we have accrued $4,920the $100,000 initial license fee.
During the year ended December 31, 2019, the company entered into an arrangement with a ARknet whereby the holder of the Crypto-note was paid in interest and have paid no interest or principal payments.common shares of Arknet. We reclassified the $100,000 Crypto-note to an advance by the Company to ARknet.
Convertible note payable, related party
On May 5, 2013 (and on August 8, 2013 with an enlargement amendment) the Company entered into a no interest demand-loan agreement with our current Chairman, Jon NN. Leonard ("Jon") under which the Company may borrow such money from JonDr. Leonard as JonDr. Leonard in his sole discretion is willing to loan. Under this agreement and its enlargement amendment (an amendment enlarging the amount of money that can be borrowed) the Company borrowed $28,000 from Jon between May 30, 2013 and October 31, 2013, and repaid Jon $3,500 of the $28,000 in cash between December 11, 2013 and December 31, 2013, leaving an unpaid balance on this note of $24,500 at December 31, 2013. On August 28, 2014, the Company repaid in cash an additional $1,000 on the note, and on January 5, 2015, an additional principal payment was made in the amount of $1,500. A loan of $160 was added to this loan during the year ended December 31, 2015 for expenses paid by Dr. Leonard on the company's behalf. The outstanding loan amount at December 31, 2015 is $22,160.
The terms of the note provide that at the Company'sCompany’s option, the Company may make repayments in stock, at a fixed share price of $1.00 per share. Also, because this loan is a no interestno-interest loan, an imputed interest expense of $1,767 and $1,920$6,796 was recorded as additional paid-in capital for the yearsyear ended December 31, 2015 and 2014, respectively.2019. The Company evaluated Dr. Leonard'sLeonard’s note for the existence of a beneficial conversion feature and determined that none existed.
On September 18, 2015,During the year ended December 31, 2019, we enteredborrowed $26,000 from and repaid $28,166 to Dr. Leonard. At December 31, 2019, the balanced owed Dr. Leonard is $79,174.
We also owe $37,825 to another officer for loans he made to the company, only $32,825 of which has been formalized into convertible notes. The additional $5,000 is treated as an advance. The notes bear interest at 5% and may convert at $0.0025 per share.
The Company has an employment agreement with Novagen Ingenium Inc,Dr. Jon Leonard, the Company’s Chief Executive Officer at a Nevada corporation ("Novagen") under whichcompensation rate of $60,000 (which increases 5% per year) and six weeks per year of paid vacation. Payment and vacation benefits began to accrue in June, 2019. For the year ended December 31, 2019, we agreedaccrued $35,000 pursuant to sellthis employment agreement.
On October 10, 2019, we issued a convertible promissory note in the amount of $62,500 to Novagen allArknet in exchange for that amount of proceeds. The note bears interest at 5% (10% after maturity), matures 18 months from the date of the transportation assets of Roadships which had, at the time of the exchange, carrying values of zero, for 2,000,000 shares of Novagen common stock. Shares of Novagen'snote and can covert to common stock are quoted underat $0.005 per share.
On December 19, 2019, we issued a convertible promissory note in the symbol "NOVZ" on the OTC Pink operated by OTC Markets Group, Inc. Novagen's controlling shareholder is Micheal Nugent who is on our Boardamount of Directors and is a major shareholder. Since the shares represent a transaction with$60,000 to a related party we recordedin exchange for that amount of proceeds. The note bears interest at 5% (10% after maturity), matures 18 months from the valuedate of these sharesthe note and can covert to common stock at zero.$0.004 per share.
On August 9, 2015, we issued a $5,000 convertible promissory note to the brother of our Board Chairman and Chief Executive Officer in return for cash. The terms of this note are provided in Note 7, subheading "Convertible Notes Payable".
Note 5 – Capital Structure
Common Stock
At December 31, 2014, we had 1,184,906,041 common shares issued and outstanding from a total of four billion authorized.
On April 20, 2015, the Registrant and Tamara Nugent, as trustee for Twenty Second Trust, entered into a Common Stock Repurchase Agreement whereby the Trust agreed to sell 1,796,571,210 shares of the our common stock to the Company in exchange for the sum of $17,966 in the form a promissory note.
During the year ended December 31, 2015,2018 we issued 6,156,179246,542,274 shares for services to several consultants according to our agreements with them. We valued theseas follows:
| · | We settled our lawsuit with Richard Morgan in full by issuing 10,000,000 shares. We valued the shares at their grant date fair values, removing the judgment liability of $5,000 and recording a $55,000 loss on litigation. |
| | |
| · | We issued 15,000,000 shares as an equity incentive to a creditor. We valued the shares at their grant-date fair values and recorded a discount on that debt of $127,500. |
| | |
| · | We issued 221,542,274 shares in conversion of outstanding convertible promissory notes. We recorded a reduction of the balance of these notes of $306,623 and $27,728 of principal and interest, respectively and recorded a loss on conversion of $41,278. As part of these conversions, we retired $326,339 of associated derivative liabilities which we included in Additional Paid in Capital. |
During the pre-merger valuation which was based on private equity raises done in 2013 and 2014 ($0.012 per share) and recorded an increase in Capital Stock and Additional Paid in Capital of $73,601. Included in these shares were shares promised and accrued for beforeyear ended December 31, 2014. We therefore reduced Common Stock Payable by $26,667 to zero.2019, we issued 1,571,976,979 shares as follows:
On May 21, 2015, we issued 1,796,571,210 common shares to the shareholders of Click Evidence, Inc. in exchange for all the issued and outstanding shares of that Company (see Note 6), effecting the merger between Click and Roadships.
| · | We issued 1,551,562,038 shares in conversion of outstanding convertible promissory notes. We recorded a reduction of the balance of these notes of $525,621 of principal, $44,418 of interest, and $4,500 of conversion fees and recorded a loss on conversion of $127,031. As part of these conversions, we retired $471,233 of associated derivative liabilities which we included in Additional Paid in Capital. |
| | |
| · | We issued 3,623,055 shares to a certain Australian individual who made baseless claims against the Company other than two existing convertible promissory notes which the Company acknowledged. Rather than engage in a prolonged international legal matter, we issued these shares in complete satisfaction of any and all claims against the Company. We valued the shares at their grant date fair value of $3,623, reduced unpaid principal and interest in the amount of $4,258 and $695, respectively, and recorded a $1,330 gain on this settlement. |
| | |
| · | We issued 12,500,000 shares to a previous supplier to retire trade debts in the amount of $35,000. We valued the shares at the grant date fair value of $185,000 and recorded a reduction of accounts payable of $35,000 and a loss on settlement of $150,000. |
| | |
| · | We issued 4,291,886 shares to a consultant to reduce our stock payable to them. We reduced the stock payable by $26,281 and recorded additional expense of $313. We recorded an additional stock payable to this consultant of $19,888 during the period. |
Series A Convertible Preferred Stock - The Series A Preferred Stock is convertible into the number of shares of Common Stock which equals 4 times the sum of: i) the total number of shares of Common Stock which are issued and outstanding at the time of conversion, plus ii) the total number of shares of Series B Preferred Stocks which are issued and outstanding at the time of conversion.
The Series A Preferred Stock voting rights are equalWe recorded a stock payable to the number of shares of Common Stock which equals 4 times the sum of: i) the total number of shares of Common Stock which are issued and outstanding, plus ii) the total number of shares of Series B Preferred Stocks which are issued and outstanding.
Series B Convertible Preferred Stock - Each share of Series B Preferred Stock is convertible at par value $0.0001 per share (the "Series B Preferred"), at any time, and/or from time to time, into the number of shares of the Corporation's common stock, par value $0.0001 per share (the "Common Stock") equal to the price of the Series B Preferred Stock ($2.50), divided by the par value of the Series B Preferred (par value of $0.0001per share), subject to adjustment as may be determined by the Board of Directors from time to time (the "Conversion Rate").
Based on the $2.50 price per share of Series B Preferred Stock, and a par value of $0.0001 per share for Series B Preferred each share of Series B Preferred Stock is convertible into 250,000 shares of Common Stock.
Each share of Series B Preferred Stock has 10 votes for any election or other vote placed before the shareholders of the Common stock.
The Preferred A stock has a stated value of $.0001 and no stated dividend rate and is non-participatory. The Series A and Series B has liquidation preference over common stock. The Voting Rights for each share of Series A is equal to 1 vote per share (equal to 4 times the number of common and Preferred B shares outstanding) and Series B Preferred Stock have 10 votes per shares.
The Holder has the right to convert the Preferred A and B to common shares of the Company with the Series A convertible to 4 times the number of common and Preferred B shares outstanding and Series B convertible to 250,000 common shares per Preferred B share. The Preferred Series A and Series B represents voting control based on management's interpretation of the Company bylaws and Certificate of Designation.
On March 12, 2013, the Company issued 1 share of Series A Convertible Preferred Stock and 39,312 shares of Series B Convertible Preferred Stock to our Chief Executive Officer, Micheal Nugent, in exchange for a reduction of debtconsultant in the amount of $98,281. The value assigned$172,938 pursuant to the preferred shares was derived from a model generated by an independent valuation expert that specializes in valuing equity instrumentsour contract with no quoted markets. The Company recorded increases to Preferred Stock and Additional Paid in Capital collectively of $1,598,110, a reduction in debt of $98,281 and a loss on conversion of $1,499,829.
them.
On December 9, 2014, we redeemedJuly 11, 2019, our CEO and Board Chairman contributed $13,750 to the 39,312 shares of Series B Convertible Preferred Stock issuedcompany which was accounted for as additional paid in 2013 to our Chief Executive Officer, by issuing a promissory note in the amount of $98,281. The promissory note is due December 31, 2015 and bears interest at 5%. We valued the shares at their fair values on the date of their conversion to this promissory note and valued the shares at $2,914,843. Because the transaction was with a related party, we recorded the removal of the Series B shares by recording a liability in the amount of $98,281, and reducing the par value of the shares and Additional Paid in Capital by $4 and $98,277, respectively, recording no gain on the conversion.capital.
Imputed Interest
Several of our loans made in our Australian subsidiary were made without any nominal interest. As such, we imputed interest at 8% to these loans, crediting Additional Paid in Capital and charging Interest Expense. For the year ended December 31, 20152019 and 2014,2018, these amounted to $7,501$16,707 and $1,920,$17,931, respectively.
Beneficial Conversion Features of Convertible Promissory NotesPreferred Stock
During the year ended December 31, 2015,2018, we borrowed $425,788 from 87 accredited investorsaccrued $1,837,000 in Australiacosts related to the 40,000 Series E Preferred shares issued in accordance with our ARknet contract (see Note 6) which contained features allowing the holder to convert the principal and accumulated interest into common stock. We evaluated these notes for beneficial conversion features and calculated4) containing a par value of $405,954, all$0.0001. This series of which has been immediately expensed as interest expense aspreferred shares have the notes are due on demand.following rights, limitations, restrictions and privileges:
Short-term convertible notes payable
During the year ended December 31, 2015, we borrowed $425,788 from 87 accredited investors in Australia. Of this amount, $336,215 was acquired after the reverse merger (see Note 6). The remainder was prior to the reverse merger, was included as part of that transaction and as such, is not included in the financing section of the Statement of Cash Flows.
These promissory notes can be converted into shares of our common stock at the rate of $0.01 per share (the aggregate of which shares convertible is 56,213,300). These notes are callable by the makers at any time and accrue interest at 5%. For the year ended December 31, 2015, we accrued $4,511 of interest on these notes and made no interest payments. We evaluated these notes for beneficial conversion features and calculated a value of $405,954, all of which has been immediately expensed as interest expense as the notes are due on demand.
Options Awards
On July 2, 2012, we granted 10 million options to purchase our common stock to each of our Chief Executive and Chief Financial Officers (20 million total) of which 5 million each vest immediately (10 million total).
In addition to the 10 million options vesting in 2012, 10 million options vested as follows:
| · | 5 million optionsThey are not entitled to our Chief Financial Officer vested on April 19, 2013.dividends,
|
| | |
| · | 5 million optionsThey are entitled to our Chief Executive Officer vested on July 2, 2013.
|
All 20 million of these options expired during the year ended December 31, 2014.
| no liquidation rights, |
F-13 |
|
| |
| · | Each share has the voting rights of all other voting shares combined, multiplied by 0.00001, and |
| | |
| · | They have no conversion or redemption rights. |
Note 6 – Business Combinations
Acquisition of Click Evidence, Inc.
On May 21, 2015, we acquired all the issued and outstanding shares of Click Evidence, Inc. ("Click"), an emerging growth company existing under the laws of the State of Arizona that has developed and owns a patent pending trustable imaging technology for smartphones. Under the terms of the Acquisition, we issued 1,796,571,209 shares of our common stock from treasury in exchange for 14,239,705 shares of Click common stock. As a result of the Acquisition, Click has become a wholly-owned subsidiary of the Registrant.
The Roadships shares were issued by the Registrant at a deemed price of $0.0012 per share to 16 Click shareholders (the "Click Shareholders") on the basis of 83.644 Roadships shares for each of the issued and then outstanding Click Shares. The number of Roadships shares issued for the Click Shares was determined by negotiation between the parties to the Acquisition and was approved by our board of directors as being fair and in the best interest of the Registrant.
As a result of the issuance of the Roadships shares, Dr. Jon N. Leonard, the President, Chief Executive Officer and a director of Click, has acquired sole voting and investment control over 1,387,829,545 shares of Roadships' common stock, representing 46.4% voting control of the Registrant. At the time of the Acquisition, Dr. Leonard directly owned 10,000,000 Click Shares and had sole voting and investment control over a further 1,000,000 Click Shares.
We deemed the transaction a reverse merger and recorded no goodwill.
Assets and liabilities of Click Evidence are as follows:
Fair value of assets and liabilities obtained from Click Evidence | | | |
| | | |
Cash | | $ | 10,597 | |
Other current assets | | | 2,000 | |
Shareholder note payable | | | (22,000 | ) |
Net liabilities acquired | | $ | (9,403 | ) |
Upon merging the two companies, we closed all historical operating results prior to the reverse merger date of May 21, 2015 of Roadships and consolidated subsidiaries to Additional Paid in Capital. Operating results and cash flows and historical equity presented in this report and subsequent reports will be that of Click Evidence, Inc.
A summary of pro-forma financial information for the years ended December 31, 2014 and 2013 are as follows:
| | Year Ended December 31, | |
| | 2014 | | | 2013 | |
Total assets | | $ | 32,072 | | | $ | 26,746 | |
Total liabilities | | | 260,133 | | | | 83,039 | |
Total stockholders' deficit | | | (228,061 | ) | | | (56,293 | ) |
Net loss | | | (311,477 | ) | | | (27,286,649 | ) |
Other comprehensive income (loss) | | | 6,423 | | | | (11,325 | ) |
Net comprehensive loss | | | (305,054 | ) | | | (27,297,974 | ) |
Weighted average shares outstanding (basic and diluted) | | | 2,987,633,430 | | | | 2,412,838,909 | |
Net loss per share (basic and diluted) | | | (0.00 | ) | | | (0.01 | ) |
Sale of Roadships Holdings' Assets
On September 18, 2015, we entered into an agreement with Novagen Ingenium Inc, a Nevada corporation ("Novagen") under which we agreed to sell to Novagen all of the transportation assets of Roadships which had, at the time of the exchange, carrying values of zero, for 2,000,000 shares of Novagen common stock. Shares of Novagen's common stock are quoted under the symbol "NOVZ" on the OTC Pink operated by OTC Markets Group, Inc. Novagen's controlling shareholder is Micheal Nugent who is on our Board of Directors and is a major shareholder. Since the shares represent a transaction with a related party, we recorded the value of these shares at zero.
The description of the terms and conditions of the Share Exchange Agreement set forth herein does not purport to be complete and is qualified in its entirety by reference to the terms of the Share Exchange Agreement, which is filed as Exhibit 10.1 to this Current Report.
The sale of these assets to Novagen was completed on September 18, 2015. As a result, Novagen has acquired all of the Transport Assets and we have exited the transport and shipping business. Management intends to focus all the resources of the registrant on the development and commercialization of its smartphone imaging technology.
Note 76 - Debt
Our debt in certain categories went from $23,500$2,023,730 at December 31, 20142018 to $632,697$3,934,795 at December 31, 20152019 as follows:
| | | 12/31/19 | | | 12/31/18 | |
| | 12/31/14 | | 12/31/15 | | | | | | |
Loans from related parties | | $ | - | | $ | 80,108 | | | $ | 103,032 | | $ | 103,074 | |
Convertible notes payable, related party | | 23,500 | | 22,160 | | | 111,999 | | 81,340 | |
Short-term convertible notes payable | | - | | 409,456 | | |
Short-term convertible notes payable, net | | | 814,685 | | 627,928 | |
Convertible notes payable in default | | | 32,000 | | 422,565 | |
Short-term notes payable | | - | | 16,025 | | | 15,465 | | 15,501 | |
Long-term convertible notes payable | | - | | 110,000 | | |
Discounts on long-term convertible notes payable | | | - | | | | (5,052 | ) | |
Court Judgment liability | | | 250,000 | | 250,000 | |
Derivative liability | | | 2,365,367 | | 365,497 | |
Long-term convertible notes payable, net | | | 158,156 | | 25,000 | |
Long-term convertible notes payable, related party | | | 84,091 | | 32,825 | |
Crypto currency notes payable | | | - | | 100,000 | |
Totals | | $ | 23,500 | | | $ | 632,697 | | | $ | 3,934,795 | | | $ | 2,023,730 | |
See Note 4 for a discussion of our related-party debts, including the first two entries in the above table.
Loans from related parties
Short-termAs is discussed in Note 4, at December 31, 2019 we owed $202,567 in related-party debts consisting of $98,032 and $25,361 in unpaid principal and interest, respectively, to the 22nd Trust and $79,174 owed to our CEO, Dr. Jon Leonard.
We also owe $37,825 to another officer for loans he made to the company, only $32,825 of which has been formalized into convertible notes. The additional $5,000 is treated as an advance. The notes bear interest at 5% and may convert at $0.0025 per share.
Convertible notes payable
During the year ended December 31, 2015,2018, we borrowed $425,788 from 87 accredited investors in Australia. Of this amount, $336,215 was acquired after the reverse merger (see Note 6). The remainder was prior to the reverse merger, was included as part of that transaction and as such, is not includedissued eight new convertible promissory notes in the financing sectionaggregate amount of the Statement$633,000, containing original issue discounts totaling $71,688, for net proceeds of Cash Flows.
$561,313. These promissoryconvertible notes can be converted into shares of ourconvert to common stock at the ratevarious different prices. We evaluated these convertible notes for derivatives and calculated a collective value of $0.01 per share (the aggregate of$209,040 which shares convertible is 56,213,300). Thesewe are accounting for as debt discounts. The individual notes are callable bydiscussed in Note 6 to the makers at any time and accrue interest at 5%. Forfinancial statements filed on Form 10-K for the year ended December 31, 2015,2018 and are hereby incorporated by reference.
During the year ended December 31, 2019 we accrued $4,511issued twenty convertible promissory notes in the aggregate amount of interest on these$1,283,757, receiving proceeds therefrom of $1,216,176. These convertible notes and made no interest payments.can convert to common stock at various prices. We evaluated these convertible notes for beneficial conversion features and calculated a collective value of $405,954, all of$983,083 which has been immediately expensedwe are accounting for as interest expense as thedebt discounts. These convertible notes are due on demand.discussed below:
| · | On January 11, 2019, we issued a convertible note in the amount of $100,000 which accrues interest at 5% (10% for unpaid interest and principal after maturity) and matures on July 8, 2020. This note can convert to 83,333,333 shares. |
| | |
| · | On January 23, 2019, we issued a convertible note in the amount of $1,475 which accrues interest at 5% (10% for unpaid interest and principal after maturity) and matures on July 23, 2020. This note can convert to 1,109,023 shares. |
Aggregate totals for these short-term convertible notes payable are:
| · | On January 16, 2019, we issued a convertible note in the amount of $4,000 which accrues interest at 5% (10% for unpaid interest and principal after maturity) and matures on July 16, 2020. This note can convert to 3,007,519 shares. |
| | |
| · | During the year ended December 31, 2019, we issued four promissory notes to an Australian Superfund in the aggregate amount of $20,331 which accrues interest at 5% (10% for unpaid interest and principal after maturity). These notes mature between October 15, 2020 and November 24, 2020 and can convert to 29,044,286 shares in the aggregate. |
| | |
| · | Also, during the year ended December 31, 2019, we issued three convertible promissory notes to a lending institution in the aggregate amount of $176,000, receiving proceeds of $167,000. These notes accrue interest at 12% (22% for unpaid interest and principal after maturity) and mature between April 17, 2020 and June 20, 2020. After 180 days from the note date, these notes may convert at 58% of the lowest two trading prices for the twenty days prior to conversion. These three notes’ interest and principal were all paid off on July 12, 2019. |
| | |
| · | On May 13, 2019, we issued a convertible note in the amount of $5,725 which accrues interest at 5% (10% for unpaid interest and principal after maturity) and matures on November 13, 2020. This note can convert to 8,178,571 shares. |
| | |
| · | On July 9, 2019, we issued a convertible note in the amount of $320,000, receiving proceeds of $294,500 with an original issue discount of $25,500. The note matures on July 9, 2020 and bears interest at 8% (24% of unpaid interest and principal after maturity). This note may convert to common stock at 63% of the lowest closing bid price for the twenty trading days prior to conversion. On August 2, 2019, we issued 11,392,539 shares in conversion of $35,000 of principal and $169 of interest. |
| | |
| · | On July 22, 2019, we issued a convertible note in the amount of $162,750, receiving proceeds of $150,000 with an original issue discount of $12,750. The note matures on July 22, 2020 and bears interest at 8% (24% of unpaid interest and principal after maturity). This note may convert to common stock at 63% of the lowest closing bid price for the twenty trading days prior to conversion. |
| | |
| · | On August 6, 2019 we issued a convertible promissory note in the amount of $500,000 to be received in various tranches. Each tranche matures 18 months from the date of funding and bears interest at 5%. As of December 31, 2019, we have received $150,000 pursuant to this note, all of which mature in February, 2021 and can convert to 30,844,098 shares in the aggregate. |
| | |
| · | On October 10, 2019, we issued a convertible promissory note in the amount of $62,500 to a related party in exchange for that amount of proceeds. The note bears interest at 5% (10% after maturity), matures 18 months from the date of the note and can covert to common stock at $0.005 per share. |
| | |
| · | On October 18, 2019, we issued a convertible promissory note in the amount of $976 to a related party for paying company expenses. The note bears interest at 5% (10% after maturity), matures 18 months from the date of the note and can covert to common stock at $0.0025 per share. |
| | |
| · | On November 6, 2019, we issued a convertible note in the amount of $220,000, receiving proceeds of $200,000 with an original issue discount of $20,000. The note matures on November 8, 2020 and bears interest at 8% (24% of unpaid interest and principal after maturity). This note may convert to common stock at 63% of the lowest closing bid price for the twenty trading days prior to conversion. |
| | |
| · | On December 19, 2019, we issued a convertible promissory note in the amount of $60,000 to a related party in exchange for that amount of proceeds. The note bears interest at 5% (10% after maturity), matures 18 months from the date of the note and can covert to common stock at $0.004 per share. |
Proceeds from issuance of short-term convertible notes | | $ | 425,788 | |
Foreign exchange effect at balance sheet date | | | (16,332 | ) |
Balance, December 31, 2015 | | $ | 409,456 | |
Long-termOn January 29, 2019, we issued 3,623,055 to a certain Australian individual who made baseless claims against the Company other than two existing convertible promissory notes payablewhich the Company acknowledged. Rather than engage in a prolonged international legal matter, we issued these shares in complete satisfaction of any and all claims against the Company. We valued the shares at their grant date fair values, reduced unpaid principal and interest in the amount of $4,258 and $695, respectively, and recorded a $1,330 gain on this settlement.
During the year ended December 31, 2015,2019, we borrowed $110,000 from eight accredited investors in the United States. These notes bearamortized $575,602 of debt discounts to interest at 5%expense, accrued $117,035 of interest and are due eighteen months from the datepaid interest of the note (all of which mature during the first or second quarter of 2017). Each note is convertible into a sum of shares which varies depending$40,781 on the note date. The aggregate sum of the shares into which these notes are convertible is 16,478,937. We evaluated these notes for embedded derivates and determined that they contained such derivatives as set forth in the Statement of Financial Accounting Standard ASC 820–10–35–37 Fair Value in Financial Instruments ( herein referenced as "ASC 820"); Statement of Financial Accounting Standard ASC 815 Accounting for Derivative Instruments and Hedging Activities (herein referenced as "ASC 815"); and ASC 815–40 (formerly Emerging Issues Task Force ("EITF") Issue No. 00–19 and EITF 07–05).existing notes.
Aggregate totals for these eight long-termAt December 31, 2019, $32,000 of our convertible notes payable are:were in default.
Proceeds from issuance of long-term convertible notes | | $ | 110,000 | |
Discounts on notes payable: | | | | |
Discounts at issuance | | | (5,930 | ) |
Less: amortization | | | 878 | |
Net unamortized discounts at December 31, 2015 | | | (5,052 | ) |
| | | | |
Long-term convertible notes payable, net of discounts | | $ | 104,948 | |
One of the eight accredited investors included in the above paragraph is the brother of our Board Chairman and Chief Executive Officer, Dr. Jon Leonard. This $5,000Convertible notes payable (excluding related-party convertible promissory notenotes which is dated August 9, 2015, matures on February 26, 2017, pays interest at 5%, and may convert into 1,020,408 common shares. The initial derivative recorded on this instrument was $226 with a valuediscussed in Note 4) at December 31, 20152019 and 2018 and their classification into long-term, short-term and in-default were as follows:
| | 12/31/19 | | | 12/31/18 | |
| | | | | | |
All convertible promissory notes | | | | | | |
Unpaid principal | | | 1,578,917 | | | | 1,121,243 | |
Discounts | | | (574,076 | ) | | | (45,750 | ) |
Convertible notes payable, net | | $ | 1,004,841 | | | $ | 1,075,493 | |
| | | | | | | | |
Classified as short-term | | | | | | | | |
Unpaid principal balance | | | 1,183,685 | | | | 673,678 | |
Discounts | | | (369,000 | ) | | | (45,750 | ) |
Convertible notes payable - short-term, net | | $ | 814,685 | | | $ | 627,928 | |
| | | | | | | | |
Classified as long-term | | | | | | | | |
Unpaid principal balance | | | 363,232 | | | | 25,000 | |
Discounts | | | (205,076 | ) | | | - | |
Convertible notes payable - short-term, net | | $ | 158,156 | | | $ | 25,000 | |
| | | | | | | | |
Classified as in default | | | | | | | | |
Unpaid principal balance | | | 32,000 | | | | 422,565 | |
Discounts | | | - | | | | - | |
Convertible notes payable - short-term, net | | $ | 32,000 | | | $ | 422,565 | |
On May 2, 2019, the company entered into an amendment to one of $2,334.the convertible promissory notes issued during 2018. The initial discountcompany allowed the creditor to own a larger percentage of the company’s total shares outstanding in exchange for a waiver of all default interest. As a result, we recorded ona reduction of interest payable to this instrument was $226,creditor and interest expense of which $414 has been amortized$140,491. On July 19, 2019, we issued 30,414,329 shares to this creditor extinguishing all principal and interest expense.owed to them.
Crypto-currency notes payable
On August 7, 2018, we issued a Crypto Exchange Promissory Note (“the Crypto Note”) in exchange for $100,000 in cash. The Crypto Note accrues interest at 4% until maturity which is 18 months from issue and 10% after maturity. The holder can convert unpaid principal and accrued interest into KLK20 tokens at any time at the rate of $0.25 per token. The holder may, for up to nine months after issuance, participate in a price guarantee: if the Company offers the tokens at less than $0.25 per token at any point for up to nine months after issuance, then the holder has the option of participating in the offer at the lower price.
During the year ended December 31, 2019, the company entered into an arrangement with a related party whereby the holder of the Crypto-note was paid in common shares of a related party. We reclassified the Crypto-note to an advance by the Company to the related party and recorded a gain of $3,334.
On July 31, 2019, we settled an outstanding trade account payable of $83,343 by agreeing to a cash payment of $35,000. We paid the $35,000 on July 31, 2019 and realized a gain of $48,343.
Derivative liabilityliabilities
The above-referenced eight convertible promissory notes issued during the year ended December 31, 20152019 were analyzed in accordance with EITF 07–05 and ASC 815. EITF 07–5, which is effective for fiscal years beginning after December 15, 2009, and interim periods within those fiscal years. The objective of EITF 07–5 is to provide guidance for determining whether an equity–linked financial instrument is indexed to an entity'sentity’s own stock. This determination is needed for a scope exception under Paragraph 11(a) of ASC 815 which would enable a derivative instrument to be accounted for under the accrual method. The classification of a non–derivative instrument that falls within the scope of EITF 00–19 - Accounting“Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company'sCompany’s Own StockStock” also hinges on whether the instrument is indexed to an entity'sentity’s own stock. A non–derivative instrument that is not indexed to an entity'sentity’s own stock cannot be classified as equity and must be accounted for as a liability. The EITF reached a consensus that would establish a two–step approach in determining whether an instrument or embedded feature is indexed to an entity’s own stock. First, the instrument's contingent exercise provisions, if any, must be evaluated, followed by an evaluation of the instrument's settlement provisions.
Derivative financial instruments should be recorded as liabilities in the consolidated balance sheet and measured at fair value. For purposes of this engagement and report, we utilized fair value as the basis for formulating our opinion which has been defined by the Financial Accounting Standards Board ("FASB"(“FASB”) as "the“the amount for which an asset (or liability) could be exchanged in a current transaction between knowledgeable, unrelated willing parties when neither party is acting under compulsion"compulsion”. The FASB has provided guidance that its definition of fair value is consistent with the definition of fair market value in IRS Rev. Rule 59–60.
In valuingThe Company issued certain fixed-rate convertible Subscription Notes from 2015 through September 30, 2019 in the United States and Australia These convertible notes have become tainted (“The Tainted Notes”) as a result of the issuance of convertible promissory notes issued in the United States since there is a possibility (however remote) that the Company would not have enough shares in the Treasury to satisfy all possible conversions.
The Convertible Note derivatives were valued as of issuance; conversion; redemption/settlement; and each quarterly period from March 31, 2018 through December 31, 2019. The following assumptions were used for the valuation of the derivative liabilities, w madeliability related to the following assumptions:Notes:
| · | The underlying stock price was used asof $0.0289 to $0.0115 in this period would fluctuate with the fair value of the common stock $0.02 – as of 12/31/15;Company projected volatility. |
| | |
| · | The stock price projection was modeled such that it follows a geometric Brownian motionnotes convert with constant drift and a constant volatility;variable conversion prices based on the percentages of the low or average trades or bids over 20 to 25 trading days. |
| | |
| · | The stock projections are based oneffective discounts rates estimated throughout the Company historical annual volatilities using the term remaining for each Note and Valuation date and rangedperiods range from 311-338%.35% to 42% with potentially an additional discount. |
| | |
| · | The Holder would automatically convert the note before maturity if the registration was effective and the company was not in default. |
| | |
| · | The projected annual volatility for each valuation period was based on the historic volatility of the company are 190.0% – 277.6% (annualized over the term remaining for each valuation). |
| · | An event of default would occur 0% of the time, increasing .50%1.00% per month to a maximum of 5.0%;20%. |
| | |
| · | Capital raising eventsThe Holders would occur quarterly at $150,000redeem the notes (with penalties up to 50% depending on the date and full–partial redemption) based on availability of alternative financing of 0% of the time, increasing 1.00% per quarter through 2017 with potential dilutive resets for the Notes;month to a maximum of 5%.
|
| | |
| · | Discount rates were based on risk free rates in effect basedThe Holder would automatically convert the note at the maximum of 2 times the conversion price or the stock price on the remaining term and date of each valuation and instrument.valuation.
|
| | |
| · | The Holder would redeem based on availability of alternative financing, 0% of the time increasing 0% monthly to a maximum of 0%; |
| ·
| The Holder wouldautomatically convert the note starting after 12 months to maturity (18 months from issuance) assuming the company was not in default subject tobased on ownership or trading volume limits.
limitations. |
We recorded the initial derivative as both a derivative liability and a debt discount (or initial reduction in carrying value of the debt). We then amortized the debt discounts using the Effective Interest Method which recognizes the cost of borrowing at a constant interest rate throughout the contractual term of the obligation. The effective interest rates on these seventhe six instruments issued during the year ended December 31, 2018 range from 5.0%243% to 10.6%289%. The effective interest rates for the instruments issued during the nine months ended September 30, 2019 range from 11% to 564%.
At each reporting date, we determine the fair market value for each derivative associated with each of the eight above instruments. At December 31, 2015,2019, we determined the fair value of these derivatives were $23,812. We therefore included the difference in the Statement of Operations as "Change in Fair Value of Derivatives".
Short-term notes payable
During the year ended December 31, 2015, we inherited three short-term notes upon our May 21, 2015 reverse merger with Roadships Holdings, Inc. whose aggregate value at December 31, 2015 is $16,025.
$2,365,367.
Changes in outstanding derivative liabilities are as follows:
Balance, December 31, 2018 | | $ | 365,497 | |
Changes due to new issuances | | | 1,044,749 | |
Changes due to extinguishments | | | (471,233 | ) |
Changes due to adjustment to fair value | | | 1,426,354 | |
Balance, December 31, 2019 | | $ | 2,365,367 | |
Balance, December 31, 2014 | | $ | - | |
Changes due to new issuances | | | 5,930 | |
| | | | |
Changes due to adjustments to fair value | | | 17,882 | |
Balance, December 31, 2015 | | $ | 23,812 | |
Note 7 – Litigation Gains and Losses
Morgan Lawsuit
Background
The May 21, 2015 merger of the Company with Click Evidence, Inc. (“Click”) resulted in the transfer of Click’s assets and interests from Click to the Company and in Click becoming an asset-less shell inside the Company and then being disposed of on November 25, 2015. In the November 25, 2015 conveyance of the Click to the new owner, its name was changed to BH Trucking, Inc. (“BH”).
Filing and service
A first lawsuit was filed in the Superior Court of the State of Arizona, Pima County, by a former consultant to Click, Richard Morgan (“Morgan”). This lawsuit was served on December 2, 2015, against Click/BH, with the Company also named in the lawsuit, but not served by it or effectively made aware of it until 2017.
Allegation
The lawsuit claimed that the consultant’s agreement with Click/BH permitted him to recover a finder’s fee for the cashless stock swap that achieved the merger on May 21, 2015. The new owner of Click/BH, the only party served, declined to defend the lawsuit allowing it to go to default.
Default judgment
On December 16, 2016, the Court issued a default judgment for the plaintiff and against the defendants in the amount of $2,377,915. The Company believes that having not been served or made aware of the lawsuit, it is not a target of the judgment.
Second Lawsuit
On January 23, 2017, the Company and its CEO were served in a second lawsuit by Morgan alleging that the Company’s intellectual property assets that were transferred to it by Click under the May 21, 2015 merger of the Company with Click, were fraudulently removed from Click/BH, and seeks to have them returned to Click/BH.
Charge to the Financial Statements
The Company believes that the second lawsuit is baseless, and is defending itself vigorously against it. The Company also believes that being named but not served, the default judgment in Morgan’s first lawsuit does not apply to the Company. Nevertheless, out of an abundance of caution, we have included in liabilities the default amount of $2,377,915 plus $4,459 interest at 4.5% from December 16, 2016, the date of the judgment, to December 31, 2016.
On August 29, 2017, the Court set aside the judgment in the First Lawsuit resulting in the removal of the liability of $2,377,915 and accrued interest of $4,459 at December 31, 2016, as well as the additional accrued interest recorded during 2017 of $44,294, for a total gain of $2,426,668.
On August 14, 2018, we settled this lawsuit in full by issuing 10 million shares. We valued the shares at their grant date fair values, removing the judgment liability of $5,000 and recording a $55,000 loss on litigation.
McRae Lawsuit
On October 10, 2017, the Company received a letter from the lawyer of Eric L McRae (“McRae”) a person whose association with the Company was terminated by the Company on June 16, 2017. The letter demanded payment of 850,000,000 unrestricted Tautachrome common shares to forestall his filing a laundry list of complaints in a variety of government agencies including with the US District Court in Kansas with complaints of contract breaches and fraud by silence, with the EEOC with complaints of termination by racial discrimination, with the OSHA with complains of termination for reasons of his being a whistleblower under Sarbanes-Oxley provisions, and with various regulatory agencies with accusations of an unspecified nature.
On October 12, 2017, McRae filed a complaint, later amended twice, against the Company in the US District Court in Kansas. The amended complaint alleges 1) that the Company breached a written agreement in an alleged employment by failing to pay him 35,000,000 shares of the Company’s common stock and terminating his association with the Company on June 16, 2017 without proper notice. The complaint goes on to allege 2) that the Company committed fraud by silence for failing to inform him of an intent to receive the benefit of his services while harboring an intent to not compensate him, 3) that the Company breached an unwritten agreement with him to provide him with 185,000,000 shares of the Company’s common stock, and 4) that the Company breached a convertible promissory note by failing and refusing to repay him the principal and accrued interest thereunder. Complaint number 4 is now moot in the belief of the Company since after the lawsuit was filed the Company continued to repay McRae’s convertible promissory note on schedule with interest due until paid in full on October 1, 2018, thus extinguishing the note and making the matter moot. These matters remain before the Court.
On December 12, 2017, McRae brought the Company before the Kansas Human Rights Commission and the U.S. Equal Employment Opportunity Commission (EEOC) alleging that on June 16, 2017 he was terminated from an alleged employment by the Company on the basis of race and for retaliation, and that the Company discriminated against him in the terms of this alleged employment because of race. The Kansas Human Rights Commission dismissed this claim.
On December 8, 2017, McRae filed a complaint with the Occupational Safety and Health Administration (the “OSHA”), alleging that his “investigation and reporting” to the Company’s CEO was a contributing factor in the termination of his alleged employment by the Company in violation of the Sarbanes-Oxley Act whistleblower’s provisions. On January 2, 2018, the Company delivered its response to the complaint, denying each of McRae’s allegations and providing its own presentation of the facts. McRae dismissed the OSHA claim with prejudice, and the matter cannot be brought again.
The Company, believing that allegations made by McRae are completely fabricated and aimed at doing harm, has been vigorously defending itself and believes it will prevail in every instance. Despite this belief, to save legal expense on October 17, 2018 the Company made a good faith settlement offer to McRae, offering him 50,000,000 shares in settlement of all outstanding legal actions against us. McRae declined the offer. However, we re-evaluated the liability on these lawsuits from $49,000 to $250,000 based on the closing price of our common stock on the date of the offer. We recognized a loss on litigation of $201,000 in so doing during 2018.
Although discovery closed on February 28, 2019 McRae involved the Company in a protracted discovery dispute regarding documents contained in the CEO’s laptop computer and in his personal e-mail account. That dispute has been substantively resolved. However, two motions have been filed by McRae. The first seeks sanctions from Tautachrome arising out of the discovery dispute. The second seeks leave to amend the complaint to include CEO personally as a party to McRae’s fraud claims. Tautachrome has opposed both motions.
On January 14, 2020, Eric McRae died unexpectedly, according to his attorney while undergoing a surgical procedure. As a result, the Court has stayed the case in its entirety and denied both pending motions without prejudice. The matter is set for a status conference on April 22nd to determine when and how the litigation will proceed.
Note 8 – Income Taxes
Deferred income taxes reflect the tax consequences on future years of differences between the tax bases:
| | 12/31/19 | | | 12/31/18 | |
Net operating loss carry-forward | | $ | 4,579,500 | | | $ | 3,380,285 | |
| | | | | | | | |
Deferred tax asset | | $ | 961,695 | | | $ | 709,860 | |
Valuation allowance | | | (961,695 | ) | | | (709,860 | ) |
Net future income taxes | | $ | - | | | $ | - | |
| | 12/31/15 | | | 12/31/14 | |
Net operating loss carry-forward | | $ | 1,109,259 | | | $ | 116,103 | |
| | | | | | | | |
Deferred tax asset at 39% | | | 432,611 | | | | 45,280 | |
Valuation allowance | | | (432,611 | ) | | | (45,280 | ) |
Net deferred tax asset | | $ | - | | | $ | - | |
Deferred taxes for 2019 and 2018 are calculated using a marginal tax rate of 21%.
In assessing the realizability of future tax assets, management considers whether it is more likely than not that some portion or all of the future tax assets will not be realized. The ultimate realization of future 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 future tax liabilities, projected future taxable income and tax planning strategies in making this assessment. Management has provided for a valuation allowance on all of its losses as there is no assurance that future tax benefits will be realized.
Our tax loss carry-forwards will begin to expire in 2022.
Note 9 – Subsequent Events
On January 8, 2016,As of March 5, 2020, we entered into a material definitive agreementissued three convertible promissory notes to acquire 100% of the member interestARknet in Photosweep, LLC, an Arizona limited liability company. Photosweep is the developer and operator of a software applicationexchange for mobile devices that allows each user to order prints of digital photographs on the user's mobile device to be delivered at such date and location$35,000 in the United States that the user may specify. Total consideration paid by the Registrant for the Acquisition consists of $39,000 and 13 million shares of the Registrant's common stock. We closed on the transaction on January 15, 2016.cash.
We have evaluated subsequent events through the date of this report.
Item 9. Changes In and Disagreements Withwith Accountants on Accounting and Financial Disclosure
None.
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
We carried out an evaluation, under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, of the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)). Based upon that evaluation, our principal executive officer and principal financial officer concluded that, as of the end of the period covered in this report, our disclosure controls and procedures were not effective to ensure that information required to be disclosed in reports filed under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the required time periods and is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.
Our management, including our principal executive officer and principal financial officer, does not expect that our disclosure controls and procedures or our internal controls will prevent all error or fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs. Due to the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. To address the material weaknesses, we performed additional analysis and other post-closing procedures in an effort to ensure our consolidated financial statements included in this annual report have been prepared in accordance with generally accepted accounting principles. Accordingly, management believes that the financial statements included in this report fairly present in all material respects our financial condition, results of operations and cash flows for the periods presented.
Management'sManagement’s Report on Internal Control over Financial Reporting.
Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) under the Securities Exchange Act, as amended. Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2015.2018. In making this assessment, our management used the 2013 criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO"(“2013 Framework”) in Internal Control-Integrated Framework. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company's annual or interim financial statements will not be prevented or detected on a timely basis. We have identified the following material weaknesses.
1. | As of December 31, 2015, we did not maintain effective controls over the control environment. Specifically we have not developed and effectively communicated to our employees its accounting policies and procedures. This has resulted in inconsistent practices. Further, the Board of Directors does not currently have any independent members and no director qualifies as an audit committee financial expert as defined in Item 407(d)(5)(ii) of Regulation S-B.As of December 31, 2019, we did not maintain effective controls over the control environment. Specifically we have not developed and effectively communicated to our employees our accounting policies and procedures. This has resulted in inconsistent practices. Further, the Board of Directors does not currently have any independent members and no director qualifies as an audit committee financial expert as defined in Item 407(d)(5)(ii) of Regulation S-K. Since these entity level programs have a pervasive effect across the organization, management has determined that these circumstances constitute e a material weakness.
As of December 31, 2019, we did not maintain effective controls over financial statement disclosure. Specifically, controls were not designed and in place to ensure that all disclosures required were originally addressed in our financial statements. Accordingly, management has determined that this control deficiency constitutes a material weakness. As of December 31, 2019, the Company did not establish a formal written policy for the approval, identification and authorization of related party transactions. Because of these material weaknesses, management has concluded that the Company did not maintain effective internal control over financial reporting as of December 31, 2015,2019, based on the criteria established in "Internal Control-Integrated Framework" issued by the COSO. Change Inin Internal Control Over Financial Reporting There were no changes in our internal control over financial reporting that occurred during our last fiscal yearquarterly period ended December 31, 2019 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Attestation Report of the Registered Public Accounting Firm This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management'sManagement’s report was not subject to attestation by our registered public accounting firm pursuant to temporary rules of the SEC that permit us to provide only management'smanagement’s report in this annual report. Item 9B. Other Information None PART III PART III
Item 10. Directors, Executive Officers, Promoters and Control Persons and Corporate Governance; Compliance with Section 16(a) Of Theof the Exchange Act As of May 26, 2016, theThe following sets forth our directors, and executive officers, promoters and control persons, their ages, and all offices and positions held. Directors are as follows:elected for a period of one year and thereafter serve until the stockholders duly elect their successor. Officers serve at the will of the Board.
Name | | AgePosition(s)
| | Position
| Michael NugentAge
| | 53Held Position(s) Since
| | Director
| Robert McClelland
| | 62
| | Director and Corporate Secretary
| Patrick Greene
| | 48
| | Director and Executive Vice President
| Jon Leonard
| | 75
| | Chairman, Director, CEO and CFO
| Matthew Staker
| | 57
| | Director
|
Michael Nugent
Micheal P. Nugent has held senior executive positions and directorships with public and private companies in the United States and Australia since 1995. He is a certified diesel fitter in Australia. Mr. Nugent's technical and corporate experience is expected to assist the Company with its efforts to implement profitable operations.
In addition to his positions with the registrant, during the past five years, Mr. Nugent has held the following positions:
Position(s) Held | | From | | To | | Employer | | Business Operations | | | | | | | | | | CEO | | 2011 | | Present | | Novagen Ingenium, Inc. | | Precision engineering | CEO | | 2011 | | 2013 | | Loadstone Motor Corporation Pty Ltd. | | Engine development | Director, CEO | | 2009 | | Present | | Roadships Holdings, Inc. | | Transport logistics | Director, CEO | | 2008 | | 2013 | | Nugent Aerospace, Inc. | | Non-operating | Director, CEO | | 2008 | | 2013 | | Fire From Ice, Inc. | | Non-operating | CEO | | 2006 | | 2013 | | Adbax Truckside Management Pty Ltd. | | Transport service provider | CEO | | 2003 | | 2013 | | Cycclone Magnetic Engines, Inc. | | Engine development | Director | | 2001 | | 2013 | | Roadships Australia Pty Ltd. | | Transportation logistics | Director | | 2001 | | 2013 | | Bronzelink Pty Ltd. | | Holding company |
Robert McClelland
Robert McClelland is a Director and company Secretary of Roadships Freight Pty Ltd. Roadships Freight represents the transport arm of Roadships Holdings, Inc. in Australia. Mr. McClelland also serves as a Director of Cycclone Magnetic Engines Inc. He is also a Director of Fire From Ice Films Pty Ltd. Robert spent 27 years in the Automotive parts Industry and some 6 years in the finance sector.
Patrick Greene
Mr. Green is a Director of Roadships Freight Pty Ltd, Roadships Freight represents the transport arm of Roadships Holdings Inc in Australia. Mr. Greene completed his discipline in the automotive and marine industries in 1988, he also taught automotive trade students at a technical college (TAFE) in the 90's. He spent 20 years in his industry as an employee and business operator. He is a Director and company Secretary of Nugent Engine Technologies Pty Ltd.
Dr. Jon N. Leonard | | President | | 78 | | May 21, 2015 | |
| | Chief Executive Officer Director | | | | | |
| | Chief Financial Officer | | | | | |
| | Director | | | | | |
| | | | | | | |
David LaMountain | | Director | | 34 | | October 10, 2019 | |
| | Chief Operations Operator | | | | | |
| | | | | | | |
Aasim Saied | | Director | | 38 | | April 16, 2018 | |
Dr. Jon N. Leonard, Ph.D., M.S., B.S.
Dr. Jon N. Leonard has been the Executive ChairmanPresident, CEO, CFO and a director of the Company since May 21, 2015. From June 2012 until November 2015, he was the President, Chief Executive Officer atand a director of Click Evidence Inc. since September 2012. From September 2002, an Arizona corporation that he co-founded, which developed our KlickZie smartphone trustable imaging technology. Prior to May 2012, Dr. Leonard was variously employed bythat he directed counterterrorism technology development for the Raytheon Missile Company in Tucson, Arizona and before that was the Chief Scientist of the Strategic Systems Division of the Hughes Aircraft Company as Senior Director of Programs, Advance Programs, and as Director, Counter Terrorism Technology. He has been a Director of Novagen Ingenium Inc. since March 2015.in El Segundo, California. Dr. Leonard holds a Ph.D. in Mathematicsmathematics from the University of Arizona, a M.Sc.an M.S. in Aerospace Engineeringengineering from U.C.L.A. and a B.A.B.S. in Physicsphysics from the University of Arizona.Arizona
Matthew StakerDavid LaMountain
In 2012, Mr. Staker co-founded Click Evidence, Inc. ("Click") with Dr. Jon N. Leonard, and has since served as its Chief Engineer and Executive Vice President in addition to being a member of its board of directors.
From April 2006 until December 2014, Mr. Staker was the Director of Technology and Solutions Architecture at Security First Corp. in Rancho Santa Margarita, California, which develops and licenses software-defined data protection solutions that provide deep data security. He was awarded two patents in digital information security as a result of his work at Security First Corp.
Since 2015, Mr. StakerLaMountain has been a technical executiveTautachrome director and the Corporation’s Chief Operating Officer (COO) since his appointment in October 10, 2019. As COO he is responsible for overseeing the overall business operations strategy for achieving the Company’s global growth and success goals. With great people skills he has directed the Company’s social network activities since November 2016, providing strategic Investor Relations functions integrating communication, marketing and securities compliance enabling effective two-way communication between Tautachrome and its constituencies, contributing to achieving fair valuation of Tautachrome’s shares. Mr. LaMountain has been a successful business owner and investor/trader in public and private entities since 1999 and is a uniquely talented and driven individual with outstanding work ethics. He is also an inventor on KlickZie’s pending ARk patent.
Aasim Saied
Mr. Aasim Saied has been a Director of Tautachrome, Inc. since April 16, 2018. He is an inventor, entrepreneur and futurist, who developed the Projector Phone technology and various other products and services. He has a successful history in building fast moving and innovative companies and has engineered powerful new patent-pending mobile device technologies and software applications. He has recruited a global team of developers and industry specialists for a leading avionics company, overseeing the developmentsuccessful launch of data acquisition units on commercial aircraft.his Companies.
Mr. Staker received an M.S. in Computer Science in 1987 from the University of Southern California, and has a B.S. in Computer Science from the University of Utah.
Family Relationships:Relationships
There isare no family relationship amongrelationships between any of our executive officers and directors.director
Involvement in Certain Legal Proceedings
Except as noted herein or below, during the last ten years none of our directors or officers have:
| 1. | had any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time; |
| | |
| 2. | 2.
| been convicted in a criminal proceeding or subject to a pending criminal proceeding; |
| | |
| 3. | 3.
| been subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities; or |
| |
| 4. | been the subject of any order, judgment or decree, not subsequently reversed, suspended or vacated, of any Federal or State authority barring, suspending or otherwise limiting for more than 60 days the right of such person to engage in securities or banking activities, or to be associated with persons engaged in any such activity; |
| 4.
|
5. | been found by a court of competent jurisdiction in a civil action or by the Commission to have violated any Federal or State securities law, and the judgment in such civil action or finding by the Commission has not been subsequently reversed, suspended, or vacated; |
| |
| 6. | been found by a court of competent jurisdiction in a civil action or by the Commodity Futures Trading Commission to have violated a federal or state securities orany Federal commodities law, and the judgment in such civil action or finding by the Commodity Futures Trading Commission has not been subsequently reversed, suspended or vacated.vacated; |
| |
| 7. | been the subject of, or a party to, any Federal or State judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended or vacated, relating to an alleged violation of: (i) Any Federal or State securities or commodities law or regulation; or (ii) Any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order; or (iii) Any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; o |
| |
| 8. | been the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization, any registered entity, or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member. |
Board of Directors and Committees
At December 31, 2015,2019, our Board of Directors presently consisted of fivethree members: Michael Nugent, Robert McClelland, Patrick Greene, Dr. Jon Leonard, David LaMountain and Matthew Staker.Aasim Saied. Our Bylaws generally provide for majority approval of directors in order to adopt resolutions, and provide that the Board of Directors may be expanded by Board action. All executive officer compensation, including payroll expenditures, salaries, stock options, stock incentives, and bonuses, must be approved by the unanimous consent of the Board of Directors. The entire Board of Directors acts as the Audit Committee and the Compensation Committee.
On future compensation matters, the Board considerswill consider and recommendsrecommend payroll expenditures, salaries, stock options, stock incentive and bonus proposals for our employees.employees (if any). Acting in its audit committee function, the Board reviews, with our independent accountants, our annual financial statements prior to publication, and reviews the work of, and approves non-audit services performed by, such independent accountants. The Board appoints the independent public accountants for the ensuing year. The Board also reviews the effectiveness of the financial and accounting functions and the organization, operation and management of our Company.
Delinquent Section 16(a) Beneficial Ownership Reporting ComplianceReports
The following table identifies each person who, at any time during the fiscal year ended December 31, 2019, was a director, executive officer, or beneficial owner of more than 10% of our common stock that failed to file on a timely basis reports required by Section 16(a) of the Securities Exchange Act during the most recent fiscal year:
Name | | Number of Late Reports | | | Number of Transactions Not Reported on a Timely Basis | | | Reports Not Filed | |
Dr. Jon Leonard | | | 1 | | | | 1 | | | | 0 | |
David LaMountain | | | 1 | | | | 1 | | | | 0 | |
Code of 1934 and the rules there under require ourEthics
We do not currently have a Code of Ethics, because we have only limited business operations, have a limited number of officers and directors, and persons who beneficially ownbelieve a Code of Ethics would, at the present time, have limited utility. We intend to adopt such a Code of Ethics as our business operations expand and we have more than ten percent of our common stock to file reports of ownershipdirectors, officers and changes in ownership with the Securities and Exchange Commission and to furnish us with copies.employees.
Based on our reviews of the copies of the Section 16(a) forms received by it, or written representations from certain reporting persons, we believe that, during the last fiscal year, none of our directors or executive officers satisfied their Section 16(a) filing requirements. Such persons are in the process, with the assistance of counsel, to file all required and missing reports.
Procedure for Nominating Directors
We have not made any material changes to the procedures by which security holders may recommend nominees to our board of directors.
The board does not have a written policy or charter regarding how director candidates are evaluated or nominated for the board. Additionally, the board has not created particular qualifications or minimum standards that candidates for the board must meet. Instead, the board considers how a candidate could contribute to the Company's business and meet the needs of the Company and the board.
Indemnification
Under our Articles of Incorporation and Bylaws of the corporation, we may indemnify an officer or director who is made a party to any proceeding, including a law suit, because of his position, if he acted in good faith and in a manner he reasonably believed to be in our best interest. We may advance expenses incurred in defending a proceeding. To the extent that the officer or director is successful on the merits in a proceeding as to which he is to be indemnified, we must indemnify him against all expenses incurred, including attorney's fees. With respect to a derivative action, indemnity may be made only for expenses actually and reasonably incurred in defending the proceeding, and if the officer or director is judged liable, only by a court order. The indemnification is intended to be to the fullest extent permitted by the laws of the State of Delaware.
Regarding indemnification for liabilities arising under the Securities Act of 1933, which may be permitted to directors or officers under Delaware law, we are informed that, in the opinion of the Securities and Exchange Commission, indemnification is against public policy, as expressed in the Act and is, therefore, unenforceable.
Item 11. Executive Compensation
Summary Compensation
As a "smaller reporting company" as defined in Item 10(f)(1) of Regulation S-K, we have elected to follow scaled disclosure requirements for smaller reporting companies with respect to the disclosures required by Item 402 of Regulation S-K. Under the scaled disclosure requirements, the Company is not required to provide aSummary Compensation Discussion and Analysis, Compensation Committee Report and certain other tabular and narrative disclosures relating to executive compensation.
The following table showsExcept for the compensation paid or accruedemployment agreement for CEO Dr. Jon N Leonard described below, during the fiscal years ended December 31, 20152019 and 2014,2018, no salary, bonus or other compensation was awarded, earned or paid to the Company’s executive officers for any service rendered in any capacity to the Company.
We intend to adopt a compensation plan for executive officers when we have positive and stable cash flows for the purpose of: (a) attracting and retaining talented executive officers who can assist with our business strategy; (b) aligning the interests of those executive officers with those of the Company; and (c) linking individual compensation to the performance of the Company. Any such plan that we may adopt will be designed to provide compensation that is both in line with our fiscal resources and competitive with companies at a similar stage of development.
The elements of compensation to be awarded to, earned by, paid to, or payable to our Chief Executive Officer, our former Chief Financial Officer (retired since January, 2014), our Executive Vice Presidentexecutive officers are currently expected to be composed of: (i) base salary (or consulting fees); (ii) option-based awards; and our Corporate Secretary.(iii) cash bonuses or share-based awards for exceptional performance that results in a significant increase in stockholder value.
Base salary will be a fixed element of compensation payable to executive officers for performing the specific duties of their respective positions. The amount of base salary for each executive officer will be reviewed and set annually by the Board of Directors. While base salary is intended to fit into our overall compensation objectives by serving to attract and retain talented executive officers, the size of the Company and the nature and stage of its business will also impact the level of base salary.
SUMMARY COMPENSATION TABLEWe intend to use option-based awards as a variable element of compensation to attract and reward talented executives and professionals. Option-based awards are intended fit into our overall compensation objectives by aligning the interests of executive officers with those of the Company and linking individual compensation to its performance. The Board of Directors will be responsible for setting and amending any equity incentive plan under which an option based award would be granted. Previous grants of stock options will be taken into account when considering new grants.
We intend to award bonuses at our sole discretion and do not have any pre-existing performance criteria or objectives.
At this time we do not provide medical, dental, pension or other benefits to our executive officers.
Name and Principal Position
|
| Year Ended December 31,
|
| Base Salary
|
|
| Option Awards
|
|
| Dollar Value of Total Compensation for the Covered Fiscal Year
|
41 |
| | | | | | | | | | | |
Dr. Jon Leonard
| | 2015
| | $ | - | | | $ | - | | | $ | - | |
CEO and CFO
| | 2014
| | | - | | | | - | | | | - | |
| | | | | | | | | | | | | | |
Robert McClelland
| | 2015
| | | - | | | | - | | | | - | |
Corporate Secretary
| | 2014
| | | - | | | | - | | | | - | |
| | | | | | | | | | | | | | |
Patrick Greene
| | 2015
| | | - | | | | - | | | | - | |
Executive Vice President
| | 2014
| | | - | | | | - | | | | - | Table of Contents |
Narrative to Summary Compensation Table
Employment Agreements of Named Executive Officers
The Company has an employment agreement with Dr. Jon Leonard, the Company’s Chief Executive Officer at a compensation rate of $60,000 (which increases 5% per year) and six weeks per year of paid vacation. Payment and vacation benefits began to accrue in June, 2019.
Other than the agreement in the previous paragraph, there are no compensationemployment agreements withor arrangements, whether written or unwritten, between the Company and any of the Named Officers.
Long-term Incentive Plans
its executive officers. We do not havecontemplate entering into any long-term incentive plans, pension plans or any similar compensatory plans for any ofother employment agreements with our directors or executive officers. Nor do we currently have any intention to initiate any such plans inofficers until the near future.Company has positive and stable cash flows.
Outstanding Equity Awards at Fiscal Year End
There are no outstanding equity awards at December 31, 2015.
Retirement BenefitsIncentive Plans
We doThe Company does not have any material termsplan or plans that providearrangement providing compensation to executive officers or directors intended to serve as an incentive for the payment of retirement benefits, or benefits that will be paid primarily following retirement, including but not limitedperformance to tax-qualified defined benefit plans, supplemental executive retirement plans, tax-qualified defined contribution plans and nonqualified defined contribution plans.occur over any period.
Nonqualified DeferredEquity Compensation Plans
We doThe Company does not have any nonqualified defined contributionstock option plans, stock appreciation rights or any other deferredplan, contract, authorization or arrangement pursuant to which the executive officers or directors of the Company may receive equity-based compensation plans.for their services to the Company.
Potential Payments Upon Outstanding Equity Awards
No executive officer or director of the Company had any unexercised option, stock that had not vested or equity incentive plan award as at the end of the Company’s last completed fiscal year.
Pension and Retirement Plans
The Company does not have any plan or arrangement by which to provide pension, retirement or similar benefits to its executive officers or directors, and we do not currently intend to offer such any such plan or arrangement until we have positive and stable cash flows
Termination, Resignation or Change of Control
We doThe Company is not as of December 31, 2015, havea party to any material terms, contracts, agreements, planscontract or arrangements, writtenagreement, and has not entered into any plan or unwritten,arrangement that providesmay provide for payment(s)payment to an executive officer or a CEOdirector at, following, or in connection with the resignation, retirement or other termination of a CEO,an executive officer or director, or a change inof control of the companyCompany or a change in the CEO's responsibilities of an executive officer following a change in control, with respect to each CEO.of control.
Compensation of Directors
The members of the Board of Directors do not receive compensation for their services as directors, but they are entitled to reimbursement for reasonable travel and other out-of-pocket expenses incurred in connection with attendance at meetings of our board of directors. We may pay cash compensation to an executive officer who is also a director, but only in his or her capacity as an executive officer. We do not currently have an established policy to provide compensation to directors for their services in that capacity.
Director Independence
Our Board of Directors has determined that none of our directors is “independent” as defined under the standards set forth in Section 303A.02 of the NYSE Listed Company Manual. In making this determination, the Board of Directors considered all transactions set forth in the section titled “Certain Relationships and Related Transactions,” elsewhere in this prospectus.
Director Compensation
The following table sets forth a summary of the compensation earned by our directors and/or paid to certain of our directors pursuant to certain agreements we have with them in 2014.
Director Compensation Table (2014)
Name | | Fees Earned or paid in cash | | | Stock awards | | | Option Awards | | | Non-equity deferred comp. earnings | | | Non-qualified deferred comp. earnings | | | All other | | | Total | |
| | | | | | | | | | | | | | | | | | | | | |
Michael Nugent | | $ | 1 | | | $ | - | | | $ | - | | | $ | - | | | $ | - | | | $ | - | | | $ | - | |
Robert McClelland | | $ | 1 | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | |
Patrick Greene | | $ | 1 | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | |
Jon Leonard | | $ | - | | | | - | | | | | | | | | | | | | | | | | | | | | |
Matthew Staker | | $ | - | | | | - | | | | | | | | | | | | | | | | | | | | | |
Our board of directors is comprised of Michael Nugent, Robert McClelland and Patrick Greene who also serve as officers of the Company. None of our directors has a compensation arrangement with the Company, except those agreements entered into in their capacity as officers, and have not been compensated since the company's inception in 2008.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The following table sets forth, as of the date of this report, information concerning ownership of our voting shares by (i) each director, (ii) each executive officer, (iii) all directors and executive officers as a group, and (iv) each person known to us to be the beneficial owner of more than five percent of each class. The number and percentage of shares beneficially owned includes any shares as to which the record ownershipnamed person has sole or shared voting power or investment power and any shares that the named person has the right to acquire within 60 days.
| | Common | | | Preferred D 1 | | | Preferred E 5 | | | % Total | |
Name of Beneficial Owner | | Shares | | | % 2 | | | Shares | | | % 3 | | | Shares | | | % 6 | | | Voting, All Classes | |
| | | | | | | | | | | | | | | | | | | | | |
5% Owners | | | | | | | | | | | | | | | | | | | | | |
Twenty Second Trust | | | 253,428,790 | | | | 7.3 | % | | | 926,139 | | | | 6.7 | % | | | - | | | | - | | | | 7.1 | % |
Nugent Bros. Trust | | | 250,000,000 | | | | 7.2 | % | | | - | | | | - | | | | - | | | | - | | | | 5.1 | % |
Arknet, Inc. (AZ Corp.) | | | - | | | | - | | | | - | | | | - | | | | 40,000 | | | | 100.0 | % | | | 40.0 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Officers and Directors | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Dr. Jon Leonard 4 | | | 379,097,992 | | | | 10.9 | % | | | 10,093,306 | | | | 73.2 | % | | | - | | | | - | | | | 28.4 | % |
David LaMountain | | | 43,280,757 | | | | 1.2 | % | | | - | | | | - | | | | - | | | | - | | | | 0.9 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Directors and Officers as a Group | | | 422,378,749 | | | | 12.2 | % | | | 10,093,306 | | | | 73.2 | % | | | - | | | | - | | | | 29.3 | % |
| (1) | Each outstanding share of Preferred D stock entitles the holder thereof to 100 votes on all matters submitted to a vote of the Company’s stockholders. |
| (2) | Based on an aggregate of 3,504,460,889 shares of common stock outstanding at March 30, 2020. |
| (3) | Based on an aggregate of 13,795,104 shares of preferred D stock outstanding at March 30, 2020. |
| (4) | Common stock holdings includes 126,166,322 shares of common stock held by California Molecular Electronics Corp., of which Dr. Leonard is the sole officer and director. |
| (5) | Each Preferred E share has the voting rights of all other voting shares combined, multiplied by 0.00001. |
| (6) | Based on an aggregate of 40,000 shares of preferred E stock outstanding at March 30, 2020. |
The mailing address for all directors, executive officers and beneficial owners of more than five percent of our common stock by our (i) directors and executive officers, (ii)is 1846 E. Innovation Park Drive, Oro Valley, Arizona 85755.
Unless otherwise stated, we believe that all of the officers and directors as a group and (iii) each person who owns more than 5% or more of our common stock. The persons named in thisthe table possess thehave sole voting and investment power with respect to theall shares of our common and preferred stock shown unless otherwise indicated. In general, beneficial ownership includes those shares thatbeneficially owned by them. For purposes hereof, a person has the poweris considered to vote, sell, or otherwise dispose. Beneficial ownership also includes that number of shares, which an individual has the right to acquire within 60 days (such as stock options) of the date this table was prepared. Two or more persons may be considered the beneficial owner of securities that can be acquired by such person within 60 days from the same shares. The inclusion in this sectiondate hereof, upon the exercise of warrants or options or the conversion of convertible securities. Each beneficial owner's percentage ownership is determined by assuming that any shares deemed beneficially owned doessuch warrants, options or convertible securities that are held by such person (but not constitute an admissionthose held by that person of beneficial ownership of those shares. All ownership of securities is direct ownership unless otherwise indicated.any other person) and which can be exercised within 60 days from the date hereof, have been exercised.
Beneficial Owner | | Address of Beneficial Owner | | Amount and Nature of Beneficial Ownership (2) | | | Percent of Class (1) | |
| | | | | | | | | | |
Jon Leonard | | 1846 E. Innovation Park Drive | | | 1,387,829,545 | | | | 46.5 | % |
| | Oro Valley, AZ 85755 | | | | | | | | |
Micheal Nugent | | 1846 E. Innovation Park Drive | | | 622,797,797 | | | | 20.8 | % |
| | Oro Valley, AZ 85755 | | | | | | | | |
Matthew Staker | | 1846 E. Innovation Park Drive | | | 346,957,386 | | | | 11.6 | % |
| | Oro Valley, AZ 85755 | | | | | | | | |
Robert McClelland | | 1846 E. Innovation Park Drive | | | 8,403,524 | | | | 0.3 | % |
| | Oro Valley, AZ 85755 | | | | | | | | |
Patrick Greene | | 1846 E. Innovation Park Drive | | | 2,093,080 | | | | 0.1 | % |
| | Oro Valley, AZ 85755 | | | | | | | | |
_____________
(1) |
| 43 |
Applicable percentage owned is based on 2,987,633,430 shares outstanding at December 31, 2015.
|
| |
(2) | Includes shares owned by legal entities controlled by our officers and directors. Also includes shares owned by individuals related to our officers and directors.
|
Changes in Control
We are not aware of any arrangement, the operation of which may at a subsequent date result in a change of control of the Company.
Item 13. Certain Relationships and Related Transactions, and Director Independence
For the years ended December 31, 20152019 and 2014,2018, certain related parties made cash payments to the Company and the Company made cash payments to the related parties (see Note 4 to the financial statements).
On December 9, 2014, we redeemed the 39,312 shares of Series B Convertible Preferred Stock issued in 2013 to our Chief Executive Officer, by issuing a promissory note in the amount of $98,281 (see Note 4 to the financial statements).
Director Independence
During the year ended December 31, 2015, Dr. Jon Leonard, Michael Nugent, Matthew Staker, Robert McClelland and Patrick Greene served as our directors.
As our common stock is currently traded on the OTC Bulletin Board, we are not subject to the rules of any national securities exchange which require that a majority of a listed company'scompany’s directors and specified committees of the board of directors meet independence standards prescribed by such rules.
Item 14. Principal Accountant Fees and Services
Audit and Review Fees. We paid M&K, CPAS, PLLC for audit and review fees of $16,200$32,500 for 20152019 and $12,800$21,100 for 2014.2018.
Tax Fees. We have not paid any money for tax related services.
All Other Fees. We have not paid any money for audit relatedother fees.
Audit Committee pre-approval policies and procedures. The entire Board of Directors, which acts as our audit committee, approved the engagement of M&K, CPAS, PLLC.
PART IV
Item 15. Exhibits, Financial Statement Schedules, Signatures
Exhibit No. | | Description of Exhibit |
3.1 | | |
3.1
| | Articles of Incorporation of Roadships Holdings, Inc. filed as exhibit 3.1 with our Form 8-K/A filed April 20, 2009 and incorporated herein by reference.reference |
3.2 | | Bylaws of Roadships Holdings, Inc. filed as exhibit 3.2 with our Form 8-K/A filed April 20, 2009 and incorporated herein by reference.reference |
21.13.3*
| | SubsidiariesAmended and Restated Certificate of the registrantIncorporation filed with our Form 8-K filed November 5, 2015 and incorporated herin by reference.
|
31.13.4*
| | CertificationCertificate of Chief Executive OfficerAmendment authorizing 6,100,000,000 shares, filed April 12, 2019
|
3.5* | | Certificate of Amendment authorizing 5,100,000,000 shares filed June 12, 2019 |
3.6* | | Certificate of Amendment authorizing 4,500,000,000 shares filed August 7, 2019 |
21.1* | | Subsidiaries of the registrant |
31.1* | | Certification pursuant to Section 302 of the Sarbanes-Oxley act of 2002 |
31.232.1*
| | Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley act of 2002
|
32
| | Certification of Officers pursuant to Section 906 of the Sarbanes-Oxley act of 2002 (18 U.S.C. section 1350) |
_____
*Filed herewith
|
| 45 |
|
101
| | Interactive data files pursuant to Rule 405 of Regulation S-T.
|
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| | Tautachrome, Inc. | |
| | | |
/s/ Dr. Jon Leonard | | | |
Date: July 5, 2016Dr. Jon Leonard
| By: | /s/ Jon N. LeonardDate: March 30, 2020
| |
| | Jon N. Leonard
| |
| | Chairman, and Chief Executive Officer and Chief Financial Officer | | | |
| | | |
/s/ David LaMountain | | | |
David LaMountain | | Date: March 30, 2020 | |
Director, Chief Operating Officer | | | |
In accordance with the Securities Exchange Act ,of 1934, this report has been duly signed by the following persons on behalf of the Company and in the capacities and on the dates indicated.
/s/ Dr. Jon Leonard
| | |
Dr. Jon Leonard
| | Date: July 5, 2016
|
Chairman, Chief Executive Officer and Chief Financial Officer
| | |
| | |
/s/ Patrick Greene
| | |
Patrick Greene
| | Date: July 5, 2016
|
Director and Executive Vice President
| | |
| | |
/s/ Robert McClelland
| | |
Robert McClelland
| | Date: July 5, 2016
|
Director and Corporate Secretary
| | |
| | |
/s/ Micheal Nugent
| | |
Micheal Nugent
| | Date: July 5, 2016
|
Director
| | |
| | |
/s/ Matthew Staker
| | |
Matthew Staker
| | Date: July 5, 2016
|
Director
| | 46 |
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