NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2013 AND 2012
NOTE 1 – NATURE OF OPERATIONS AND BASIS OF PRESENTATION
The Company was incorporated as Venture Investments Inc. under the Laws of the State of Nevada on November 29, 1983. The Company underwent a name change to Asdar Group on December 10, 1987, a name change to Precise Life Sciences Ltd. on April 30, 2002, a name change to Iceberg Brands Corporation on February 18, 2003, a name change to Avalon Gold Corporation on August 28, 2003, a name change to Avalon Energy Corporation on March 22, 2005, a name change to Shotgun Energy Corporation on September 25, 2007 and a name change to Organa Gardens International Inc. on February 26, 2009 and a name change to Bravo Enterprises Ltd. on June 1, 2012. The Company was dormant from 1991 to 1996 and currently has no revenue generating operations. The Company was considered a development stage company since January 1, 1996 and as a result of changing its business focus to air to water harvesting units is considered to be a development stage company. Expected operations will consist of manufacturing and distributing air to water harvesting units worldwide.
Going Concern
The financial statements have been prepared on the basis of a going concern which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has generated nominal revenues of $40,476 to date and has incurred losses of $25,690,709 since inception. The Company will depend almost exclusively on outside capital through the issuance of common shares to finance ongoing operating losses and to fund the manufacture and distribution of the air to water harvesting units. The ability of the Company to continue as a going concern is dependent on raising additional capital and ultimately on generating future profitable operations. There can be no assurance that the Company will be able to raise the necessary funds when needed to finance its ongoing costs. These factors raise substantial doubt about the ability of the Company to continue as a going concern. The accompanying financial statements do not include any adjustments relative to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that might result from the outcome of this uncertainty.
In April, 2012, a majority of the shareholders entitled to vote on such matters approved a change of name from Organa Gardens International Inc. to “Bravo Enterprises Ltd.” and a one-for-twenty (1:20) stock split of all of this Company’s outstanding common stock, without any change in par value for the shares of common stock of this Company. The stock split did not include a change in the authorized capital of the Company. On April 23, 2012, a Certificate of Amendment to its Articles of Incorporation was filed with the State of Nevada changing the name to Bravo Enterprises Ltd., effective June 1, 2012. As advised on May 9, 2012, the Company’s CUSIP Number changed from 68618Y 10 6 to 10567L 10 7. On June 8, 2012, the Company began to trade as Bravo Enterprises Ltd. under the same trading symbol being “OGNG”. Pre-split the total shares outstanding was 61,796,467 and post-split the total shares outstanding was 3,089,823.
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation
The accompanying financial statements are presented in United States dollars and are prepared in accordance with accounting principles generally accepted in the United States.
Use of Estimates and Assumptions
Preparation of the Company’s financial statements in conformity with United States generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates.
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Concentration of Credit Risk
Cash in bank accounts is at risk to the extent that it exceeds U.S. Federal Deposit Insurance Corporation and Canadian Deposit Insurance Corporation insured amounts. To minimize risk, the Company places its cash with high credit quality institutions. All cash is deposited in one prominent Canadian financial institution.
Fair Value of Financial Instruments
The Company’s financial instruments include cash, receivables, prepaid expenses, available-for-sale securities and due to related parties. Management believes the fair values of these financial instruments approximate their carrying values due to their short-term nature. The Company adopted ASC Topic 820-10 for all financial assets and liabilities and non-financial assets and liabilities that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually). Topic 820-10 defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements Topic 820-10 defines fair value as the price that would be received upon sale of an asset or paid upon transfer of a liability in an orderly transaction between market participants at the measurement date and in the principal or most advantageous market for that asset or liability. The fair value should be calculated based on assumptions that market participants would use in pricing the asset or liability, not on assumptions specific to the entity. In addition, the fair value of liabilities should include consideration of nonperformance risk including our own credit risk. In addition to defining fair value, Topic 820-10 expands the disclosure requirements around fair value and establishes a fair value hierarchy for valuation inputs. The hierarchy prioritizes the inputs into three levels based on the extent to which inputs used in measuring fair value are observable in the market. Each fair value measurement is reported in one of the three levels which is determined by the lowest level input that is significant to the fair value measurement in its entirety. These levels are:
* Level 1 – inputs are based upon unadjusted quoted prices for identical instruments traded in active markets.
* Level 2 – inputs are based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
* Level 3 – inputs are generally unobservable and typically reflect management’s estimates of assumptions that market participants would use in pricing the asset or liability. The fair values are therefore determined using model-based techniques that include option pricing models, discounted cash flow models, and similar techniques.
In general, and where applicable, we use quoted prices in an active market for identical derivative assets and liabilities that are traded on exchanges. These derivative assets and liabilities are included in Level 1.The application of the three levels of the fair value hierarchy under Topic 820-10-35 to our assets and liabilities are described below:
|
|
|
Fair Value Measurements
|
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total Fair Value
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
14,206
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
14,206
|
|
|
Taxes recoverable
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
|
Accounts Receivable
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Available securities
|
|
|
36,795
|
|
|
|
-
|
|
|
|
-
|
|
|
|
36,795
|
|
|
Prepaid Expenses
|
|
|
23,400
|
|
|
|
|
|
|
|
|
|
|
|
23,400
|
|
|
Intangible Assets
|
|
|
-
|
|
|
|
-
|
|
|
|
234,613
|
|
|
|
234,613
|
|
|
Total
|
|
$
|
74,401
|
|
|
$
|
-
|
|
|
$
|
234,613
|
|
|
$
|
309,014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current and related party
|
|
$
|
555,064
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
555,064
|
|
|
Total
|
|
$
|
555,064
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
555,064
|
|
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Foreign Currency Translation
The financial statements are presented in United States dollars. In accordance with ASC Topic 830 “Foreign Currency Matters”, foreign denominated monetary assets and liabilities are translated to their United States dollar equivalents using foreign exchange rates that prevailed at the balance sheet date. Non-monetary assets and liabilities are translated at exchange rates prevailing at the transaction date. Revenue and expenses are translated at average rates of exchange during the year. Related translation adjustments are reported as a separate component of stockholders’ equity, whereas gains or losses resulting from foreign currency transactions are included in results of operations.
Available For Sale Securities – related parties
The Company holds marketable equity securities which are available-for-sale and as such, their carrying value is adjusted to market at the end of each reporting period. As required by ASC Topic 220 (formerly SFAS 130),, unrealized gains and losses on these investments are recorded as a component of accumulated other comprehensive income (loss) and are recorded as a component of net income (loss) when realized. However, if there is a permanent decline in the market value of available-for-sale securities, this permanent market value adjustment is taken into income in the period.
Stock-Based Compensation
On January 1, 2006, the Company adopted the fair value recognition provisions of ASC Topic 718 & 505
.
Prior to January 1, 2006, the Company accounted for share-based payments under the recognition and measurement provisions of ASC Topic 718. In accordance with ASC Topic 718 no compensation cost was required to be recognized for options granted that had an exercise price equal to the market value of the underlying common stock on the date of grant. . The Company uses the Black-Scholes pricing model to calculate the fair value of options and warrants issued to both employees and non-employees. Stock issued for compensation is valued using the market price of the stock on the date of the related agreement.
In addition, deferred stock compensation related to non-vested options is required to be eliminated against additional paid-in capital. The Company accounts for equity instruments issued in exchange for the receipt of goods or services from other than employees in accordance with ASC Topic 718 & 505. Costs are measured at the estimated fair market value of the consideration received or the estimated fair value of the equity instruments issued, whichever is more reliably measurable.
Research and Development Costs
Expenditure on research activities, undertaken with the prospect of obtaining new scientific or technical knowledge and understandings are expensed as incurred and include costs of consultants who conduct research and development on behalf of the Company.
Intangible Assets
Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 350 , “Intangibles-Goodwill and Other” requires that goodwill and intangible assets with indefinite useful lives no longer be amortized, but instead tested for impairment at least annually in accordance with the provisions of ASC 350. This standard also requires that intangible assets with definite useful lives be amortized over their respective estimated useful lives to their estimated residual values, and reviewed for impairment. The Company's intangible assets consist of the acquisition of the license to import and distribute wine & liquor products and various brands and labels. The Company determined that the intangibles have an estimated useful life of 18 years and will be reviewed annually for impairment. Amortization will be recorded over the estimated useful life of the assets using the straight-line method for financial statement purposes. The Company will commence amortization when the economic benefits of the assets begin to be consumed in January, 2013. Other intangibles are carried at acquisition cost less accumulated amortization. Amortization is provided over the estimated useful lives of the assets on straight line basis per annum.
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Definite life intangible assets are tested for recoverability whenever events or changes in circumstances indicate that the carrying amounts may not be recoverable. These tests involve the use of estimates and assumptions appropriate in the circumstances. In assessing fair value, valuation models are used that include discounted cash flows. The models use assumptions that include levels of growth in assets under management from net sales and market, pricing and margin changes, synergies achieved on acquisition, discount rates, and observable data for comparable transactions. As of December 31, 2013, the Company believed there was an adjustment required to its intangible assets due to the cancellation of the license agreement subsequent to year end and reduced the value of the intangible asset by $1,175,200 to reflect the new fair value of the intangible asset. As at December 31, 2013, the intangible asset is valued in the amount of $234,613 (2012- $1,492,743).
Income Taxes
The Company follows the liability method of accounting for income taxes as set forth in ASC Topic 740-10. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax balances. Deferred tax assets and liabilities are measured using enacted or substantially enacted tax rates expected to apply to the taxable income in the years in which those differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the date of enactment or substantive enactment. A valuation allowance is provided for deferred tax assets if it is more likely than not that the Company will not realize the future benefit, or if the future deductibility is uncertain. In accordance with ASC 740-10. This interpretation introduces a new approach that changes how enterprises recognize and measure tax benefits associated with tax positions and how enterprises disclose uncertainties related to income tax positions in their financial statements.
Revenue Recognition
Sales are recognized upon purchase by customers at our product facility. All sales at our product facility are final, allowing for no sales returns. As at December 31, 2013, $Nil (2012 - $3,354) is in accounts receivable from the sale of water units.
Recent Accounting Pronouncements
There have been no recent accounting pronouncements not yet adopted by the Company which would have a material impact on our financial statements.
The Company adopted certain amendments to Accounting Standards Codification (“ASC”) 820, “Fair Value Measurements,” effective January 1, 2012. These amendments include a consistent definition of fair value, enhanced disclosure requirements for “Level 3” fair value adjustments and other changes to required disclosures. Their adoption did not have a material impact on the Company’s consolidated financial statements.
The Company adopted the amendments to ASC 220, “Comprehensive Income,” effective January 1, 2012. The amendments pertained to presentation and disclosure only.
The Company adopted the amendments to ASC 350, “Intangibles-Goodwill and Others,” effective January 1, 2012. The amended guidance allows us to do an initial qualitative assessment of relevant events and circumstances to determine if fair value of a reporting unit is more likely than not to be less than its carrying value, prior to performing the two-step quantitative goodwill impairment test. The adoption of these amendments did not have a material impact on the Company’s financial statements.
NOTE 3 – AVAILABLE FOR SALE SECURITIES – RELATED PARTIES
Golden Star Enterprises Ltd.
During 2004, the Company received 111,111 restricted Rule 144 shares of Golden Star Corporation (“Golden Star”), a public company with directors and significant shareholders in common. The restricted shares were received as non-refundable consideration pursuant to agreements with Golden Star dated November 10, 2004 and December 10, 2004 to acquire certain mineral property interests from the Company. These agreements were subsequently terminated.
Effective December 31, 2004 the Company recorded, as other comprehensive loss for the year, a $10,000 unrealized loss in the carrying value of its shares of Golden Star. During the years ended December 31, 2005 and 2006 the Company recorded additional unrealized losses in the carrying value of its shares of Golden Star totalling $90,000 and $8,889 respectively, which were recorded as other comprehensive loss for those years. During the year ended December 31, 2007, the Company sold 2,500 shares resulting in a realized gain of $165 and recorded an additional unrealized loss of $473 in 2007. During the year ended December 31, 2008, the Company sold 10,000 shares resulting in a realized loss of $800 and recorded an additional unrealized loss of $15,026 to December 31, 2008. As a result, the carrying value of the available for sale shares of Golden Star is $2,712 as at December 31, 2008.
During the year ended December 31, 2009, the Company recorded an unrealized gain of $1,232. As a result, the carrying value of the available for sale shares of Golden Star is $3,945 as at December 31, 2009.
During the year ended December 31, 2010, the Company sold Nil Golden Star shares and recorded an unrealized gain of $11,774. As a result, the carrying value of the available for sale shares of Golden Star is $2,860 as at December 31, 2010. Effective December 31, 2010, the Company recorded a $12,859 write-down of its investment in Golden due to an other-than-temporary decline in the value of the shares.
During the year ended December 31, 2011, the Company sold Nil Golden Star shares and recorded an unrealized loss of $2,623. As a result, the carrying value of the available for sale shares of Golden Star is $237 as at December 31, 2011. Effective December 31, 2011, the Company recorded a $2,909 write-down of its investment in Golden due to an other-than-temporary decline in the value of the shares.
During the year ended December 31, 2012, the Company sold Nil Golden Star shares and recorded an unrealized loss of $148. As a result, the carrying value of the available for sale shares of Golden Star is $89 as at December 31, 2012.
During the year ended December 31, 2013, the Company sold Nil Golden Star shares and recorded an unrealized loss of $57. As a result, the carrying value of the available for sale shares of Golden Star is $32 as at December 31, 2013. In July of 2013, the Golden Star shares held were subject to a 1:40 reverse split.
Legacy Platinum Group Inc.
During 2003 the Company settled an outstanding debt receivable of $122,988 from Legacy Mining Ltd. (“Legacy”) for the issue of 1,229,880 restricted shares of Legacy representing a then 9.8% interest in Legacy. During 2004, the Company wrote this investment down to $1 because management determined that it was not recoverable within a reasonable period of time.
Effective December 31, 2007, the Company recorded, as other comprehensive income for the year, a $604,440 unrealized gain in the carrying value of its shares of Legacy.
During the year ended December 31, 2008, the Company sold 150,000 Legacy shares resulting in a realized gain of $26,100 and recorded an additional unrealized gain of $270,562 to December 31, 2008. As a result, the carrying value of the available for sale shares of Legacy was $885,502 as at December 31, 2008.
NOTE 3 – AVAILABLE FOR SALE SECURITIES – RELATED PARTIES (continued)
During the year ended December 31, 2009, the Company sold 30,985 Legacy shares resulting in a realized loss of $2,987 (net of commissions of $595) and recorded an additional unrealized loss of $797,161 to December 31, 2009. As a result, the carrying value of the available for sale shares of Legacy is $ 62,934 as at December 31, 2009.
During the year ended December 31, 2010, the Company the Company received 2,627,440 restricted shares of Legacy valued to $131,372 pursuant to a debt settlement and sold Nil Legacy shares. The Company recorded an unrealized gain in the carrying value of its available-for-sale securities totaling $35,021, which was recorded as other comprehensive income (loss). As a result, the carrying value of the available for sale shares of Legacy is $58,822 as at December 31, 2010. Effective December 31, 2010, the Company recorded a $78,823 write-down of its investment in Legacy due to an other-than-temporary decline in the value of the shares.
During the year ended December 31, 2011, the Company sold Nil Legacy shares and recorded an unrealized loss of $52,939. As a result, the carrying value of the available for sale shares of Legacy is $5,882 as at December 31, 2011. Effective December 31, 2011, the Company recorded a $51,469 write-down of its investment in Legacy due to an other-than-temporary decline in the value of the shares.
During the year ended December 31, 2012, the Company sold Nil Legacy shares and recorded an unrealized loss of $2,941. As a result, the carrying value of the available for sale shares of Legacy is $2,941 as at December 31, 2012.
During the year ended December 31, 2013, the Company sold Nil Legacy shares and recorded an unrealized gain of $33,822. As a result, the carrying value of the available for sale shares of Legacy is $36,763 as at December 31, 2013. In November of 2013, the Legacy shares held were subject to a 1:9 reverse split.
Available for sale securities – related parties include the following:
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
|
2013
|
|
|
2012
|
|
|
|
|
|
|
|
|
|
|
408,402 (2012-408,402) shares of Legacy Platinum Group Inc.
|
|
$
|
36,763
|
|
|
$
|
2,941
|
|
|
2,465 (2012- 2,465) shares of Golden Star Enterprises Ltd.
|
|
|
32
|
|
|
|
89
|
|
|
|
|
$
|
36,795
|
|
|
$
|
3,030
|
|
NOTE 4 – INTANGIBLE ASSETS
On November 23, 2012, the Company signed an Exclusive Licensing Agreement with Water-For-The-World-Manufacturing Inc. of Wellpinit, Washington with respect to its commercial atmospheric water harvester system.
Water-For-The-World-Manufacturing Inc. is a leader in the design, manufacture and distribution of water from air systems known as Air-to-Water Harvesters that extracts moisture from the air through a dehumidification process then filters and purifies the water for consumption. The company has developed a unique air drive system that will enable the machine not only to be powered through a conventional power source but also in emergency situations the machine can be powered directly from an engine using its patented drive system. The atmospheric water harvester can produce up to 3000 gallons of drinking water under optimum conditions.
Water-For-The-World-Manufacturing Inc. has appointed Bravo Enterprises Ltd. as its exclusive worldwide manufacturing and sales representative for the consideration of 120,000,000 restricted common shares of Bravo Enterprises Ltd. The company has proven concept and developed a production model exclusively for the generation of water for human consumption.
NOTE 4 – INTANGIBLE ASSETS (continued)
A portion of the 120,000,000 restricted common share consideration is being received by certain shareholders that also owned shares in Bravo Enterprises Ltd. prior to the November 23, 2012 agreement. The value of these shares considered a related party portion is $67,257 and as such, this amount has been eliminated from the transaction.
Intangible assets include the following:
|
|
|
December 31,
|
|
|
December 31,
|
|
|
Description
|
|
2013
|
|
|
2012
|
|
|
|
|
|
|
|
|
|
|
|
|
18 year general license to manufacture and distribute water units
|
|
$
|
1,560,000
|
|
|
$
|
1,560,000
|
|
|
Less: related party portion of consideration for license
|
|
|
(67,257
|
)
|
|
|
(67,257
|
)
|
|
Less: accumulated amortization
|
|
|
(82,930
|
)
|
|
|
-
|
|
|
Balance
|
|
$
|
1,409,813
|
|
|
$
|
1,492,743
|
|
|
Less: effect of 2014 cancellation of partial consideration for license
|
|
|
(1,175,200
|
)
|
|
|
-
|
|
|
Adjusted Balance
|
|
$
|
234,613
|
|
|
$
|
1,492,743
|
|
Subsequent to year end the Company cancelled 90,400,000 restricted common shares relating to the exclusive license agreement dated November 23, 2012. See subsequent event note 11.
Related Agreement:
On August 12, 2013, the Company signed a marketing and sales agreement with Splash Water Solutions Canada Ltd., a privately owned Company based in British Columbia, Canada. The agreement calls for Splash Canada to set up at least one showroom store to market Bravo’s Atmospheric Water Harvesting Machines, the AIRMAX 3000 and the AIRWELL 3000. Under the terms of the agreement, Splash Canada must meet minimum purchase order requirements from Bravo of the AIRMAX 3000 and AIRWELL 3000 and branded accessories in order to maintain its exclusive marketing rights for Canada annually and non-exclusive rights for the rest of the world.
NOTE 5 – DEFERRED COMPENSATION
On July 16, 2012 the Company entered into an agreement with Palisades Financial Ltd. (“Palisades”), a private company controlled by a significant shareholder, with a two year term, whereby Palisades provides investor relations services to the Company (valued at $27,625) in exchange for 1,250,000 restricted shares of the Company’s common stock.
On July 16, 2012, the Company entered into an agreement with 1063244 Alberta Ltd. (“1063244”), a private company controlled by a significant shareholder, with a two-year term, whereby 1063244 provides investment-banking services to the Company (valued at $33,150) in exchange for 1,500,000 restricted shares of the Company’s common stock.
On July 16, 2012, the Company entered into agreements with two consultants, for a two year term, whereby the consultants provide consulting services to the Company (valued at $38,675) in exchange for 1,750,000 shares of the Company’s common stock.
The Company amortizes the costs of these services over the respective terms of the contracts. During the years ended December 31, 2013 and 2012, the Company recorded amortization of deferred compensation totaling $57,228 and $77,780 respectively. As of December 31, 2013 the unamortized portion of the deferred compensation totaled $26,932. (December 31, 2012 - $84,160).
NOTE 6 - STOCKHOLDERS’EQUITY
In April, 2012, a majority of the shareholders entitled to vote on such matters approved a change of name from Organa Gardens International Inc. to “Bravo Enterprises Ltd.” and a one-for-twenty (1:20) stock split of all of this Company’s outstanding common stock, without any change in par value for the shares of common stock of this Company. The stock split did not include a change in the authorized capital of the Company. On April 23, 2012, a Certificate of Amendment to its Articles of Incorporation was filed with the State of Nevada changing the name to Bravo Enterprises Ltd., effective June 1, 2012. As advised on May 9, 2012, the Company’s CUSIP Number changed from 68618Y 10 6 to 10567L 10 7. On June 8, 2012, the Company began to trade as Bravo Enterprises Ltd. under the same trading symbol being “OGNG”. Pre-split the total shares outstanding was 61,796,467 and post-split the total shares outstanding was 3,089,823.
(1)
2013 Stock Transactions
- During the year ended December 31, 2013:
|
(a)
|
The Company issued 80,000 restricted common shares valued at $8,000 to a consultant services earned in 2012.
|
|
|
The Company issued 800,000 restricted common shares for cash in the amount of $80,000 pursuant to private placement subscription agreements.
|
|
|
The Company issued 62,500 restricted common shares for cash received in 2012 in the amount of $5,000 pursuant to a private placement subscription agreement.
|
|
|
The Company issued 225,000 restricted common shares for cash in the amount of $35,000 pursuant to three private placement subscription agreements.
|
|
|
The Company issued 4,000,000 common shares for cash in the amount of $52,000 pursuant to the exercise of incentive stock options in accordance with the 2012 Stock Option Plan.
|
|
(f)
|
The Company issued 10,000 restricted common shares valued at $3,000 to a consultant for his services.
|
|
|
The Company issued 120,000 restricted common shares for cash in the amount of $20,200 pursuant to private placement subscription agreements.
|
(2)
2012 Stock Transactions
-
During the year ended December 31, 2012
:
|
(a)
|
The Company issued 4,500,000 restricted common shares valued at $99,450 pursuant to deferred compensation agreements.
|
|
(b)
|
The Company issued 120,000,000 restricted common shares valued at $1,492,743 pursuant to the exclusive licensing agreement acquiring the manufacturing and distribution rights for the air to water harvester units.
|
|
(c)
|
The Company issued a total of 19,000,000 common shares pursuant to the exercise of options under the Company’s 2012 Stock Incentive and Option Plan. These shares were issued at $0.013 per share for cash in the amount of $50,000 and to satisfy debt to related parties in the amount of $197,000.
|
|
(d)
|
The Company issued 625,000 restricted common shares for cash in the amount of $50,000 pursuant to a private placement subscription agreement. The Company received an additional $5,000 pursuant to a private placement subscription agreement and issued the 62,500 restricted common shares to the subscriber subsequent to year end.
|
(3) 2013 Stock Options
The Company’s stock option activity is as follows:
|
|
|
Number
of options
|
|
|
Weighted Average Exercise Price
|
|
|
Weighted Average Remaining Contractual Life
(in years)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2011
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Granted during 2012
|
|
|
26,000,000
|
|
|
|
0.013
|
|
|
|
5.00
|
|
|
Exercised during 2012
|
|
|
(19,000,000
|
)
|
|
|
0.013
|
|
|
|
|
|
|
Balance, December 31, 2012
|
|
|
7,000,000
|
|
|
|
0.013
|
|
|
|
5.00
|
|
|
Granted during the period
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Exercised during the period
|
|
|
(4,000,000
|
)
|
|
|
-
|
|
|
|
-
|
|
|
Balance December 31,2013
|
|
|
3,000,000
|
|
|
|
0.013
|
|
|
|
5.00
|
|
NOTE 6 - STOCKHOLDERS’EQUITY(continued)
The Company issued 4,000,000 common shares for cash in the amount of $52,000 pursuant to the exercise of incentive stock options in accordance with the 2012 Stock Option Plan.
(4) 2012 Stock Options
The Company issued a total of 19,000,000 common shares pursuant to the exercise of options under the Company’s 2012 Stock Incentive and Option Plan. These shares were issued at $0.013 per share for cash
in the amount of $50,000 and to satisfy debt to related parties in the amount of $197,000, for a total of $247,000.
The Company’s stock option activity is as follows:
|
|
|
Number
of options
|
|
|
Weighted Average Exercise Price
|
|
|
Weighted Average Remaining Contractual Life
(in years)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2011
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Granted during 2012
|
|
|
26,000,000
|
|
|
|
0.013
|
|
|
|
5.00
|
|
|
Exercised during 2012
|
|
|
(19,000,000
|
)
|
|
|
0.013
|
|
|
|
-
|
|
|
Balance, December 31, 2012
|
|
|
7,000,000
|
|
|
|
0.013
|
|
|
|
5.00
|
|
On December 7, 2012 the Company filed Registration Statements on Form S-8 to register 26,000,000 to be issue pursuant to the Company’s 2012 Stock. Incentive and Option Plan. All 26,000,000 shares have been granted and 19,000,000 have been exercised under the December 2012 Stock Option Plan.
The fair value of 7,000,000 of the common stock options granted during the year was measured at the grant date using the Black-Scholes option pricing model with the following weighted average assumptions:
|
Expected dividend yield
|
|
|
0
|
%
|
|
Risk-free interest rate
|
|
|
4.99
|
%
|
|
Expected volatility
|
|
|
164.35
|
%
|
|
Expected option life (in years)
|
|
|
1
|
|
The Company recognized stock-based compensation of $70,000 in accordance with SFAS 123R which represented the fair value of stock options granted to consultants in exchange for services rendered to the Company.
NOTE 7– RELATED PARTY TRANSACTIONS
During the year ended December 31, 2013, the Company incurred $15,000 (2012 -$4,000) in management fees to directors.
During the year ended December 31, 2013 the Company incurred $33,760 (2012 - $32,507) in rent and office expenses to a private company controlled by a shareholder.
During the year ended December 31, 2013, significant shareholders and companies controlled by significant shareholders earned $57,228 (2012 - $77,880) pursuant to deferred compensation agreements.
NOTE 7– RELATED PARTY TRANSACTIONS (continued)
On November 23, 2012, the Company acquired a exclusive license to manufacture and distribute air-to-water harvester units for consideration of 120,000,000 restricted common shares of the Company valued at $1,560,000. A portion of the 120,000,000 restricted common share consideration is being received by certain shareholders that also owned shares in Bravo Enterprises Ltd. prior to the November 23, 2012 agreement. The value of these shares considered a related party portion is $67,257 and as such, this amount has been eliminated from the transaction, leaving an original net value of $1,492,743 for the license.
The following amounts are due to related parties at:
|
|
|
December 31,
2013
|
|
|
December 31,
2012
|
|
|
|
|
|
|
|
|
|
|
Significant shareholders
|
|
$
|
56,129
|
|
|
$
|
2,142
|
|
All related party transactions are in the normal course of business and are measured at the exchange amount, which is the amount of consideration established and agreed to by the related parties.
NOTE 8 – SUPPLEMENTAL CASH FLOW INFORMATION
|
|
|
December 31,
2013
|
|
|
December 31,
2012
|
|
|
Cash paid during the year for:
|
|
|
|
|
|
|
|
Interest
|
|
$
|
45,533
|
|
|
$
|
-
|
|
|
Income taxes
|
|
$
|
-
|
|
|
$
|
-
|
|
During the year ended December 31, 2013 the Company issued:
|
(a)
|
The Company issued 80,000 restricted common shares valued at $8,000 to a consultant services earned in 2012.
|
|
|
The Company issued 800,000 restricted common shares for cash in the amount of $80,000 pursuant to private placement subscription agreements.
|
|
|
The Company issued 62,500 restricted common shares for cash received in 2012 in the amount of $5,000 pursuant to a private placement subscription agreement.
|
|
|
The Company issued 225,000 restricted common shares for cash in the amount of $35,000 pursuant to three private placement subscription agreements.
|
|
|
The Company issued 4,000,000 common shares for cash in the amount of $52,000 pursuant to the exercise of incentive stock options in accordance with the 2012 Stock Option Plan.
|
|
(f)
|
The Company issued 10,000 restricted common shares valued at $3,000 to a consultant for his services.
|
|
|
The Company issued 120,000 restricted common shares for cash in the amount of $20,200 pursuant to private placement subscription agreements.
|
During the year ended December 31, 2012 the Company issued:
|
(a)
|
4,500,000 restricted common shares valued at $99,450 pursuant to deferred compensation agreements. (See Note 5)
|
|
(b)
|
120,000,000 restricted common shares valued at $1,492,743 pursuant to the exclusive licensing agreement acquiringthe manufacturing and distribution rights for the air to water harvester units. (See Note 4)
|
|
(c)
|
19,000,000 common shares pursuant to the exercise of options under the Company’s 2012 Stock Incentive
and
Option Plan. These shares were issued at $0.013 per share for cash in the amount of $50,000 and to satisfy debt to related parties in the amount of $197,000.
|
|
|
625,000 restricted common shares valued at $50,000 pursuant to a private placement subscription agreement.
|
|
|
An additional $5,000 pursuant to a private placement subscription agreement and issued the 62,500 restricted common shares to the subscriber subsequent to year end.
|
NOTE 9 – COMMITMENTS AND CONTINGENCIES
On February 21, 2002, the Company issued 350,000 shares valued at $119,000 to Empire Sterling Corporation for services to be rendered with respect to the acquisition of ACGT Corporation (“ACGT”). The shares were to be held in trust and not sold until all necessary financing was in place to complete the ACGT acquisition. Empire Sterling Corporation breached the trust agreement and the Company placed a stop transfer on these shares and requested they be returned to the Company. Empire Sterling Corporation failed to return the share certificate and as such, the Company commenced court proceedings against the principals of Empire Sterling Corporation. The Company argued for an interim injunction against all parties and was successful. On May 9, 2002, the Court ordered Empire Sterling Corporation to deposit the shares with the Court pending judicial disposition. The Company continued to file legal process claiming ownership of the shares and breach of trust
inter alia
. The Company was successful and has now applied to have the share certificates released and subsequently cancelled. As of December 31, 2013, the Company is still in the process of having the certificates released.
In February, 2008, the Company received a demand notice from CGG Veritas for failure to pay an outstanding balance of $317,380 pursuant to a Master Agreement and Job Supplement for the Shotgun Draw 2D Seismic Program in Utah. In accordance with Section 15.3 of the Master Agreement and Job Supplement dated March 21, 2007, CGG has demanded payment by April 25, 2008. If CGG Veritas is forced to proceed with litigation of this matter, it will seek reimbursement of its attorneys’ fees and expenses related to the litigation. The Company is currently examining various alternatives to resolve this matter. CGG Veritas has not proceeded with litigation as of December 31, 2013.
The Company conducts busines in Canada and the Goods and Services Tax is defined in law at Part IX of the Excise Tax Act. GST is levied on supplies of goods or services purchased in Canada and includes most products, except certain politically sensitive essentials such as groceries, residential rent, and medical services, and services such as financial services. Businesses that purchase goods and services that are consumed, used or supplied in the course of their "commercial activities" can claim "input tax credits" subject to prescribed documentation requirements (i.e., when they remit to the Canada Revenue Agency the GST they have collected in any given period of time, they are allowed to deduct the amount of GST they paid during that period). In 2013, the Company received a demand from Canada Revenue Agency to file outstanding corporate income tax returns for the years 2000-2012 as required under GST rules. The Company filed these returns and all of the returns had $Nil tax payable. However, Canada Revenue Agency imposed late filing penalties and interest totalling $45,533 for the corporate tax returns. The Company has filed notices of objection for all the years 2000-2012 and will dispute the penalties and interest. The Company has had no response from Canada Revenue Agency.
As of August 1, 2012, the Company has leased 1250 sq. ft of office space from Holm Investments Ltd. at $2,500 per month for a period of 3 years.
|
Payments
|
|
2013
|
|
|
2014
|
|
|
2015
|
|
|
TOTAL
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Office Rent
|
|
$
|
30,000
|
|
|
$
|
30,000
|
|
|
$
|
30,000
|
|
|
$
|
90,000
|
|
Potential benefits of United States Federal income tax losses are not recognized in the accounts until realization is more likely than not. As of December 31, 2013, the Company has combined net operating losses carried forward totaling approximately $25,700,000 for tax purposes which expire through 2030. Availability of loss usage is subject to change of ownership limitations under Internal Revenue Code 382 for 2002 and prior year’s losses. Pursuant to SFAS No. 109, the Company is required to compute tax asset benefits for net operating losses carried forward. Future tax benefits which may arise as a result of these losses have not been recognized in these financial statements, as their realization is determined not likely to occur and accordingly, the Company has recorded a valuation allowance for the deferred tax asset relating to these tax loss carry forwards.
NOTE 10 – INCOME TAXES (continued)
A reconciliation of income tax computed at the federal and state statutory tax rates is as follows:
|
|
|
December 31,
2013
|
|
|
December 31,
2012
|
|
|
|
|
|
|
|
|
|
|
Federal income tax provision at statutory rate
|
|
|
(35.00
|
)%
|
|
|
(35.00
|
)%
|
|
State income tax provision at statutory rate, net of federal income tax effect
|
|
|
(0.00
|
)
|
|
|
(0.00
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Total income tax provision rate
|
|
|
(35.00
|
)%
|
|
|
(35.00
|
)%
|
The actual income tax provisions differ from the expected amounts calculated by applying the federal income tax statutory rate to the Company’s loss before income taxes. The components of these differences are as follows:
|
|
|
December 31,
2013
|
|
|
December 31,
2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before income taxes
|
|
$
|
(489,019
|
)
|
|
$
|
(302,218
|
)
|
|
Corporate tax rate
|
|
|
35.00
|
%
|
|
|
35.00
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Expected tax expense (recovery)
|
|
|
(171,157
|
)
|
|
|
(105,776
|
)
|
|
Non-deductible stock based compensation
|
|
|
-
|
|
|
|
-
|
|
|
Unrecognized loss carry forward and other
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax provision
|
|
$
|
-
|
|
|
$
|
-
|
|
The Company’s tax-effected deferred income tax assets and liabilities are estimated as follows:
|
|
|
2013
|
|
|
2012
|
|
|
|
|
|
|
|
|
|
|
Non-capital loss carry forwards
|
|
$
|
8,167,000
|
|
|
$
|
8,167,000
|
|
|
Valuation allowance
|
|
|
(8,167,000
|
)
|
|
|
(8,167,000
|
)
|
|
Net deferred tax asset
|
|
$
|
-
|
|
|
$
|
-
|
|
NOTE 11 – SUBSEQUENT EVENTS
The Company issued 3,000,000 restricted common shares valued at $300,000 to two shareholders pursuant to deferred compensation agreements dated February 15, 2014.
In February, 2014, the Company and Water For The World Manufacturing Inc. formally terminated the exclusive licensing agreement dated November 23, 2012 with certain provisions. Specifically, in consideration for the goodwill generated during the period of the exclusive license agreement between Water For The World Manufacturing Inc. and Bravo Enterprises Ltd., certain private transactions involving the beneficial owners of some of the 120,000,000 restricted common shares issued will be honored. These private transactions transpired prior to the cancellation of the above mentioned exclusive license agreement. As such 90,400,000 restricted common shares valued at $1,175,200 were cancelled and returned to treasury.