NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2015 and 2014
1.
|
ORGANIZATION AND BASIS OF PRESENTATION
|
Constant Environment, Inc. (the "Company"), was incorporated on July 21, 2008, under the laws of the State of Nevada as an early stage product and services company that provides microclimate systems to specialty markets, who have a need to protect and preserve rare and/or valuable items.
On December 16, 2009 the Board of Directors of Constant Environment, Inc. (the "Company") filed a Certificate of Amendment to the Articles of Incorporation with the Secretary of State of Nevada changing the Company's name to Zentric, Inc. The Company is a battery technology company based on a new technology that incorporates high voltages dual electrolytes to produce higher voltages and power.
On, November 16, 2011, Zentric, Inc. established a wholly-owned subsidiary in Hong Kong, China to assist with solar project development. In April 1, 2014, this subsidiary was sold to William Tien, the company's director, in exchange for waiving $1,000 in loans. See Note 11.
On June 17, 2014 the Board of Directors of Zentric, Inc. (the "Company") filed a Certificate of Amendment to the Articles of Incorporation with the Secretary of State of Nevada increasing the authorized number of common shares to 2,000,000,000.
The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America with the assumption that the Company will be able to realize its assets and discharge its liabilities in the normal course of business. The Company suffered reccurring net loss from operations and has a net capital deficiency, which raises substantial doubt about its ability to continue as a going concern. The financial statements do not include any adjustments to the amounts and classifications of assets and liabilities that might be necessary should the Company be unable to continue as a going concern.
The Company's ability to continue as a going concern is contingent upon its ability to complete public equity financing and generate profitable operations in the future. Management's plan in this regard is to secure additional funds through equity financing and through loans made by the Company's stockholders.
3.
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
|
|
a)
|
Basis of Presentation and Principles of Consolidation
|
The consolidated financial statements of the Company have been prepared in accordance with accounting principles
generally accepted in the
United
States
("US GAAP") and are expressed in U.S. dollars. The financial statements include
the accounts of the Company and its subsidiary,
Zentric HK Limited
,
a limited liability company in Hong Kong. All significant intercompany transactions have been eliminated as part of the consolidation.
The Company's fiscal year-end is December 31.
The prepara
tion of financial statements in conformity with US GAAP requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the
date of the financial statem
ents and the reported amounts of revenues and expenses during the reporting period. The
Company regularly evaluates estimates and assumptions related to the deferred income tax asset valuation allowances. The
Company bases its estimates and assumptions on
current facts, historical experience and various other factors that it
believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the
c
arrying 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 the Company's estimates.
To the extent there are material differences between the estimates and the actua
l results, future results of operations will be
affected.
|
c)
|
Cash and cash equivalents
|
The Company considers all highly liquid instruments with a maturity of three months or less at the time of issuance to be
cash equivalents. As at
December 31
, 201
5
an
d 201
4
, the Company had no cash equivalents.
|
d)
|
Basic and Diluted Net Loss per Share
|
The Company computes net income (loss) per share in accordance with FASB codification standards. The standard requires presentation of both basic and diluted earnings per share (EPS) on the face of the income statement. Basic EPS is computed by dividing net income (loss) available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible preferred stock using the if converted method. In computing Diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive.
|
e)
|
Concentration of Credit Risk
|
Financial instruments, which potentially subjec
t us to concentrations of credit risk, consist principally of cash. Our cash balances are maintained
in accounts held by major banks and financial institutions located in the
United States
. The Company occasionally maintains amounts on
deposit with a finan
cial institution that are in excess of the federally insured limit of $250,000. The risk is managed by maintaining all deposits
in high quality financial institutions. The Company had $0 of cash balances in excess of federally insured limits at December 31
, 201
5
and
201
4
.
ASC 220,
Comprehensive Income
, establishes standards for the reporting and display of comprehensive loss and its
components in the financial statements. As of December 31,
201
5 and
2014, the Company has no items that represent a comprehensive loss and, therefore, has not included a schedule of comprehensive loss in the financial statements.
|
g)
|
Foreign Currency Translation
|
The Company's functional and reporting currency is the
United States
dollar. Monetar
y assets and liabilities denominated in
foreign currencies are translated in accordance with ASC 830 Foreign Currency Translation Matters, using the exchange rate prevailing at the balance sheet date. Gains and losses arising on translation or settlement of foreign currency denominated transactions or balances are included in the determination of income. Foreign currency transactions are primarily undertaken in Hong Kong dollars. The Company has not, to the date of these financial statements, entered into derivative instruments to offset the impact of foreign currency fluctuations.
|
h)
|
Derivative Financial Instruments
|
The Company evaluates its convertible instruments, options, warrants or other contracts to determine if those contracts or embedded components of those contracts qualify as derivatives to be separately accounted for under ASC Topic 815, "Derivatives and Hedging." The result of this accounting treatment is that the fair value of the derivative is marked-to-market each balance sheet date and recorded as a liability. In the event that the fair value is recorded as a liability, the change in fair value is recorded in the statement of operations as other income (expense). Upon conversion or exercise of a derivative instrument, the instrument is marked to fair value at the conversion date and then that fair value is reclassified to equity. Equity instruments that are initially classified as equity that become subject to reclassification under ASC Topic 815 are reclassified to liabilities at the fair value of the instrument on the reclassification date. We analyzed the derivative financial instruments (the Convertible Note and tainted Warrant), in accordance with ASC 815. The objective is to provide guidance for determining whether an equity-linked financial instrument is indexed to an entity's own stock. This determination is needed for a scope exception 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 ASC 815-40-05 "Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company's Own Stock" also hinges on whether the instrument is indexed to an entity's own stock. A non-derivative instrument that is not indexed to an entity's own stock cannot be classified as equity and must be accounted for as a liability. There is 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. The Company utilized multinomial lattice models that value the derivative liability within the notes based on a probability weighted discounted cash flow model. The Company utilized the fair value standard set forth by the Financial Accounting Standards Board, defined as the amount at which the assets (or liability) could be bought (or incurred) or sold (or settled) in a current transaction between willing parties, that is, other than in a forced or liquidation sale.
Pursuant to ASC 820,
Fair Value Measurements and Disclosures
, an entity is required to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument's categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. ASC 820 prioritizes the inputs into three levels that may be used to measure fair value:
Level 1
Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.
Level 2
Level 2 applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or Liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.
Level 3
Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.
The carrying amounts reported in the balance sheets for cash, accounts payable and accrued expenses approximate their fair market value based on the short-term maturity of these instruments.
The following table presents assets and liabilities that are measured and recognized at fair value as of December 31, 2015, on a recurring basis:
Description
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Gains (Losses)
|
|
Derivative Liability
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
89,238
|
|
|
$
|
12,477
|
|
Total
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
89,238
|
|
|
$
|
12,477
|
|
The following table presents assets and liabilities that are measured and recognized at fair value as of December 31, 2014, on a recurring basis:
Description
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Gains (Losses)
|
|
Derivative Liability
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
149,343
|
|
|
$
|
47,524
|
|
Total
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
149,343
|
|
|
$
|
47,524
|
|
Potential benefits of income tax losses are not recognized in the accounts until realization is more likely than not. The
Company has adopted ASC 740 "
Accounting for Income Taxes
" as of its inception. Pursuant to ASC 740, the Company is
required to compute tax asset benefits for net operating losses carried forward. The potential benefits of net operating
losses have not been recognized in this financial statement because the Company cannot be assured it is more likely than
not it will utilize the net operating losses carried forward in future years.
|
k)
|
Stock-Based Compensation
|
The Company records stock-based compensation in accordance with FASB codification standards, using the fair value method. All transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable. Equity instruments issued to employees and the cost of the services received as consideration are measured and recognized based on the fair value of the equity instruments issued."
|
l)
|
Valuation of Long-Lived Intangible Assets and Goodwill
|
Pursuant to the ASC 350-10-05 Goodwill and Other Intangible Assets and the Impairment or Disposal of Long-lived Assets, we assess the impairment of identifiable intangibles, long-lived assets and goodwill annually or whenever events or circumstances indicate that the carrying value of these assets may not be recoverable. Factors we consider include and are not limited to the following:
|
·
|
Significant changes in performance relative to expected operating results
|
|
·
|
Significant changes in the use of the assets or the strategy of our overall business
|
|
·
|
Significant industry or economic trends
|
As determined in accordance with the ASC, if the carrying amount of goodwill of a reporting unit exceeds its fair value, the impairment loss is measured as the amount by which the carrying amount exceeds the fair market value of the assets. In accordance with the ASC, in determining if impairment exists, we estimate the undiscounted cash flows to be generated from the use and ultimate disposition of these assets. The impairment loss is measured as the amount by which the carrying amount of the assets exceeds the fair market value of the assets.
|
m)
|
Impairment of Long-Lived Assets
|
The Company accounts for long-lived assets in accordance with "Accounting for the Impairment or Disposal of Long-Lived Assets" (ASC 360-
10). This stat
ement requires that long-lived assets and certain identifiable intangibles be reviewed for impairment whenever events or changes
in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and
used is measured
by a comparison of the carrying amount of an asset to future undiscounted net cash flows expected to be generated by the asset. If such assets
are considered to be impaired, the impairment to be recognized is measured by the amount by whic
h the carrying amount of the assets exceeds
the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell.
|
n)
|
Recent Accounting Pronouncements
|
In June 2014, the FASB issued an accounting standard which provides new guidance that requires share-based compensation to meet 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 guidance is effective for fiscal years 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 guidance 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. Early adoption is
permitted. The adoption of ASU 2014-10 is not expected to have a material impact on our financial position or results of operations.
In June 2014, the Financial Accounting Standards Board issued Accounting Standards Update 2014-10,
"Development Stage Entities". The amendments in this update remove the definition of a development stage entity from the
Maste
r Glossary of the ASC thereby removing the financial reporting distinction between development stage entities and
other reporting entities from U.S. GAAP. In addition, the amendments eliminate the requirements for development stage
entities to (1) present
inception-to-date information in the statements of income, cash flows, and shareholder equity, (2) label
the financial statements 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
early adoption of ASU 2014-10 i
s permitted which removed the development stage entity financial reporting requirements
from the Company.
In August 2014, the FASB issued an accounting standard that requires 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 standard (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 standard in this Update is effective for the annual period ending after December
15, 2016, and for annual periods and interim periods thereafter. Early application is permitted. The adoption of ASU 2014-15 is not expected to have a material impact on our financial
position or results of operations.
In November 2014, the FASB issued new guidance 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. The adoption of ASU 2014-16 is not expected to have a material impact on our financial position or results of operations.
In November 2014, the FASB issued guidance to provide an acquired entity with an option to apply push down accounting in its separate financial statements upon occurrence of an
event in which an acquirer obtains control of the acquired entity. 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. The amendments in this Update are effective on November 18, 2014.
The adoption of ASU 2014-17 is not expected to have a material impact on our financial position or results of operations.
In April 2015, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2015-03,
Interest–Imputation of Interest
(Subtopic 835-30) ("ASU 2015-03"), which changes the presentation of debt issuance costs in financial statements. ASU 2015-03 requires an entity to present such costs in the balance sheet as a direct deduction from the related debt liability rather than as an asset. Amortization of the costs will continue to be reported as interest expense. It is effective for annual reporting periods beginning after December 15, 2016. Early adoption is permitted. The new guidance will be applied retrospectively to each prior period presented. The Company is currently in the process of evaluating the impact of adoption of ASU 2015-03 on its balance sheets.
In August, 2015, the FASB issued ASU No. 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date ("ASU 2015-14"). The amendment in this ASU defers the effective date of ASU No. 2014-09 for all entities for one year. Public business entities, certain not-for-profit entities, and certain employee benefit plans should apply the guidance in ASU 2014-09 to annual reporting periods beginning December 15, 2017, including interim reporting periods within that reporting period. Earlier application is permitted only as of annual reporting periods beginning after December 31, 2016, including interim reporting periods with that reporting period.
In September, 2015, the FASB issued ASU No. 2015-16, Business Combinations (Topic 805) ("ASU 2015-16"). Topic 805 requires that an acquirer retrospectively adjust provisional amounts recognized in a business combination, during the measurement period. To simplify the accounting for adjustments made to provisional amounts, the amendments in the Update require that the acquirer recognize adjustments to provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amount is determined. The acquirer is required to also record, in the same period's financial statements, the effect on earnings of changes in depreciation, amortization, or other income effects, if any, as a result of the change to the provisional amounts, calculated as if the accounting had been completed at the acquisition date. In addition an entity is required to present separately on the face of the income statement or disclose in the notes to the financial statements the portion of the amount recorded in current-period earnings by line item that would have been recorded in previous reporting periods if the adjustment to the provisional amounts had been recognized as of the acquisition date. ASU 2015-16 is effective for fiscal years beginning December 15, 2015. The adoption of ASU 2015-016 is not expected to have a material effect on the Company's consolidated financial statements.
Holders of common stock are entitled to one vote for each share held. There are no restrictions that limit the Company's ability to pay dividends on its common stock. The Company has not declared any dividends since incorporation.
During the period ended June 30, 2013, Zentric, Inc. entered into an settlement with the Chief Financial Officer to issue 102,900,000 common shares for $205,500 of salaries past due by the Company. Total value of the shares was $360,150; the excess of $154,650 is recorded as additional compensation expense. The shares were valued based on the fair market value on date of grant. As of December 31, 2015 and 2014, the shares have not been issued and are recorded a part of derivative liability.
On December 31, 2011, the Company granted options to an officer/director of the company to acquire 4,000,000 common shares, 1,000,000 vested December 31, 2011 at $0.03 per share; the remaining 3,000,000 will vest on December 31, 2012, 2013 and 2014 at price of $0.10, $0.25 and $0.50 per share, respectively. The options have a vesting period of three years or ninety days from termination of employment. The company value such options using the Black-Scholes Valuation Model. The options have an expected volatility rate of 282.71% calculated using the Company stock price for a two-year period beginning December 31, 2011. A risk free interest rate of 0.19% was used to value the options. The total value of these options was $34,841. As of December 31, 2014, these options were fully vested and the remaining $8,718 was expensed.
On February 24, 2014, Zentric, Inc. received the notice of conversion to convert $5,000 of principal from Asher Enterprises, Inc. into 12,820,513 common shares of the Company. Due to conversion within the terms of the note, no gain or loss was realized.
On March 3, 2014, Zentric, Inc. received the notice of conversion to convert $3,000 of principal from Asher Enterprises, Inc. into 7,692,308 common shares of the Company. Due to conversion within the terms of the note, no gain or loss was realized.
On March 13, 2014, Zentric, Inc. received the notice of conversion to convert $5,000 of principal from Asher Enterprises, Inc. into 12,820,513 common shares of the Company. Due to conversion within the terms of the note, no gain or loss was realized.
On April 1, 2014, the Company entered into a Sale Agreement with William Tien, a related party, in which William Tien will acquire the subsidiary, Zentric HK, for a total purchase price of $1,000 as a direct reduction in the debt owed to him. During the same period, William Tien forgave the Company debt balance of $14,693 which was recorded as additional paid-in capital due to related party relationship.
On April 9, 2014, Zentric, Inc. entered into a subscription agreement to issue 31,250,000 common shares for $50,000 cash investment into the Company. As of December 31, 2015 and 2014, the shares have not been issued and recorded a part of derivative liability.
On April 14, 2014, Zentric, Inc. received the notice of conversion to convert $11,500 of principal from Asher Enterprises, Inc. into 15,972,222 common shares of the Company. Due to conversion within the terms of the note, no gain or loss was realized.
On April 16, 2014, Zentric, Inc. received the notice of conversion to convert $8,000 of principal from Asher Enterprises, Inc. together with $1,300 of accrued and unpaid interest totaling $9,300 into 12,916,667 common shares of the Company. Due to conversion within the terms of the note, no gain or loss was realized.
On May 13, 2014, Zentric, Inc. received the notice of conversion to convert $9,500 of principal from Asher Enterprises, Inc. into 15,322,581 common shares of the Company. Due to conversion within the terms of the note, no gain or loss was realized.
On May 16, 2014, Zentric, Inc. received the notice of conversion to convert $1,500 of principal from Asher Enterprises, Inc. together with $440 of accrued and unpaid interest totaling $1,940 into 3,129,032 common shares of the Company. Due to conversion within the terms of the note, no gain or loss was realized.
On June 3, 2014, the Company authorized 4,000,000 shares of Series A Preferred Stock to be granted to Jeff Mak as additional stock based compensation. Each share of the Series A preferred stock shall have 100 votes on the election of their directors and for all other purposes. The Series A shares were valued according to the additional voting rights assigned. The value assigned to the Series A shares was $47,400.
On August 19, 2014, Zentric, Inc. received the notice of conversion to convert $9,410 of principal from Asher Enterprises, Inc. into 24,128,205 common shares of the Company. Due to conversion within the terms of the note, no gain or loss was realized.
On September 3, 2014, Zentric, Inc. received the notice of conversion to convert $7,965 of principal from Asher Enterprises, Inc. into 24,136,364 common shares of the Company. Due to conversion within the terms of the note, no gain or loss was realized.
On September 5, 2014, Zentric, Inc. received the notice of conversion to convert $7,965 of principal from Asher Enterprises, Inc. into 24,136,364 common shares of the Company. Due to conversion within the terms of the note, no gain or loss was realized.
On September 22, 2014, Zentric, Inc. received the notice of conversion to convert $7,000 of principal from Asher Enterprises, Inc. into 24,137,931 common shares of the Company. Due to conversion within the terms of the note, no gain or loss was realized.
On September 26, 2014, Zentric, Inc. received the notice of conversion to convert $160 of principal from Asher Enterprises, Inc. together with $1,300 of accrued and unpaid interest totaling $1,460 into 5,214,286 common shares of the Company. Due to conversion within the terms of the note, no gain or loss was realized.
On January 12, 2015, Zentric, Inc. received the notice of conversion to convert $1,900 of principal from KBM Worldwide, Inc. into 17,272,727 common shares of the Company. Due to conversion within the terms of the note, no gain or loss was realized.
On January 14, 2015, Zentric, Inc. received the notice of conversion to convert $1,900 of principal from KBM Worldwide, Inc. into 17,272,727 common shares of the Company. Due to conversion within the terms of the note, no gain or loss was realized.
On January 20, 2015, Zentric, Inc. received the notice of conversion to convert $1,900 of principal from KBM Worldwide, Inc. into 17,272,727 common shares of the Company. Due to conversion within the terms of the note, no gain or loss was realized.
On January 23, 2015, Zentric, Inc. received the notice of conversion to convert $1,900 of principal from KBM Worldwide, Inc. into 17,272,727 common shares of the Company. Due to conversion within the terms of the note, no gain or loss was realized.
On February 2, 2015, Zentric, Inc. received the notice of conversion to convert $1,900 of principal from KBM Worldwide, Inc. into 17,272,727 common shares of the Company. Due to conversion within the terms of the note, no gain or loss was realized.
On February 5, 2015, Zentric, Inc. received the notice of conversion to convert $1,945 of principal from KBM Worldwide, Inc. into 21,611,111 common shares of the Company. Due to conversion within the terms of the note, no gain or loss was realized.
On February 10, 2015, Zentric, Inc. received the notice of conversion to convert $1,945 of principal from KBM Worldwide, Inc. into 21,611,111 common shares of the Company. Due to conversion within the terms of the note, no gain or loss was realized.
On February 18, 2015, Zentric, Inc. received the notice of conversion to convert $1,945 of principal from KBM Worldwide, Inc. into 21,611,111 common shares of the Company. Due to conversion within the terms of the note, no gain or loss was realized.
On February 27, 2015, Zentric, Inc. received the notice of conversion to convert $1,490 of principal from KBM Worldwide, Inc. into 24,833,333 common shares of the Company. Due to conversion within the terms of the note, no gain or loss was realized.
On March 4, 2015, Zentric, Inc. received the notice of conversion to convert $1,490 of principal from KBM Worldwide, Inc. into 24,833,333 common shares of the Company. Due to conversion within the terms of the note, no gain or loss was realized.
On March 13, 2015, Zentric, Inc. received the notice of conversion to convert $1,490 of principal from KBM Worldwide, Inc. into 24,833,333 common shares of the Company. Due to conversion within the terms of the note, no gain or loss was realized.
On March 19, 2015, Zentric, Inc. received the notice of conversion to convert $1,490 of principal from KBM Worldwide, Inc. into 24,833,333 common shares of the Company. Due to conversion within the terms of the note, no gain or loss was realized.
March 13, 2015, the Company authorized 2,000,000 shares of Series A Preferred Stock to be granted to Jeff Mak in exchange for $60,000 in accrued salaries. Each share of the Series A preferred stock shall have 100 votes on the election of their directors and for all other purposes. The Series A shares were valued according to the additional voting rights assigned. The value assigned to the Series A shares was $32,100. As this was a related party transaction the gain on exchange of $27,900 was credited to additional paid-in capital.
On April 14, 2015, Zentric, Inc. received the notice of conversion to convert $1,775 of principal from KBM Worldwide, Inc. into 29,583,333 common shares of the Company. Due to conversion within the terms of the note, no gain or loss was realized.
On May 22, 2015, Zentric, Inc. received the notice of conversion to convert $1,865 of principal from KBM Worldwide, Inc. into 31,083,333 common shares of the Company. Due to conversion within the terms of the note, no gain or loss was realized.
On May 27, 2015, Zentric, Inc. received the notice of conversion to convert $1,865 of principal from KBM Worldwide, Inc. into 31,083,333 common shares of the Company. Due to conversion within the terms of the note, no gain or loss was realized.
On November 17, 2015, Zentric, Inc. received the notice of conversion to convert $2,050 of principal from KBM Worldwide, Inc. into 34,166,667 common shares of the Company. Due to conversion within the terms of the note, no gain or loss was realized.
On December 28, 2015, Zentric, Inc. received the notice of conversion to convert $2,050 of principal from KBM Worldwide, Inc. into 34,166,667 common shares of the Company. Due to conversion within the terms of the note, no gain or loss was realized.
On December 30, 2015, Zentric, Inc. received the notice of conversion to convert $1,600 of principal and $450 of the interest from KBM Worldwide, Inc. into 34,166,667 common shares of the Company. Due to conversion within the terms of the note, no gain or loss was realized.
During the years ended December 31, 2015 and 2014, the Company recorded a total of $47,628 and $114,452 as a reduction in derivative liability due to conversion of $32,500 and $76,000 of convertible debt into common shares.
During the years ended December 31, 2015 and 2014, the Company received $30,786 and $2,990 in advances for Company related expense that are non-interest bearing with no stated maturity. During the period ended December 31, 2015, the Company repaid back $0 in cash. As of December 31, 2015 and December 31, 2014, related party advances are $380,449 and $349,663, respectively. The Company recorded imputed interest of $54,222 and $58,414 during the years ended December 31, 2015 and 2014.
Holders of common stock are entitled to one vote for each share held. There are no restrictions that limit the Company's ability to pay dividends on its common stock. The Company has not declared any dividends since incorporation.
5.
|
RELATED PARTY TRANSACTIONS
|
Related party transactions are in the normal course of operations and are recorded at amounts established and agreed between the related parties. Related party transactions not disclosed elsewhere in these consolidated financial statements are as follows:
On April 2010, the Company entered into a Promissory Note that carries an interest rate of 15% interest rate with a related party. Note payable balance as of December 31, 2015 and 2014 is $7,018.
Interest accrual for all loans outstanding as of December 31, 2015 and December 31, 2014 are $5,949 and $4,752, respectively.
The Company has received cash accumulated advances of $380,449 and $349,663 for the years ended December 31, 2015 and December 31, 2014, respectively from directors and shareholders. Interest has been imputed at 15% resulting in interest expense of $54,222 and $58,414 for the years ended December 31, 2015 and December 31, 2014, respectively. During the year ended December 31, 2015 and 2014, the Company borrowed $30,786 and $2,990 and repaid $0 and $58,233, respectively.
On April 1, 2014, the Company entered into a Sale Agreement with William Tien, a related party, in which William Tien will acquire the subsidiary, Zentric HK, for a total purchase price of $1,000 as a direct reduction in the debt owed to him. During the same period, William Tien forgave the Company debt balance of $14,693 which was recorded as additional paid-in capital due to related party relationship.
During the period ended June 30, 2013, Zentric, Inc. entered into an settlement with the Chief Financial Officer to issue 102,900,000 common shares for $205,500 of salaries past due by the Company. Total value of the shares issued was $360,150; the excess of $154,650 is recorded as additional compensation expense. The shares were valued based on the fair market value on date of grant. As of December 31, 2015 and 2014, the shares have not been issued and recorded as part of derivative liability.
On December 31, 2011, the Company granted options to an officer/director of the company to acquire 4,000,000 common shares, 1,000,000 vested December 31, 2011 at $0.03 per share; the remaining 3,000,000 will vest on December 31, 2012, 2013 and 2014 at price of $0.10, $0.25 and $0.50 per share, respectively.
The options have a vesting period of three years or ninety days from termination of employment. The company value such options using the Black-Scholes Valuation Model. The options have an expected volatility rate of 282.71% calculated using the Company stock price for a two-year period beginning December 31, 2011. A risk free interest rate of 0.19% was used to value the options. The total value of these options was $34,841
. As of December 31, 2014, these options were fully vested and the remaining $8,718 was expensed.
March 13, 2015, the Company authorized 2,000,000 shares of Series A Preferred Stock to be granted to Jeff Mak in exchange for $60,000 in accrued salaries. Each share of the Series A preferred stock shall have 100 votes on the election of their directors and for all other purposes. The Series A shares were valued according to the additional voting rights assigned. The value assigned to the Series A shares was $32,100. As this was a related party transaction the gain on exchange of $27,900 was credited to additional paid-in capital.
On April 2010, the Company entered into a Promissory Note that carries an interest rate of 15% interest rate with a related party. Note payable balance as of December 31, 2015 and 2014 is $7,018.
Interest accrued for all loans outstanding as of December 31, 2015 and December 31, 2014 are $5,949 and $4,752, respectively.
The Company accounts for income taxes under FASB ASC 740-10, which requires use of the liability method. FASB ASC 740-10-25 provides that deferred tax assets and liabilities are recorded based on the differences between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes, referred to as temporary differences.
As of December 31, 2015, there were no differences between financial reporting and tax bases of assets and liabilities. The Company will have tax losses available to be applied against future years' income as result of the losses incurred. However, due to the losses incurred in the period and expected future operating results, management determined that it is more likely than not that
the deferred tax asset resulting from the tax losses available for carryforward will not be realized through the reduction of future income tax payments. Accordingly a 100% valuation allowance has been recorded for deferred income tax assets. The net loss carry-forward was $2,515,848 and $2,331,856 for the years ended December 31, 2015 and December 31, 2014 respectively.
The deferred tax asset for December 31, 2015 and December 31, 2014 is as follows:
|
|
2015
|
|
|
2014
|
|
Deferred Tax Asset arising from Net Operating Loss Carry-forwards
|
|
$
|
880,547
|
|
|
$
|
816,150
|
|
Valuation allowance
|
|
|
(880,547
|
)
|
|
|
(816,150
|
)
|
Net deferred tax asset
|
|
$
|
-
|
|
|
$
|
-
|
|
Based on the available objective evidence, including the Company's history of its loss, management believes it is more likely than not that the net deferred tax assets will not be fully realizable. Accordingly, the Company provided for a full valuation allowance against its net deferred tax assets at December 31, 2015 and 2014, respectively.
A reconciliation between the amounts of income tax benefit determined by applying the applicable U.S. and State statutory income tax rate to pre-tax loss is as follows:
|
|
2015
|
|
|
2014
|
|
Federal and state statutory rate
|
|
|
35
|
%
|
|
|
35
|
%
|
Chang in valuation allowance on deferred tax assets
|
|
|
(35
|
%)
|
|
|
(35
|
%)
|
|
In accordance with FASB ASC 740, the Company has evaluated its tax positions and determined there are no uncertain tax positions.
On August 19, 2013, the Company, entered into a $32,500 convertible promissory note that carries an 8% interest rate, matures on May 15, 2014. The principal is convertible into shares of common stock at the discretion of the note holder at a price equal to fifty five percent (55%) of the average of the three (3) lowest trading bid prices of the Company's common stock for the forty five (45) trading days prior to the conversion date. The note carries a twenty two percent (22%) interest rate in the event of default, and the debt holder is limited to owning 4.99% of the Company's issued and outstanding shares. The company can prepay the note at 150% of the loan plus interest within 180 days. Due to indeterminable number of shares to be issued at conversion, the Company recorded a derivative liability. The Company recorded a total discount of $32,500 for the variable conversion features of the convertible note incurred during the period ended December 31, 2013. The discount will be amortized to interest expense over the term of the debenture using the effective interest method. The Company recorded $6,168 of interest expense pursuant to the amortization of the note discount during the year ended December 31, 2013. The remaining discount of $26,332 was fully amortized as of December 31, 2014. During the same period, the holder converted $33,800 of principal and interest into 62,222,223 shares of common stock; due to conversion within the terms of the note, no gain or loss was recognized as a result of the conversion. As of December 31, 2015 and 2014, the Company has a remaining principal and accrued interest balance of balance of $0.
On October 29, 2013, the Company, entered into a $11,000 convertible promissory note that carries an 8% interest rate, matures on July 30, 2014. The principal is convertible into shares of common stock at the discretion of the note holder at a price equal to fifty five percent (55%) of the average of the three (3) lowest trading bid prices of the Company's common stock for the ten (10) trading days prior to the conversion date. The note carries a twenty two percent (22%) interest rate in the event of default, and the debt holder is limited to owning 4.99% of the Company's issued and outstanding shares. The company can prepay the note at 150% of the loan plus interest within 180 days. Due to indeterminable number of shares to be issued at conversion, the Company recorded a derivative liability. The Company recorded a total discount of $11,000 for the variable conversion features of the convertible note incurred during the period ended December 31, 2013. The discount will be amortized to interest expense over the term of the debenture using the effective interest method. The discount will be amortized to interest expense over the term of the debenture using the effective interest method.
The Company recorded $232 of interest expense pursuant to the
amortization of the note discount during the year ended December 31, 201
3
. The remaining discount of $10,768 was fully amortized as of December 31, 2014. During the same period, the holder converted $11,440 of principal and interest into 18,451,613 shares of common stock; due to conversion within the terms of the note, no gain or loss was recognized. As of December 31, 2015 and 2014, the Company has a remaining principal and accrued interest balance of $0.
On February 3, 2014, the Company, entered into a $32,500 convertible promissory note that carries an 8% interest rate, matures on July 30, 2014. The principal is convertible into shares of common stock at the discretion of the note holder at a price equal to fifty five percent (55%) of the average of the three (3) lowest trading bid prices of the Company's common stock for the ten (10) trading days prior to the conversion date. The note carries a twenty two percent (22%) interest rate in the event of default, and the debt holder is limited to owning 4.99% of the Company's issued and outstanding shares. The company can prepay the note at 150% of the loan plus interest within 180 days. Due to indeterminable number of shares to be issued at conversion, the Company recorded a derivative liability. The Company recorded a total discount of $32,500 for the variable conversion features of the convertible note incurred during the period ended September 30, 2014. The discount will be amortized to interest expense over the term of the debenture using the effective interest method. As of December 31, 2014, the discount was fully amortized. During the same period, the holder converted $33,800 of principal and interest into 101,753,150 shares of common stock; due to conversion within the terms of the note, no gain or loss was recognized. As of December 31, 2015 and 2014, the Company has a remaining principal and accrued interest balance of $0.
During the period ended June 30, 2014, the Company entered into Convertible Promissory Notes totalling $32,500 that carries an interest rate of 8%. The principal is convertible into shares of common stock at the discretion of the note holder at a price equal to fifty five percent (55%) of the average of the three (3) lowest trading bid prices of the Company's common stock for the ten (10) trading days prior to the conversion date. The note carries a twenty two percent (22%) interest rate in the event of default, and the debt holder is limited to owning 4.99% of the Company's issued and outstanding shares. The company can prepay the note at 150% of the loan plus interest within 180 days. Due to indeterminable number of shares to be issued at conversion, the Company recorded a derivative liability (see Note 10). The Company recorded a total discount of $32,500 for the variable conversion features of the convertible note incurred during the period ended December 31, 2014. The discount will be amortized to interest expense over the term of the debenture using the effective interest method. The Company recorded $8,772 and $23,728 of interest expense pursuant to the amortization of the note discount during the year ended December 31, 2014 and 2015, respectively. During the same period, the holder converted $32,950 of principal and interest into 444,780,300 shares of common stock; due to conversion. Within the terms of the note, no gain or loss was recognized. As of December 31, 2015 and 2014, the Company has a remaining principal $0 and $32,500 and accrued interest balance of $0 and $850, respectively.
On November 10, 2014, the Company, entered into an $11,500 convertible promissory note that carries an 8% interest rate, matures on August 13, 2015. The principal is convertible into shares of common stock at the discretion of the note holder at a price equal to fifty five percent (55%) of the average of the three (3) lowest trading bid prices of the Company's common stock for the ten (10) trading days prior to the conversion date. The note carries a twenty two percent (22%) interest rate in the event of default, and the debt holder is limited to owning 4.99% of the Company's issued and outstanding shares. The company can prepay the note at 150% of the loan plus interest within 180 days. Due to indeterminable number of shares to be issued at conversion, the Company recorded a derivative liability (see Note 10). The Company recorded a total discount of $11,500 for the variable conversion features of the convertible note incurred during the period ended December 31, 2014. The discount will be amortized to interest expense over the term of the debenture using the effective interest method. The discount will be amortized to interest expense over the term of the debenture using the effective interest method. The Company recorded $1,003 and $10,497 of interest expense pursuant to the amortization of the note discount during the year ended December 31, 2014 and 2015, respectively. As of December 31, 2015 and 2014, the Company has a remaining principal balance of $11,500 and $11,500 and an unamortized discount of 10,589 and $0, respectively.
Total accrued interest related of the convertible note as of December 31, 2015 and 2014, is $1,871 and 1,542, respectively.
As of December 31, 2015 and 2014 the Company recorded a discount of $0 and $76,500, respectively and recognized $34,317 and $79,283 of amortization during the years ended December 31, 2015 and 2014.
9.
|
DERIVATIVE LIABILITIES
|
The Company issued convertible notes payable that provide for the issuance of convertible notes with variable conversion provisions. The conversion terms of the convertible note is variable based on certain factors, such as the future price of the Company's common stock. The number of shares of common stock to be issued is based on the future price of the Company's common stock. The number of shares of common stock issuable upon conversion of the promissory note is indeterminate. Due to the fact that the number of shares of common stock issuable could exceed the Company's authorized share limit, the equity environment is tainted and all additional convertible debentures, stock payables and warrants are included in the value of the derivative. Pursuant to ASC 815-15 Embedded Derivatives, the fair values of the variable conversion option and warrants and shares to be issued were recorded as derivative liabilities when the environment becomes tainted.
The fair values of the Company's derivative liabilities were estimated at the issuance date and are revalued at each subsequent reporting date, using a lattice model. The Company recorded current derivative liabilities of $89,238 and $149,343 at December 31, 2015 and 2014, respectively. The change in fair value of the derivative liabilities resulted in gains of $12,477 and $47,524 for the years ended December 31, 2015 and 2014, respectively, which has been reported as other income (expense) in the condensed statements of operations. The gain of $12,477 in 2015 consisted of a gain of $12,477 attributable to the mark to market adjustment of the convertible notes. The gain of $47,524 in 2014
consisted of a gain of
$66,119
attributable to the mark to market
adjustment of the convertible notes and a loss of ($
18,595
) attributable to excess value over of the convertible note discoun
t.
The following presents the derivative liability at December 31, 2015 and 2014, respectively:
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2015
|
|
|
2014
|
|
Stock payable
|
|
$
|
75,830
|
|
|
$
|
88,745
|
|
Convertible Note
|
|
$
|
13,408
|
|
|
$
|
60,598
|
|
Convertible Debentures
|
|
$
|
89,238
|
|
|
$
|
149,343
|
|
The following is a summary of changes in the fair market value of the derivative liability during the year ended December 31, 2015 and 2014:
|
|
Derivative
Liability Total
|
|
Balance, December 31, 2013
|
|
$
|
184,819
|
|
Increase in derivative value due to issuances of convertible promissory note
|
|
|
76,500
|
|
Increase in derivative value due to excess of discount
|
|
|
18,595
|
|
Increase in derivative value due to reclassification of stock payable
|
|
|
50,000
|
|
Change in fair market value of derivative liabilities
|
|
|
(66,119
|
)
|
Settlement of derivative due to conversion of debt to common shares
|
|
|
(114,452
|
)
|
Balance, December 31, 2014
|
|
$
|
149,343
|
|
Decrease in derivative value due to reclassification of stock payable
|
|
|
(12,915
|
)
|
Change in fair market value of derivative liabilities
|
|
|
438
|
|
Settlement of derivative due to conversion of debt to common shares
|
|
|
(47,628
|
)
|
Balance, December 31, 2015
|
|
$
|
89,238
|
|
The existing derivative instrument was valued as of issuance; conversion; and the year end 12/31/15. The following assumptions were used for the valuation of the derivative liability related to the Note (to-date no Notes are in default):
|
-
|
The underlying stock price $.00020 was used as the fair value of the common stock;
|
|
-
|
The Asher and KBM notes with the same terms as at issuance and effectively convert at a discount of 54.82% to 56.90%.
|
|
-
|
Capital raising events of $50,000 would occur in each quarter starting 1 month following the date of valuation at 75% of market generating dilutive reset events at prices below $0.000043 (rounded) for the Notes;
|
|
-
|
The Holder would redeem based on availability of alternative financing, 10% of the time increasing 1.0% monthly to a maximum of 20%;
|
|
-
|
The Holder would automatically convert the note at maturity if the registration was effective and the company was not in default;
|
|
-
|
An event of default would occur 5% of the time, increasing 1.00% per month to a maximum of 10% – to-date the 2 notes in default have been converted by the holder.
|
|
-
|
The projected volatility of 125%-126% for each valuation period was based on the volatility of 18 comparable company's in the same industry.
|
No legal proceedings are currently pending or, to our knowledge, threatened against us that, in the opinion our management, could reasonably be expected to have a material adverse effect on our business or financial conditions or results of operations.
11.
|
DISCONTINUED OPERATIONS
|
On April 1, 2014, the Company entered into a Sale Agreement with William Tien, a related party, in which William Tien will acquire the subsidiary, Zentric HK, for a total purchase price of $1,000 as a direct reduction in the debt owed to him. During the same period, William Tien forgave the Company debt balance of $14,693 which was recorded as additional paid-in capital due to related party relationship.
There were no activities in Zentrick HK during the year ended December 31, 2014 and as a result of discontinued operations the net loss of $0 for that period ended. There were no assets and the liabilities of Zentric HK were segregated in the balance sheet and labelled as discontinued.
On January 7, 2016, Zentric, Inc. received the notice of conversion to convert $850 of accrued interest from KBM Worldwide, Inc. into 14,166,667 common shares of the Company. Due to conversion within the terms of the note, no gain or loss was realized.
On January 7, 2016, Zentric, Inc. received the notice of conversion to convert $1,200 of principal from KBM Worldwide, Inc. into 20,000,000 common shares of the Company. Due to conversion within the terms of the note, no gain or loss was realized.
On January 11, 2016, Zentric, Inc. received the notice of conversion to convert $2,050 of principal from KBM Worldwide, Inc. into 34,166,667 common shares of the Company. Due to conversion within the terms of the note, no gain or loss was realized.
January 25, 2016, the Company issued 4,000,000 shares of Series A Preferred Stock to Jeff Mak in exchange for $28,000 in accrued salaries.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None
Item 9A. Controls and Procedures.
Disclosure Controls and Procedures
We maintain disclosure controls and procedures, as defined in Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934 (the "Exchange Act"), that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
We carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of December 31, 2015. Based on the evaluation of these disclosure controls and procedures, and in light of the material weaknesses found in our internal controls over financial reporting, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective.
Management's Report on Internal Control Over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Exchange Act Rule 13a-15(f). The Company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Under the supervision and with the participation of management, including the Chief Executive Officer and Chief Financial Officer, the Company conducted an evaluation of the effectiveness of the Company's internal control over financial reporting as of December 31, 2015 using the criteria established in "
Internal Control - Integrated Framework
" issued by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO").
A material weakness is a deficiency, or 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. In its assessment of the effectiveness of internal control over financial reporting as of December 31, 2015, the Company determined that there were control deficiencies that constituted material weaknesses, as described below.
|
1)
|
We do not have an Audit Committee
– While not being legally obligated to have an audit committee, it is the management's view that such a committee, including a financial expert member, is an utmost important entity level control over the Company's financial statement. Currently the Board of Directors acts in the capacity of the Audit Committee, and does not include a member that is considered to be independent of management to provide the necessary oversight over management's activities.
|
|
|
|
|
2)
|
We did not maintain appropriate cash controls
– As of December 31, 2015, the Company has not maintained sufficient internal controls over financial reporting for the cash process, including failure to segregate cash handling and accounting functions, and did not require dual signature on the Company's bank accounts. Alternatively, the effects of poor cash controls were mitigated by the fact that the Company had limited transactions in their bank accounts.
|
|
|
|
|
3)
|
We did not implement appropriate information technology controls
– As at December 31, 2015, the Company retains copies of all financial data and material agreements; however there is no formal procedure or evidence of normal backup of the Company's data or off-site storage of the data in the event of theft, misplacement, or loss due to unmitigated factors.
|
Management is evaluating plans on a cost benefit basis to remedy the above weaknesses and we continue the process to complete a thorough review of our internal controls as part of our preparation for compliance with the requirements of Section 404 of the Sarbanes-Oxley Act of 2002. Section 404 requires our management to report on, and our external auditors to attest to, the effectiveness of our internal control structure and procedures for financial reporting. As a non-accelerated filer under Rule 12b-2 of the Exchange Act, our first report under Section 404 as a smaller reporting company will be contained in our
Form 10-K for the year ended December 31, 2015.
This annual report does not include an attestation report of the company's independent registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by the company's registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the company to provide only management's report.
Changes in Internal Control over Financial Reporting
There has been no change in our internal control over financial reporting identified in connection with our evaluation we conducted of the effectiveness of our internal control over financial reporting as of December 31, 2015, that occurred during our fourth fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
This annual report does not include an attestation report of the Company's registered public accounting firm regarding internal control over financial reporting. Managements report was not subject to attestation by the Company's registered public accounting firm pursuant to temporary rules of the SEC that permit the Company to provide only management's report in this annual report.
Item 9B. Other Information
None.
PART II
OTHER INFORMATION
Item 10. Directors, Executive Officers, Promoters and Control Persons
Directors and Executive Officers
Set forth below are the names, ages and present principal occupations or employment, and material occupations, positions, offices or employments for the past five years of our current directors and executive officers.
Name
|
|
Age
|
|
Positions and Offices Held
|
|
|
|
|
|
William Tien
|
|
55
|
|
President/Director
|
Jeff Mak
|
|
58
|
|
President/CEO/CFO/Secretary/Director/Treasurer, Principal Executive Officer, Principal Financial Officer
|
BUSINESS EXPERIENCE
Set forth below is the name of our director and officer, all positions and offices held with us , the period during which he has served as such, and the business experience during at least the last five years:
JEFF MAK was appointed as our Chief Executive Officer, Chief Financial officer and a member of the Board of Directors as of July 23, 2008. Mr. Mak brings several years of experience in the design and technology industry. He was a founder and director of Logicsys Technologies, Inc a once publicly traded company on the TSX. He was also, president and founder of Eastgate Innovations, Inc. a product design and research and development company which owns several original patents and has licensed to several other companies. Mr. Mak was previously co-founder and director of Peceptek Inc. for 6 years since January 2002 to February 2008.
WILLIAM TIEN was appointed as our President and a member of the Board of Directors on July 18, 2011. He is an entrepreneur and business consultant serving in officer capacities for various private and public (Australian) entities. Since August 2004, he has been a director of C8R Asia Limited, a Hong Kong based investment firm, which specializing in advising new technology driven businesses on formation, business structures, and business operations. Mr. Tien is the Chairman, President and Principal Financial Officer of Alpha Lujo, Inc., a reporting company under the federal securities laws (OTCBB:ALEV).
Neither our sole executive officer nor any of our directors is a director in any other U.S. reporting companies. Our director/officer has not been affiliated with any company that has filed for bankruptcy within the last five years. The Company is not aware of any proceedings to which the Company's officer/directors, or any associate of any such officer/directors, is a party adverse to the Company or any of the Company's subsidiaries or has a material interest adverse to it.
Each director of the Company serves for a term of one year or until the successor is elected at the Company's annual shareholders' meeting and is qualified, subject to removal by the Company's shareholders. Each officer serves, at the pleasure of the board of directors, for a term of one year and until the successor is elected at the annual meeting of the board of directors and is qualified.
Audit Committee and Expert
We do not have an audit committee or an audit committee financial expert. Our corporate financial affairs are simple at this stage of development and each financial transaction can be viewed by any officer or director at will. The policy of having no committee will change if the constitution of one such becomes necessary as a result of growth of the company or as mandated by public policy.
Auditors; Code of Ethics; Financial Expert
We do not currently have a Code of Ethics applicable to our principal executive, financial and accounting officers. We do not have a "financial expert" on the board or an audit committee or nominating committee.
Potential Conflicts of Interest
Since we do not have an audit or compensation committee comprised of independent directors, the functions that would have been performed by such committees are performed by our directors. Thus, there is a potential conflict of interest in that our directors and officers have the authority to determine issues concerning management compensation and audit issues that may affect management decisions. We are not aware of any other conflicts of interest with any of our executives or directors.
Director Independence
We are not subject to listing requirements of any national securities exchange or national securities association and, as a result, we are not at this time required to have our board comprised of a majority of "independent directors." We do not believe that any of our directors currently meet the definition of "independent" as promulgated by the rules and regulations of the American Stock Exchange.
Item 11. Executive Compensation
Summary Compensation
On July 1, 2011, the Company approved an employment agreement with Jeff Mak, Chief Executive Officer, Chief Financial officer and a member of the Board of Directors offering a salary of $9,800 per month for his services. Due to the lack on cash on hand, this salary has been accrued for the year ended December 31, 2015 and 2014.
On November 1, 2011, the Company approved an employment agreement with William Tien was appointed as our President and a member of the Board of Directors offering a salary of $10,000 per month for his services. During the year ending December 31, 2013, William Tien waived $30,000 of his salaries and the remaining salary has been accrued. The agreement offers options as follows: option to acquire 1,000,000 common shares at $0.03 from December 31, 2011; option to acquire 1,000,000 common shares at $0.10 from December 31, 2012; option to acquire 1,000,000 common shares at $0.25 from December 31, 2013; and option to acquire 1,000,000 common shares at $0.50 from December 31, 2014. All options have a vesting period of three years or ninety days from termination of employment. On September 30, 2014, William Tien and the Board of Directors agreed to discontinue his current salary due to his reduced involvement in the company until further notice.
As of December 31, 2015, we have paid a total of $43,400 and accrued $387,650 to our directors or officers in consideration for their services rendered to our Company in their capacity as such. We have no pension, health, annuity, bonus, insurance, profit sharing or similar benefit plans.
Outstanding Equity Awards
Our directors and officers do not have unexercised options, stock that has not vested, or equity incentive plan awards.
Compensation of Directors
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Since our incorporation on July 21, 2008, we have issued 500,000 shares of common stock to Kwok Kwong Chan in consideration for his services rendered in his capacity as director, valued in the amount of $5,000.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The following table lists, as of April 14, 2015, the number of shares of common stock of our Company that are beneficially owned by (i) each person or entity known to our Company to be the beneficial owner of more than 5% of the outstanding common stock; (ii) each officer and director of our Company; and (iii) all officers and directors as a group. Information relating to beneficial ownership of common stock by our principal shareholders and management is based upon information furnished by each person using "beneficial ownership" concepts under the rules of the Securities and Exchange Commission. Under these rules, a person is deemed to be a beneficial owner of a security if that person has or shares voting power, which includes the power to vote or direct the voting of the security, or investment power, which includes the power to vote or direct the voting of the security. The person is also deemed to be a beneficial owner of any security of which that person has a right to acquire beneficial ownership within 60 days. Under the Securities and Exchange Commission rules, more than one person may be deemed to be a beneficial owner of the same securities, and a person may be deemed to be a beneficial owner of securities as to which he or she may not have any pecuniary beneficial interest. Except as noted below, each person has sole voting and investment power.
The percentages below are calculated based on 856,494,158 shares of our common stock and 10,000,000 shares of our preferred class A stock issued and outstanding as of April 14, 2015. We do not have any outstanding options, warrants or other securities exercisable for or convertible into shares of our common stock. Unless otherwise indicated, the address of each person listed is c/o Zentric, Inc., Unit C2, 802 Southdown Road, Mississauga, Ontario, L5J Canada.
Name of Beneficial Owner
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Title Of
Class
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Amount and Nature of Beneficial Ownership
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Percent of
Class
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Mr. Jeff Mak
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Common
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19,750,000
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2.3
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%
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Preferred A
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10,000,000
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100
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%
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William Tien
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Common
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6,666,667
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0.77
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%
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Directors and Officers as a Group (2 person)
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Common
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26,416,667
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3.1
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%
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Changes in Control
There are no arrangements which may result in a change in control of the Company.
Item 13. Certain Relationships and Related Transactions
Other than the transactions discussed below, we have not entered into any transaction nor are there any proposed transactions in which our Director, executive officer, stockholder or any member of the immediate family of the foregoing had or is to have a direct or indirect material interest.
Our officers and directors have advanced funds for professional fees and general expenses in the amount of $25,796 and $2,990 as of December 31, 2015 and 2014, respectively.
Item 14. Principal Accounting Fees and Services
Audit Fees
The aggregate fees billed for professional services rendered by the Company's principal accountant for the audit of the Company's annual financial statements for the fiscal years ended December 31, 2015 and 2014 were $6,000 and $7,500 respectively.
Audit-Related Fees
The Company incurred no fees during the last two fiscal years for assurance and related services by the Company's principal accountant that were reasonably related to the performance of the audit or review of the registrant's financial statements and are not reported under Item 9(e)(1) of Schedule A.
Tax Fees
The Company incurred no fees during the last two fiscal years for professional services rendered by the Company's principal accountant for tax compliance, tax advice and tax planning.
All Other Fees
The Company incurred fees during the last two fiscal years ended December 31, 2015 and 2014 were
$6,000 and $7,500 for services rendered by the Company's principal accountants relating to the review of quarterly financial statements for inclusion in the Company's quarterly reports on Form 10-Q.
PART IV
Item 15. Exhibits, Financial Statement Schedules
(3.1)
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(i) Articles of Incorporation
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(3.2)
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(ii) Bylaws. (1)
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(31.1)
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Rule 13a-14(a)/15d-14(a) Certifications
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(i) Certification of Jeff Mak
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(32.1)
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Certification Pursuant To The Sarbanes-Oxley Act 18 U.S.C. Section 1350 As
Adopted Pursuant To Section 906 Of The Sarbanes-Oxley Act Of 2002
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(i) Certification of Jeff Mak
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101
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XBRL Interactive Data Files
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_____________
(1)
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Incorporated by reference to previous filing
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(2)
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These items have been previously filed
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b)
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Reports on Form 8-K
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None
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this annual report on Form 10-K to be signed on its behalf by the undersigned thereunto duly authorized.
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ZENTRIC, INC.
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Date: April 14, 2016
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By:
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/s/ Jeff Mak
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Name:
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Jeff Mak
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Title:
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Chief Executive Officer, Chief Financial Officer
(Principal Executive Financial and Accounting Officer)
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