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CAUTIONARY NOTE FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K (this “Report”) contains “forward-looking statements” within the meaning of the Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements discuss matters that are not historical facts. Because they discuss future events or conditions, forward-looking statements may include words such as “anticipate,” “believe,” “estimate,” “intend,” “could,” “should,” “would,” “may,” “seek,” “plan,” “might,” “will,” “expect,” “predict,” “project,” “forecast,” “potential,” and “continue” negatives thereof or similar expressions. These forward-looking statements are found in various places throughout this Report and include information concerning possible or assumed future results of our operations; business strategies; future cash flows; financing plans; plans and objectives of management; any other statements regarding future operations, future cash needs, business plans and future financial results, and any other statements that are not historical facts.
From time to time, forward-looking statements also are included in our other periodic reports on Forms 10-Q and 8-K, in our press releases, in our presentations, on our website and in other materials released to the public. Any or all of the forward-looking statements included in this Report and in any other reports or public statements made by us are not guarantees of future performance and may turn out to be inaccurate. These forward-looking statements represent our intentions, plans, expectations, assumptions and beliefs about future events and are subject to risks, uncertainties and other factors. Many of those factors are outside of our control and could cause actual results to differ materially from the results expressed or implied by those forward-looking statements. In light of these risks, uncertainties and assumptions, the events described in the forward-looking statements might not occur or might occur to a different extent or at a different time than we have described. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this Report. All subsequent written and oral forward-looking statements concerning other matters addressed in this Report and attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this Report.
Except to the extent required by law, we undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, a change in events, conditions, circumstances or assumptions underlying such statements, or otherwise.
PART I
Item 1. Business
Organization
We were formed as a limited liability company in the state of Florida on April 1, 2010, to engage in the development and distribution of nutritional and dietary oral spray products. On December 3, 2012, we converted from a Limited Liability Company to a Florida Corporation.
Our principal executive office is located at 6601 Lyons Road Suite L-6, Coconut Creek, Florida 33073, and our telephone number is 888-509-8901.
We have not been involved in a bankruptcy receivership or similar proceeding. Additionally, we have not been involved in a reclassification, merger, consolidation, or purchase or sale of a significant amount of assets not in the ordinary course of business.
As of April 23, 2015 and December 31, 2014, we had cash on hand of $248,702 and $25,053 respectively.
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During the years ended December 31, 2014, and 2013, we received $680,000 and $615,000, respectively from the sale of our common stock. During the years ended December 31, 2014 and 2013, we received $565,000 and $755,000, respectively from the issuance of promissory notes. We used the proceeds of these offerings for working capital.
For the years ended 2014 and 2013, our revenues were $62,274, and $597,777, respectively. We incurred net losses of $2,075,720 and $2,083,359 for the years ended December 31, 2014 and 2013, respectively.
Our products are sold at over 200 retail locations including Walgreens, Shell, Mobil, Exxon Tiger Mart, Speedys, 7-Eleven, Shop rite Tobacco Plus and other convenience stores and truck stops.
Our Business
We manufacture and distribute four (4) oral spray nutritional and dietary products to retail and wholesale outlets. Our oral spray products are designed to provide faster and more efficient absorption than capsules or liquid formulas. Each product we offer is based upon the research of Edgar Ward, our Chief Executive Officer, President and sole Director, and in house chemist. Our products are and in the future will continue to be identified by Mr. Ward based upon suggestions from our customers, and from industry and market research he conducts on an ongoing basis. We do not employ medical professionals and our management does not have experience in the healthcare industry or in the treatment of disease. Our products have not been confirmed in any respect by the U.S. Food and Drug Administration or any other governmental agency, and may not produce the results intended.
All of our products are manufactured at our facility in Coconut Creek, Florida. We obtain all raw materials and ingredients for our products from third party suppliers. For all orders, we manufacture, package, label and ship the product to the customer.
Our website at http://www.shopnutrafuels.com allows retail customers to purchase our products on the internet. Our website at http://www.nutrafuels.com is used by our wholesale customers to place orders.
Our distribution strategy includes selling to retailers, distributors, private label customers and consumers through our retail website.
Our Products
During 2014, we developed three (3) new spray products and expanded our product offerings adding two new products, Headache and Pain Spray and Hair, Skin and Nails Spray. We also made modifications to our NutraFuels Weight Loss Spray, which now contains Garcinia Cambogia.
Our products are as follows:
NutraFuels Sleep Spray
Our Sleep Spray contains Melatonin, GABA and Valerian Root. NutraFuels Sleep Spray is designed to support a healthy sleep cycle and improve the quality of restful sleep. The retail price of our Sleep Spray is $3.99 per .25 (¼) ounce.
NutraFuels Energy Spray
Our Energize Spray contains B complex Vitamins, B-12. NutraFuels Energize Spray is designed to increase energy and restore vigor and vitality. The retail price of our Energize Spray is $3.99 per .25 (¼) ounce.
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NutraFuels Garcinia Cambogia Spray
Our Appetite and Weight management Spray contains Garcinia Cambogia. Our NutraFuels Garcinia Cambogia Spray is designed to suppress the appetite and boost metabolism. The retail price of our Body Slim Spray is $3.99 per .25 (¼) ounce.
NRG-X Extreme Energy Spray
Our NRG-X Extreme Energy Spray contains B complex Vitamins, B-12 and Caffeine. NutraFuels NRG-X Extreme Energy Spray is designed to increase energy and stamina. The retail price of our NRG-X Extreme Spray is $3.99 per .25 (¼) ounce.
NutraFuels Headache & Pain Spray
Our Headache and Pain Spray contains Turmacin a natural anti-inflammatory. Our NutraFuels Headache and Pain Spray is designed to relieve headaches and pain. The retail price of our Headache and Pain Spray is $3.99 per .25 (¼) ounce. We plan to launch this product in May 2015.
NutraFuels Hair, Skin & Nails Spray
Our Hair, Skin and Nails Spray contains Biotin, MSM, and Collagen. Our NutraFuels Hair, Skin and Nails Spray is designed to nourish and encourage hair, skin and nail growth. The retail price of our Hair, Skin and Nails Spray is $3.99 per .25 (¼) ounce. We plan to launch this product in May 2015.
Order Processing
We package and label all products we manufacture. We store inventory at our manufacturing facility. Upon receiving orders for products not in inventory, we manufacture, package and label the product. We ship the product ordered within 30 days to retail customers and within 3 weeks to our distributors and private label customers. All orders are shipped by freight delivery.
Material Agreements
On October 14, 2014, we entered into an agreement with Uptick Capital LLC, a Connecticut Limited Liability Company (“Uptick Capital”) to act as our business consultant. The agreement had an initial term of 3 months, and renews for subsequent 3 month terms unless terminated. The agreement provides that Uptick Capital will use its best efforts to: (a) become familiar with our business and operations and review and analyze our formal and informal strategic, marketing, financial and business plans and (b) advise us in strategic planning matters and assist in the implementation of short- and long-term strategic planning initiatives to enhance and accelerate the commercialization of our business objectives.
In exchange for Uptick Capital’s services, we pay 20,000 shares of our common stock per month. To date, we have issued 120,000 common shares to Uptick Capital for their services.
On April 14, 2015, we entered into an agreement with Benchmark Advisory Partners, LLC (“Benchmark”), a California Limited Liability Company, to provide us with business and financial advice and introductions to securities law professionals, legal teams, accountants, auditors, investment bankers, brokerage firms, venture capital firms, banks, private equity firms, special situation investors, alternative debt financiers and others who may be able to provide equity or debt financing to us.
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The agreement has a term of six (6) months. We agreed to pay three hundred thousand shares (300,000) shares of our common stock in exchange for their services with one hundred thousand (100,000) shares due upon execution, one hundred thousand (100,000) shares due on June 14, 2015, and the remaining one hundred thousand (100,000) shares due on August 14, 2015.
To date, we have issued 100,000 common shares to Benchmark in exchange for their services.
On February 19, 2015, we entered into an agreement with GenCap Securities, LLC (“GenCap”), to serve as the exclusive placement agent for us, on a best efforts basis, in connection with the proposed offering of up to $10,000,000 in common equity, senior secured debt, junior debt, convertible debt, and/or other instruments.
The agreement terminates upon the earlier of: (i) 90 days after execution, or (ii) consummation of an offering. After 90 days, the agreement may be terminated by either party upon 15 days notice.
We are obligated to pay to GenCap: (i) a retainer fee in the amount of $15,000 per month for a period of months which shall accrue and be payable upon financing facilitated by GenCap; and (ii) a cash placement fee of: (a) for senior and junior debt that is not convertible, 5.5% of the aggregate purchase price paid by each investor; and (b) for common equity, preferred equity and convertible debt, 12% of the aggregate purchase price paid by each investor plus warrants to purchase that number of shares of Common Stock equal to 12% of the aggregate number of shares sold in the Offering, or of the total “would be” issued securities on an “as-is” converted basis. To date, GenCap has not located funding for us and as such, no payments have been made to GenCap.
On July 25, 2013, we entered into an agreement, amended on January 29, 2014, with Nutra Evolution whereby we were granted a license to market nutritional supplements under the TapouT XT name to retail locations worldwide.
This agreement was terminated on April 20, 2015. We presently are in negotiations for the renewal of this agreement.
Presently, Core-Mark Holdings Company is the only distributor of our products.
Website Sales
Our retail website is www.ShopNutraFuels.com. Website orders are paid for upon order. Website orders accounted for less than 3% of our revenues for the year ending December 31, 2014.
Product Quality
In developing our products, we require:
·
ingredients that are supported with a certificate of analysis, publicly available scientific research and references which our Chief Executive Officer reviewed with a chemist who developed our final products;
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ingredients that are combined so that their effectiveness is not impaired;
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ingredients that are in dosage levels that fall within tolerable upper intake levels established for healthy people by the Institute of Medicine of the National Academies;
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·
products that do not contain any substances banned by major sporting organizations such as the World Anti-Doping Agent, or WADA, NFL or MLB, or adulterated ingredients such as ephedra, androstenedione, aspartame, steroids or human growth hormones; and
·
formulations that have a minimum one-year shelf life.
Marketing Strategy
Our core marketing strategy is to brand our “Fuels Your Life” brand for those seeking to improve the quality of life through dietary supplementation. We believe that our marketing mix of TV, print, radio, billboards and in store event promotions, providing coupons along with sample products for our retail resellers to use, is an optimal strategy to increase sales.
Return and Refund Policy
We will exchange any product found to be defective. A written exchange request must be submitted when a customer returns defective or damaged products. Purchasers can apply for a refund in full amount of purchased products within 10 days of purchase. If the purchasers are not satisfied with our products for any reason, they can return products and request for an exchange. All shipping fees for product exchanges or returns must be paid by the purchaser. Historically, product returns as a percentage of our net sales have been nominal.
Patents and Trademarks
We received federal trademark registration for the expression “Spray your way to a healthier day!” that we use or intend to use to distinguish ourselves from others. All trademark registrations are protected for an initial period of five years and then are renewable after five years, if still in use, and every 10 years thereafter.
We hold the following trade names from the U.S. Patent and Trademark office:
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NRG-X Spray
·
Micro-Blast Body Slim
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Micro-Blast
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Body Slim
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Spray your way to a healthier day!
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NUTRA FUELS
Employees
We have a total of nine (9) full-time employees as follows:
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Our Chief Executive Officer, President and sole Director, Edgar Ward oversees our day to day operations;
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One (1) supervisor of our manufacturing facility;
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Four (4) full time employees who assist in our manufacturing facility;
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One (1) Chemist;
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·
One (1) Secretary; and
·
One (1) Administrative Assistant.
Part-time Employees
Neil Catania, our Vice President works closely with Edgar Ward and provides us with approximately 60 hours per month of services.
None of our employees are employed under a collective bargaining agreement. We believe we have an excellent relationship with our employees and independent contractors.
Manufacturing
Our manufacturing process generally consists of the following operations: (i) sourcing ingredients for products, (ii) warehousing raw ingredients, (iii) measuring ingredients for inclusion in products, and (iv) blending using automatic equipment. The next step, bottling and packaging, involves filling, capping, coding, labeling and placing the product in packaging with appropriate tamper-evident features then sending the packaged product to our customers.
We manufacture, package, label and store our products at our facility in Coconut Creek, Florida. We manufacture 100% of our products. By manufacturing our own products, we believe that we maintain better control over product quality and availability while also reducing production costs.
The FDA requires companies manufacturing homeopathic medicines to have their facilities certified as Good Manufacturing Practices ("GMPs"). Our manufacturing facility has been fully compliant with its GMP certification. Our quality control program seeks to ensure the superior quality of our products and that they are manufactured in accordance with current GMP. Our processing methods are monitored closely to ensure that only quality ingredients are used and to ensure product purity. Periodically, we retain the services of outside GMP audit firms to assist in our efforts to comply with GMPs. In 2013, we used the services of ASI Food Safety Consultants, Inc., a GMP audit firm to assist us with our GMP compliance.
Sources and Availability of Raw Materials
Raw materials used by us are available from a variety of suppliers. We maintain a good relationship with our suppliers and do not anticipate that any of our suppliers will terminate their relationship with us in the near term. We have ongoing relationships with secondary and tertiary suppliers. In the event, we are unable to obtain any of our raw materials from our suppliers, we believe that we could obtain alternative sources of any raw materials from other suppliers. We do not have contracts with our suppliers and we order our raw materials on an as-needed basis. We have not experienced any material adverse effects on our business as a result of shortages of raw materials or packaging materials used in the manufacturing of our products. An unexpected interruption or a shortage in supply of raw materials could adversely affect our business derived from these products.
Backlog of Orders
We have no backlog of orders.
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Seasonal Aspect of our Business
None of our products are affected by seasonal factors.
Status of any Publicly Announced New Product or Service
We do not have any publicly announced new product or service.
Competitive Business Conditions
The nutritional and dietary supplement industries are highly competitive. Nutritional supplements include vitamins, minerals, dietary supplements, herbs, botanicals and compounds derived therefrom. Numerous manufacturers and distributors compete with us for customers throughout the United States in the packaged nutritional supplement industry selling products to retailers such as mass merchandisers, drug store chains, independent pharmacies and health food stores. We are also vulnerable to competition from companies that can purchase similar products to ours and private label them with their own brand name.
Many of our indirect competitors are substantially larger, have more experience than us, have longer operating histories, and have materially greater financial and other resources than us.
Costs and Effects of Compliance with Environmental Laws
We are in a business that involves the use of raw materials in a manufacturing process, however, it is unlikely that such materials are likely to result in the violation of any existing environmental rules and/or regulations. Further, we do not own any real property that could lead to liability as a landowner. Therefore, we do not anticipate that there will be any material costs associated with compliance with environmental laws and regulations.
Government Approvals
We are not required to obtain governmental approval of our products.
Product Liability
We have product liability insurance for our manufacturing activities and products in the amount of $5,000,000. Product liability claims may result in significant legal costs related to our defense of such actions if the amounts exceed our product liability insurance coverage. The design, development, and manufacture of products for human consumption involves an inherent risk of product liability claims and corresponding damage to our brand name reputation, including claims of product failure or harm caused by our products. As such, any product liability claim could adversely affect our business.
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Government Regulation
The formulation, manufacturing, packaging, labeling, advertising, distribution and sale (hereafter, "sale" or "sold" may be used to signify all of these activities) of our products are subject to regulation by one or more federal agencies, principally the Food and Drug Administration ("FDA") and the Federal Trade Commission ("FTC"), and to a lesser extent the Consumer Product Safety Commission ("CPSC"), the United States Department of Agriculture and the Environmental Protection Agency. Our activities are also regulated by various governmental agencies for the states and localities in which our products are sold, as well as by governmental agencies in certain countries outside the United States in which our products are sold. Among other matters, regulation by the FDA and FTC are concerned with product safety and claims made with respect to a product's ability to provide health-related benefits. Specifically, the FDA, under the Federal Food, Drug, and Cosmetic Act ("FDCA"), regulates the formulation, manufacturing, packaging, labeling, distribution and sale of food, including dietary supplements, and over-the-counter drugs. The FTC regulates the advertising of these products. The National Advertising Division ("NAD") of the Council of Better Business Bureaus oversees an industry-sponsored, self-regulatory system that permits competitors to resolve disputes over advertising claims. The NAD has no enforcement authority of its own, but may refer matters that appear to violate the Federal Trade Commission Act or the FDCA to the FTC or the FDA for further action, as appropriate.
Federal agencies, primarily the FDA and the FTC, have a variety of procedures and enforcement remedies available to them, including initiating investigations, issuing warning letters and cease-and-desist orders, requiring corrective labeling or advertising, requiring consumer redress (for example, requiring that a company offer to repurchase products previously sold to consumers), seeking injunctive relief or product seizures, imposing civil penalties, or commencing criminal prosecution. In addition, certain state agencies have similar authority. These federal and state agencies have in the past used these remedies in regulating participants in the food, dietary supplement and over-the-counter drug industries, including the imposition of civil penalties in the millions of dollars against a few industry participants.
The Dietary Supplement Health and Education Act ("DSHEA") was enacted in 1994, amending the FDCA. We believe DSHEA is generally favorable to consumers and to the dietary supplement industry. DSHEA establishes a statutory class of "dietary supplements," which includes vitamins, minerals, herbs, amino acids and other dietary ingredients for human use to supplement the diet. Dietary ingredients marketed in the United States before October 15, 1994 may be marketed without the submission of a "new dietary ingredient" ("NDI") premarket notification to the FDA. Dietary ingredients not marketed in the United States before October 15, 1994 may require the submission, at least 75 days before marketing, of an NDI notification containing information establishing that the ingredient is reasonably expected to be safe for its intended use. Among other things, DSHEA prevents the FDA from regulating dietary ingredients in dietary supplements as "food additives" and allows the use of statements of nutritional support on product labels and in labeling. The FDA has issued final regulations under DSHEA and has issued draft guidance on NDI notification requirements. Further guidance and regulations are expected. Several bills to amend DSHEA in ways that would make this law less favorable to consumers and industry have been proposed in Congress.
The Nutrition Labeling and Education Act of 1990 ("NLEA”) amended the FDCA to establish additional requirements for ingredient and nutrition labeling and labeling claims for foods. If the NLEA labeling requirements change at a future time, we may need to revise our product labeling. Most of our products are classified as dietary supplements.
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The FDA issued a Final Rule on GMPs for dietary supplements on June 22, 2007. The GMPs cover manufacturers and holders of finished dietary supplement products, including dietary supplement products manufactured outside the United States that are imported for sale into the United States. Among other things, the new GMPs: (a) require identity testing on all incoming dietary ingredients, (b) call for a "scientifically valid system" for ensuring finished products meet all specifications, (c) include requirements related to process controls, including statistical sampling of finished batches for testing and requirements for written procedures and (d) require extensive recordkeeping.
We have reviewed the GMPs and have taken steps to ensure compliance. While we believe we are in compliance, there can be no assurance that our operations or those of our suppliers will be in compliance in all respects at all times. Additionally, there is a potential risk of increased audits as the FDA and other regulators seek to ensure compliance with the GMP’s.
On December 22, 2006, Congress passed the Dietary Supplement and Nonprescription Drug Consumer Protection Act, which went into effect on December 22, 2007. The law requires, among other things, that companies that manufacture or distribute nonprescription drugs or dietary supplements report serious adverse events allegedly associated with their products to the FDA and institute recordkeeping requirements for all adverse events (serious and non-serious). There is a risk that consumers, the press and government regulators could misinterpret reported serious adverse events as evidence of causation by the ingredient or product complained of, which could lead to additional regulations, banned ingredients or products, increased insurance costs and a potential increase in product liability litigation, among other things.
The Consumer Product Safety Improvement Act of 2008 ("CPSIA") primarily addresses children's product safety but also improves the administrative process of the CPSC. Among other things, the CPSIA requires testing and certification of certain products and enhances the CPSC's authority to order recalls.
The FDA Food Safety Modernization Act ("FSMA"), enacted January 4, 2011, amended the FDCA to significantly enhance the FDA's authority over various aspects of food regulation. The FSMA granted the FDA mandatory recall authority when the FDA determines if there is reasonable probability that a food is adulterated or misbranded and that the use of, or exposure to, the food will cause serious adverse health consequences or death to humans or animals. Other changes include the FDA's expanded access to records; the authority to suspend food facility registrations and require high risk imported food to be accompanied by a certification; stronger authority to administratively detain food; the authority to refuse admission of an imported food if it is from a foreign establishment to which a U.S. inspector is refused entry for an inspection; and the requirement that importers verify that the foods they import meet domestic standards.
One of the FSMA's more significant changes is the requirement of hazard analysis and risk-based preventive controls ("HARBPC") for all food facilities required to register with the FDA, except dietary supplement facilities in compliance with both GMPs and the serious adverse event reporting requirements. Although dietary supplement facilities are exempt from the HARBPC requirements, dietary ingredient facilities might not qualify for the exemption. The HARBPC requirements, which the FDA has yet to propose, are expected to be onerous because facilities will have to develop and implement preventive controls to assure that identified hazards are significantly minimized or prevented, monitor the effectiveness of the preventive controls and maintain numerous records related to the HARBPC. The HARBPC requirements may increase the costs of dietary ingredients and/or affect our ability to obtain dietary ingredients.
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As required by Section 113(b) of the FSMA, the FDA published in July 2011 a draft guidance document clarifying when the FDA believes a dietary ingredient is an NDI, when a manufacturer or distributor must submit an NDI premarket notification to the FDA, the evidence necessary to document the safety of an NDI and the methods for establishing the identity of an NDI. The draft guidance, if implemented as proposed, could have a material impact on our operations. Although our industry has strongly objected to several aspects of the draft guidance, it is unclear whether the FDA will make changes to the final guidance. In addition, it is possible that the FDA will begin taking enforcement actions consistent with the interpretations in the draft guidance before issuing a final version.
The new FSMA requirements, as well as the FDA enforcement of the NDI guidance as written, could require us to incur additional expenses, which could be significant, and negatively impact our business in several ways, including, but not limited to, the detention and refusal of admission of imported products, the injunction of manufacturing of any dietary ingredients or dietary supplements until the FDA determines that such ingredients or products are in compliance and the potential imposition of fees for re-inspection of noncompliant facilities. Each of these events would increase our liability and could have a material adverse effect on our financial condition, results of operations or cash flows.
The FTC and the FDA have pursued a coordinated effort to challenge what they consider to be unsubstantiated and unsafe weight-loss products, and have also coordinated enforcement against dietary supplement claims in other areas, including children's products. Their efforts to date have focused on manufacturers and marketers as well as media outlets, and have resulted in a significant number of investigations and enforcement actions, some resulting in civil penalties of several million dollars under the Federal Trade Commission Act. We expect that the FTC and the FDA will continue to focus on health-related claims for dietary supplements and foods, and our products could be the subject of an FTC/FDA inquiry.
Item 1A. Risk Factors
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information under this item.
Item 1B. Unresolved Staff Comments
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information under this item.
Item 2. Properties
We lease an aggregate of 6,400 square feet of office and warehouse space at 6601 Lyons Rd, Suites L-6&7, Coconut Creek, FL 33073, with base rent at $5,300 per month from Lyons Corporate Park for our executive offices and manufacturing facility. Approximately 5,800 square feet is used for manufacturing and distribution. The lease term expires on January 16, 2016. We believe our facilities are suitable for our present needs. Other than the foregoing, we do not intend to renovate, improve, or develop properties.
We are not subject to competitive conditions for property and currently have no property to insure. We have no policy with respect to investments in real estate or interests in real estate and no policy with respect to investments in real estate mortgages. Further, we have no policy with respect to investments in securities of or interests in persons primarily engaged in real estate activities.
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Item 3. Legal Proceedings
We are not involved in any legal proceedings. From time to time, we may become involved in various lawsuits and legal proceedings, which arise, in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business. We are currently not aware of any such legal proceedings or claims that we believe will have a material adverse effect on our business, financial condition or operating results.
Item 4. Mine Safety Disclosures
Not applicable.
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Public Market for Common Stock
Our common stock has been quoted by OTC Markets OTC Link in the OTCQB tier since May 19, 2014, under the symbol NTFU. The OTC Markets OTC Link is a quotation service that displays real-time quotes, last-sale prices, and volume information in over-the-counter ("OTC"), equity securities. An OTC equity security is generally any equity that is not listed or traded on a national securities exchange. The following table shows, for the periods indicated, the high and low bid prices per share of our common stock as reported by the OTC quotation service. These bid prices represent prices quoted by broker-dealers on the OTC quotation service. The quotations reflect inter-dealer prices, without retail mark-up, mark-down or commissions, and may not represent actual transactions.
Price Range of Common Stock
The following table shows, for the periods indicated, the high and low bid prices per share of our common stock as reported by the OTC quotation service. These bid prices represent prices quoted by broker-dealers on the OTC quotation service. The quotations reflect inter-dealer prices, without retail mark-up, mark-down or commissions, and may not represent actual transactions.
| | | | | | | | | | | | | |
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| Fiscal
December 31,
2014
|
|
| |
|
|
| High
|
|
| Low
|
|
| |
|
First Quarter (January 1 – March 31, 2014)
|
| $
| N/A
|
|
| $
| N/A
|
|
| |
Second Quarter (April 1 – June 30, 2014)
|
| $
| 2.00
|
|
| $
| 1.01
|
|
| |
Third Quarter (July 1- September 30, 2014)
|
| $
| 1.75
| |
| $
| .50
|
|
| |
Fourth Quarter (October 1 - December 31, 2014)
|
| $
| 1.05
| |
| $
| .41
|
|
| |
First Quarter (January 1 – March 31, 2015)
| | $
| 1.94
|
| | $
| .40
| | | |
| | | | | | | | | | | | |
Penny Stock Considerations
Our common shares will be "penny stocks", as that term is generally defined in the Securities Exchange Act of 1934 to mean equity securities with a price of less than $5.00. Thus, our shares will be subject to rules that impose sales practice and disclosure requirements on broker-dealers who engage in certain transactions involving a penny stock.
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Under the penny stock regulations, a broker-dealer selling a penny stock to anyone other than an established customer must make a special suitability determination regarding the purchaser and must receive the purchaser's written consent to the transaction prior to the sale, unless the broker-dealer is otherwise exempt.
In addition, under the penny stock regulations, the broker-dealer is required to:
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Deliver, prior to any transaction involving a penny stock, a disclosure schedule prepared by the Securities and Exchange Commission relating to the penny stock market, unless the broker-dealer or the transaction is otherwise exempt;
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Disclose commissions payable to the broker-dealer and our registered representatives and current bid and offer quotations for the securities;
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Send monthly statements disclosing recent price information pertaining to the penny stock held in a customer's account, the account's value, and information regarding the limited market in penny stocks; and
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Make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser's written agreement to the transaction, prior to conducting any penny stock transaction in the customer's account.
Because of these regulations, broker-dealers may encounter difficulties in their attempt to sell shares of our common stock, which may affect the ability of our shareholders or to sell their shares in the secondary market, and have the effect of reducing the level of trading activity in the secondary market. These additional sales practice and disclosure requirements could impede the sale of our securities, if our securities become publicly traded. In addition, the liquidity for our securities may be decreased, with a corresponding decrease in the price of our securities. Our shares in all probability will be subject to such penny stock rules and our shareholders will, in all likelihood, find it difficult to sell their securities.
Sales of Our Common Stock under Rule 144
As of April 24, 2015, we had 22,392,114 common shares outstanding. Of these shares 15,153,635 common shares are held by non-affiliates and 7,238,479 common shares are held by affiliates, which Rule 144 of the Securities Act of 1933 defines as restricted securities. In general, persons holding restricted securities, including affiliates, as amended, must hold their shares for a period of at least six months, may not sell more than one percent of the total issued and outstanding shares in any 90-day period, and must resell the shares in an unsolicited brokerage transaction at the market price. As of the date of this report on Form 10-K, we have 15,133,635 common shares that are held by non-affiliates and eligible for public resale. Sales of shares under Rule 144 could reduce the price of our common shares.
Transfer and Registrar
Our transfer agent is VStock Transfer LLC located at 77 Spruce Street, Suite 201 Cedarhurst, NY 11516. Its telephone number is 212-828-8436 and its website is located at http://www.vstocktransfer.com.
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Dividends
We have not declared any cash dividends on our common stock since our inception and do not anticipate paying such dividends in the foreseeable future. We plan to retain any future earnings for use in our business. Any decisions as to future payments of dividends will depend on our earnings and financial position and such other facts, as the Board of Directors deems relevant.
Authorized Capital Stock
We are authorized to issue 499,990,000 shares of common stock, $.0001 par value per share, and 10,000 shares of preferred stock. As of December 31, 2014 and April 24, 2015, there are 22,282,114 and 22,392,114 shares of our common stock issued and outstanding respectively. We have 50 stockholders of record, and 1,000 shares of preferred stock outstanding held by one holder, Edgar Ward, our Chief Executive Officer, President and Sole Director.
Common Stock
Each share of our common stock entitles the holder to one (1) vote, either in person or by proxy, at meetings of shareholders. The shareholders are not permitted to vote their shares cumulatively. Accordingly, the holders of more than fifty percent (50%) of the total voting rights on matters presented to our common stockholders can elect all of our directors and, in such event, the holders of the remaining minority shares will not be able to elect any such directors. The vote of the holders of a majority of the holders entitled to vote on matters submitted to our common stockholders including of our Series A Preferred Shares described below is sufficient to authorize, affirm, ratify, or consent to such act or action, except as otherwise provided by law.
To date, we have paid no cash dividends on our shares of common stock. Any future disposition of dividends will be at the discretion of our Board of Directors and will depend upon, among other things, our future earnings, operating and financial condition, capital requirements, and other factors. We have no present plans for future cash or stock dividends. We intend to retain future earnings, if any, to provide funds for operation of our business.
Holders of our common stock have no preemptive rights. All outstanding shares of our common stock are validly issued, fully paid and non-assessable.
Upon our liquidation or dissolution, the assets legally available for distribution to holders of shares of the common stock, after payment of all of our obligations, are distributable ratably among the holders of the then outstanding common stock.
Preferred Stock
We are authorized to issue 10,000 shares of preferred stock with a par value of $.0001 per share. We have designated 1,000 shares of our preferred stock as Series A Shares. All outstanding Series A Preferred Shares are validly issued, fully paid and non-assessable.
16
The Series A Shares have the following rights and preferences:
·
Each one (1) share is entitled to 500,000 votes per share on all matters submitted to our common stockholders;
·
The Series A Shares are not convertible into common shares;
·
The holders of the Series A Shares are not entitled to receive dividends or any distribution upon our liquidation or dissolution;
·
The holders of the Series A Shares cannot assign or sell the shares; and
·
The Series A Shares are redeemable in whole by us for the price of $1000 at the option of the holder.
So long as any of the Series A Shares are outstanding, we cannot take the following actions without the consent of the holders of 100% of the Series A Shares: amend, alter, waive or repeal, whether by merger consolidation, combination, reclassification or otherwise, the Articles of Incorporation or Bylaws; or create, authorize or issue any class, series or shares of any class of capital stock. The rights and preferences of the Series A Share cannot be amended without the consent of 100% of the holders of the Series A Shares.
We have 1000 Series A shares outstanding which are held by Edgar Ward, our Chief Executive Officer, President and Sole Director. The 1000 shares held by Mr. Ward entitle him to 500,000,000 votes per share on all matters submitted to our stockholders.
Our Board of Directors may designate the authorized but unissued shares of the Preferred Stock with such rights and privileges as the board of directors may determine subject to the rights granted to the holders of the Series A Shares as described above. As such, our Board of Directors may issue an additional 9,000 preferred shares and designate conversion, voting and other rights and preferences without notice to our shareholders and without shareholder approval if it obtains the consent of Mr. Ward.
Securities Authorized for Issuance under Equity Compensation Plans
We presently do not have any equity based or other long-term incentive programs. In the future, we may adopt and establish an equity-based or other long-term incentive plan if it is in the best interest of the Company and our stockholders to do so.
Sales of Unregistered Securities
In the two years, prior to the filing of this Form 10-K, we offered and sold securities below. None of the issuances involved underwriters, underwriting discounts or commissions. We relied upon Sections 4(2) of the Securities Act, and Rule 506 of the Securities Act of 1933, as amended for the offer and sale of the securities.
17
We believed these exemptions were available because:
·
We are not a blank check company;
·
We filed a Form D, Notice of Sales, with the SEC;
·
Sales were not made by general solicitation or advertising;
·
All certificates had restrictive legends;
·
Sales were made to persons with a pre-existing relationship to our Chief Executive Officer, President and Sole Director, Edgar Ward; and
·
Sales were made to investors who represented that they were accredited investors.
In connection with the above transactions, although some of the investors may have also been accredited, we provided the following to all investors:
·
Access to all our books and records;
·
Access to all material contracts and documents relating to our operations; and
·
The opportunity to obtain any additional information, to the extent we possessed such information, necessary to verify the accuracy of the information to which the investors were given access.
Prospective investors were invited to review at our offices at any reasonable hour, after reasonable advance notice, any materials available to us concerning our business.
On January 9, 2013, we sold 71,429 common shares to Davis Pallan for the price of $.35 per share or an aggregate price of $25,000.
On January 14, 2013, we sold 71,429 common shares to James Stuart for the price of $.35 per share or an aggregate price of $25,000.
On January 17, 2013, we sold 142,857 common shares to Craig Hetherington for the price of $.35 per share or an aggregate price of $50,000. On May 17, 2013, we sold 185,714 common shares for the price of $.27 per share to Craig Hetherington for the aggregate price of $50,000.
On February 15, 2013 we issued a $50,000 convertible note to Neil Catania. As amended, the note bears interest at a rate of 10%, and is due and payable on November 15, 2015. The note is convertible into shares of our common stock at $1.00 per share.
On March 5, 2013, we sold 71,428 common shares to James Kushner for the price of $.35 per share or an aggregate price of $25,000.
On April 11, 2013, we sold 71,428 common shares to Bernadine Cawley for the price of $.35 per share or an aggregate price of $25,000. On June 21, 2013, we sold 71,428 common shares to Bernadine Cawley for the price of $.35 per share or an aggregate price of $25,000.
18
On May 5, 2013, we issued 714,285 of shares and on September 3, 2013, we issued 1,000,000 shares to Edgar Ward for services rendered. We valued these shares at $.35 per share.
On May 17, 2013, we issued 778,571 common shares to Neil Catania which we valued at $.35 per share, for services rendered to us.
On May 17, 2013, we issued 17,142 common shares to Swen Paul Swenson for services rendered to us. We valued these shares at $.35 per common share.
On May 17, 2013, we issued 285,714 common shares to Jesse Kleinstein for services rendered to us. We valued these shares at $.35 per common share. On September 1, 2013, we issued 100,000 shares of our common stock to Jesse Kleinstein for services rendered to us. We valued these shares at $.35 per share.
On May 17, 2013, we issued 17,142 common shares to Aero Tech Labs, Inc., a company controlled by Scott Hofman, for rent. We valued these shares at $.35 per common share.
On May 17, 2013, we issued 100,000 common shares to Robert Gorgia for services rendered to us. We valued these shares at $.35 per common share.
On May 17, 2013, we issued 42,857 common shares to Zachary Trimble as a signing bonus for serving as our plant production manager. We valued these shares at $.35 per common share. Zachary Trimble is the adult son of our President and Chief Executive Officer Edgar Ward.
On May 17, 2013, we issued 14,285 of our common shares Domenic Mucciacciaro for services rendered to us. We valued these shares at $.35 per common share.
On May 17, 2013, we issued 14,285 common shares to Daniel Ryan for service rendered to us. We valued these shares at $.35 per common share. On September 4, 2013, we issued 42,857 shares of our common stock to Daniel Ryan for services rendered to us. We valued these shares at $.35 per share.
On May 17, 2013 we issued 25,000 common shares to Royal Palm Consulting Services LLC for services rendered by Joseph Babiak. We valued these shares at $.35 per common share.
On May 17, 2013, we issued 71,428 common shares to Richard Callipari for services rendered. We valued these shares at $.35 per common share.
On May 17, 2013, we issued 14,285 common shares to Clinical Consultant Assistant Inc. for services rendered by Keith Foulis. We valued these shares at $.35 per common share.
On June 1, 2013, we issued 25,000 shares of our common stock to Nicholas Ward for services rendered to us. We valued these shares at $.35 per share. Nicholas Ward is the adult son of our President and Chief Executive Officer Edgar Ward.
On June 7, 2013, we issued a $100,000 convertible note to Craig Hetherington. As amended, the note bears interest 10% and is due June 1, 2015. The note is convertible into shares of our common stock at $1.00 per share.
19
On July 2, 2013, we sold 71,428 common shares to Ann Noble for the price of $.35 per share or an aggregate price of $25,000.
On July 8, 2013, we sold 71,428 common shares to Patrick Kilcooley, Sr for the price of $.35 per share or an aggregate price of $25,000.
On July 9, 2013, we sold 71,428 common shares to Joseph Repice for the price of $.35 per share or an aggregate price of $25,000.
On July 11, 2013, we sold 71,428 common shares to Thomas Noble for the price of $.35 per share or an aggregate price of $25,000.
On July 13, 2013, we sold 142,457 common shares to Richard Scott Lohan for the price of $.35 per share or an aggregate price of $50,000. On October 22, 2013, Mr. Lohan purchased 50,000 common shares, at the price of $1.00 per share or an aggregate price of $50,000.
On July 17, 2013, we sold 42,857 common shares to Patrick Kilcooley Jr. for the price of $.35 per share or an aggregate price of $15,000. Patrick Kilcooley Jr. is the son of Patrick Kilcooley Sr.
On August 26, 2013, we issued a $200,000 note to Craig Hetherington. As amended, the note bears interest at 15%, and is due and payable on August 26, 2015. In connection with the investment, Mr. Hetherington received 250,000 common shares and warrants to purchase 500,000 shares of our common stock at $0.75 per share at any time prior to August 26, 2015.
On September 1, 2013, we issued 50,000 shares of our common stock to Donna Prestine Henry for services rendered to us. We valued these shares at $.35 per share.
On September 1, 2013, we issued 50,000 shares of our common stock to John Hampton for services rendered to us. We valued these shares at $.35 per share.
On September 3, 2013, we issued 28,571 shares of our common stock to Patrick Kilcooley Jr. for services rendered to us. We valued these shares at $.35 per share.
On September 4, 2013, we issued 100,000 shares to Hamilton & Associates for legal services rendered to us. We valued these shares at $.35 per share. On November 27, 2013, we issued 9,484 shares of our common stock to Hamilton & Associates Law Group, P.A., in exchange for legal services. We valued these shares at $.35 per share.
On September 30, 2013, Paul Paternoster purchased 100,000 shares of our common stock for the price of $1.00 per share or an aggregate price of $100,000.
On December 16, 2013, we sold 50,000 common shares to John Romero for the price of $1.00 per share or an aggregate price of $25,000.
On December 17, 2013, we issued 7,329 shares of our common shares to Sherlley Baptiste for Services rendered to us. Ms. Baptiste is an employee at Hamilton & Associates Law Group P.A. We valued these shares at $.35 per share.
20
On December 18, 2013, we sold 25,000 common shares to John Romero Jr. for the price of $1.00 per share or an aggregate price of $25,000.
On December 28, 2013, we sold 25,000 common shares to John Seip for the price of $1.00 per share or an aggregate price of $25,000.
During February 20, 2014, we issued a $50,000 note to Dennis Poland with a maturity date of May 1, 2014 (subsequently extended to January 15, 2016. Mr. Poland also received 50,000 shares of our common stock.
On March 26, 2014, we issued a $290,000 convertible note to Craig Hetherington. As amended, the note bears interest at the rate of 10%, and is due and payable on January 15, 2016. The note is convertible into shares of our common stock at $1.00 per share. In connection with the investment, Mr. Hetherington also received warrants to purchase 500,000 shares of our common stock at $0.50 per share until March 26, 2016.
On April 25, 2014, we sold 500,000 Units to William J. Ferri in exchange for $500,000. Each one (1) unit includes 500,000 shares of common stock and warrants to purchase 500,000 common shares. Each warrant was convertible into one (1) share of our common stock at the price of $.50 at any time before April 25, 2015. To date, no warrants have been exercised.
On June 23, 2014, we issued a $30,000 convertible note to Craig Hetherington. The note bears interest at 10%, matures on June 23, 2015, and is convertible into shares of our Company at $1.00 per share.
On August 5, 2014, we issued 10,000 shares of our common stock to Jonathan Dunsmoor for services rendered to us. We valued these shares at $1.25 per share.
On August 27, 2014, we issued a $50,000 convertible note to John Hampton. The note bears interest at 10%. As amended, the note is due January 2, 2016. The note is convertible into shares of our common stock at $1.00 per share. Mr. Hampton also received 50,000 shares of our common stock in connection with the investment.
On September 2, 2014, we issued 150,000 shares of our common stock for $150,000 to Donald Brennick. In connection with the investment, we issued warrants to Mr. Brennick to purchase 150,000 shares of our common stock at an exercise price of $0.20 per share. The warrants expire on September 2, 2015.
On October 3, 2014, we issued a $60,000 convertible note to John Hampton. As amended, the note bears interest at the rate of 10%, and is due and payable on January 15, 2016. The note is convertible into shares of our common stock at the price of $1.00 per share. Mr. Hampton also received 150,000 shares of our common stock.
On October 14, 2014, we issued 60,000 shares of our common stock to Uptick Capital LLC for services rendered to us. We valued these shares at $0.80 per share.
During December 2, 2014, we issued a $30,000 note to Dennis Poland with a maturity date of May 1, 2015. Mr. Poland also received 30,000 shares of our common stock.
On March 5, 2015 we issued 60,000 shares of our common stock to Uptick Capital LLC for services rendered to us. We valued these shares at $0.60 per share.
21
On April 3, 2015, we issued 30,000 shares of our common stock to Barbara Ludwig at the price of $.20 per share.
On April 20, 2015, we issued 100,000 shares to Benchmark Advisory Partners, LLC for services rendered to us.
On April 21, 2015 we sold 250,000 units to William Ferri in exchange for $250,000. Each one (1) unit contains: (i) 250,000 shares of common stock; (ii) 250,000 options (iii) and a promissory note in the amount of $250,000. The note bears interest at the rate of $10%. The options are exercisable at the higher of twenty five cents ($.25) or fifty percent (50%) of the average closing price of the Company’s shares as reported by the OTC Markets for the 10 trading days prior to the day of conversion.
Item 6. Selected Financial Data
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information under this item.
22
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Management’s Discussion and Analysis of Financial Condition and Results of Operation
You should read the following discussion of our financial condition and results of operations in conjunction with the consolidated financial statements and notes thereto included elsewhere in this prospectus. The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to these differences include those discussed below and elsewhere in this prospectus, particularly in “Risk Factors”.
Overview
NutraFuels, Inc. (also will be referred as, “us”, “we”, or “our”) is the producer of nutritional oral spray supplements that provides a faster and more efficient absorption of nutrients than traditional methods of delivery such as other ingestible pill, capsule and liquid products.
We were founded as NutraFuels, LLC in 2010. We have progressively added the needed equipment to expand our operations to meet the demand of consumption on a national level.
We have continually invested for the long term, adding larger facilities, purchasing necessary equipment, and other application developments to expand sales and marketing. This has increased our costs in the near-term. Many of these investments had and will continue to occur in the advance of experiencing any near-term benefit.
During the year ending December 31, 2014, we shifted our focus on, and completed, our market research analysis for the rebranding, repackaging, and re-launch of our product line for 2015.
Components of Results of Operations
Revenues
We derive our revenues from sales of our products. We recognize our revenues from the point of sale and shipment. For the years ended December 31, 2014, and December 31, 2013, our revenues were $62,274 and $597,777, respectively. Our revenues declined during the period ending December 31, 2014 while we suspended production and distribution, and shifted our focus on market research analysis to develop, our now completed, rebranding, repackaging, and re-launch of our product line for 2015.
Should we not have sufficient revenues to meet operating costs, we will require additional capital. We have no commitments or assurances that it will ever be successful in obtaining adequate future financing. There can be no assurance that our continuing efforts to execute our business plan will be successful and that we will be able to continue as a going concern. The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America. As of December 31, 2014 we did not have sufficient cash to sustain us for the next twelve months and we will require additional capital to continue. In the event that future financing does not materialize, we may be unable to pay our obligations as they become due or continue as a going concern, any of which circumstances would have a material adverse effect on our business, prospects, financial condition and results of operations.
23
Costs and Expenses
The Cost of Goods Sold was heavily concentrated in labor and overhead costs.
Advertising costs continued to be some of our largest operational expenses. As we enter 2015 and the re-launch of our product line into the national and international market, we are anticipating more marketing expenditures to research, advertise, market, promote, and enhance our brand.
We are in process of entering into our phase 2 agreement with the Sullivan Media Group which will finalize the rebranding, repackaging, and re-launch of the NutraFuels product line.
During the 4th quarter of 2014, as a result of our brand enhancement efforts, we established an inventory reserve for our discontinued products and wrote down our net inventory value to $70,000.
The remaining significant expenses related to professional fees associated with our SEC filings and accrued interest as it relates to debt securities issued from current and prior years.
Results of Operations
In comparison to the prior year, sales have decreased by 90%. As of December 31, 2014, we suspended production and distribution due to our shifted interest in market research analysis, rebranding, repackaging, and re-launch. Starting in the beginning of the 2015 year, we have successfully completed these concentrations.
Advertising costs have been driven by marketing research and the implementation of the rebranding initiatives.
Selling, General, and Administrative Costs are lower than the prior year, as there has been less stock compensation issued for services performed by employees or outside parties.
Finally, interest expense is higher due to the issuance of debt securities to finance operations.
Liquidity and Capital Resources
In addition to revenue, our primary source of cash stems from issuance of equity and debt securities. We are dependent upon the proceeds from the offer and sale of securities to fund our operations.
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|
|
|
|
|
| Years Ending
Ended December 31,
|
|
|
|
|
|
|
| 2014
|
| 2013
|
Net Cash used in Operating Activities
|
|
|
| (1,231,077)
|
| (902,486)
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|
|
|
|
|
|
|
|
|
|
Net cash used in Investing Activities
|
|
|
| (27,125)
|
| (239,009)
|
|
|
|
|
|
|
|
|
|
|
Net provided by Financing Activities
|
|
|
| 1,220,000
|
| 1,060,000
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|
|
|
|
|
|
|
|
|
|
24
Operating
During the year ended December 31, 2014, in addition to fixed & variable overhead costs, other operational expenditures primarily consisted of inventory purchases, payments to vendors, professional fees, and advertising costs.
Investing
During the year ended December 31, 2014, our investments in fixed assets were limited to equipment purchases.
Financing
Our cash inflow from financing related to the issuance of debt and equity securities. During the year ended December 31, 2014, we received an aggregate of $1,220,000 from the sale of securities as follows:
·
an operating note payable in the amount of $30,000 on December 19, 2014.
·
a note payable with shares of common stock in the amount of $30,000 on December 2, 2014.
·
the sale of 30,000 common shares at a price of $1.00 per share, on November 10, 2014.
·
an operating note payable in the amount of $25,000 on November 10, 2014.
·
a convertible note with shares of common stock in the amount of $60,000 on October 3, 2014.
·
the sale of 150,000 common shares at a price of $1.00 per share, on September 2, 2014,
·
a note payable with shares of common stock in the amount of $50,000 on August 27, 2014,
·
a convertible note in the principal amount of $30,000 on June 23, 2014,
·
the sale of 500,000 common shares at the price of $1.00 per share or an aggregate of $500,000, on April 25, 2014.
·
a convertible note with attached warrants in the principal amount of $290,000 on March 26, 2014,
·
a note payable with shares of common stock in the amount of $50,000 on February 20, 2014,
Significant Accounting Policies
We report revenues and expenses using the accrual method of accounting for financial and tax reporting purposes.
Use of Estimates
Management uses estimates and assumption in preparing these financial statements in accordance with generally accepted accounting principles. Those estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenues and expenses.
25
Income Taxes
We account for income taxes under ASC 740 “Income Taxes” which codified SFAS 109, “Accounting for Income Taxes” and FIN 48 “Accounting for Uncertainty in Income Taxes – an Interpretation of FASB Statement No. 109.” Under the asset and liability method of ASC 740, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statements carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Under ASC 740, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period the enactment occurs. A valuation allowance is provided for certain deferred tax assets if it is more likely than not that we will not realize tax assets through future operations.
Fair Value of Financial Instruments
Accounting Standards Codification Topic 820, “Disclosures About Fair Value of Financial Instruments,” requires us to disclose, when reasonably attainable, the fair market values of our assets and liabilities, which are deemed to be financial instruments. Our financial instruments consist primarily of cash.
Per Share Information
We compute net loss per share accordance with FASB ASC 205 “Earnings per Share”. FASB ASC 205 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 loss available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all potentially dilutive common shares outstanding during the period. Diluted EPS excludes all potentially dilutive shares if their effect is anti-dilutive.
Stock Option Grants
We have not granted any stock options to our officers and directors since our inception. Upon the further development of our business, we will likely grant options to directors and officers consistent with industry standards for nutritional and dietary supplement companies.
26
Item 8. Financial Statements and Supplementary Data
FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm
F-1
Balance Sheets
F-3
Statements of Operations
F-4
Statement of Stockholders’ Equity (Deficit)
F-5
Statements of Cash Flows
F-6
Notes to the Financial Statements
F-7
27
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and
Stockholders of NutraFuels, Inc.
Coconut Creek, Florida
We have audited the accompanying balance sheet of NutraFuels, Inc. (the “Company”) at December 31, 2014, and the related statements of operations, changes in stockholders’ deficit and cash flows for the year ended December 31, 2014. The Company’s management is responsible for these financial statements. Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of NutraFuels, Inc. at December 31, 2014, and the results of its operations and its cash flows for the year ended December 31, 2014, in conformity with accounting principles generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As described in Note 3 to the consolidated financial statements, the Company has sustained recurring losses from operations and has working capital and accumulated deficits that raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are described in Note 3. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. Our opinion is not modified with respect to this matter.
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/s/ Daszkal Bolton, LLP
Fort Lauderdale, Florida
April 24, 2015
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28
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors
NutraFuels, Inc.
Coconut Creek, Florida
We have audited the accompanying balance sheets of NutraFuels, Inc. (the “Company”), as of December 31, 2013, and the related statements of operations, changes in stockholders' deficit, and cash flows for each of the year then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform an audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of NutraFuels, Inc. as of December 31, 2013, and the results of its operations and its cash flows for each of the years then ended in conformity with accounting principles generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 3 to the financial statements, the Company has suffered losses from operations and has deficits in cash flows from operating activities, which raises substantial doubt about its ability to continue as a going concern. Management's plans regarding these matters also are described in Note 3. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ MALONE BAILEY, LLP
www.malonebailey.com
Houston, Texas
May 5, 2014
29
NutraFuels, Inc
BALANCE SHEETS
Note 5 – Convertible Debt
On March 26, 2014, we issued a $290,000 convertible note. The note bears interest at 10%, with an initial maturity of March 26, 2015 (subsequently amended to January 15, 2016), and is convertible into shares of our common stock at $1.00 per share. The investor also received warrants to purchase 500,000 shares of our common stock at $0.50 per share with a two-year exercise term.
We evaluated the warrants for derivative accounting consideration under ASC Topic 815-40, Derivatives and Hedging – Contracts in Entity’s own stock, and concluded that the warrants meet the criteria for classification in stockholders' equity. We allocated the proceeds received to the debt, stock, and warrants based on their relative fair values. We determined the fair value of the warrants using a Black-Scholes option pricing model with the following inputs:
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Risk-free interest rate
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| 0.45
| %
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Dividend yield
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| -
| %
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Volatility factor
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| 145
| %
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Expected life (years)
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| 2
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|
The volatility was determined by referring to the average historical volatility of a peer group of public companies because we do not have a trading history from which to determine historical volatility.
The proceeds were allocated between the securities issued based on their relative fair values, as follows:
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Relative fair value of warrants
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| $167,477
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Relative fair value of note payable
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|
$122,553
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|
Because the price for recent sales of our common stock exceeded the effective conversion price, we also recognized a beneficial conversion right of $122,553. The total discount on the note of $290,000 is being amortized and recognized as additional interest over the life of the note. At December 31, 2014, the unamortized discount is $147,645.
On June 7, 2013, we issued a $100,000 convertible note. The note bears interest 10%, had an original due date of June 1, 2014 (subsequently amended to June 1, 2015), and is convertible by the holder into shares of our common stock at $1.00 per share.
35
On August 26, 2013, we issued a $200,000 note. The note bears interest at 15%, and had an original due date of August 26, 2014 (subsequently extended to August 26, 2015). The investor received 250,000 common shares and warrants to purchase 500,000 shares of our common stock at $0.75 per share at any time prior to August 26, 2015.
On June 23, 2014, we issued a $30,000 convertible note. The note bears interest at 10%, matures on June 23, 2015, and is convertible into shares of our Company at $1.00 per share. Because the market price for our common stock on the date of the note exceeded the note’s conversion price of $1.00 per share, we recognized a beneficial conversion feature of $21,600 as a discount on the note. The discount is being amortized as additional interest over the life of the note. At December 31, 2014, the unamortized discount is $14,080.
We evaluated the conversion features embedded in the two notes payable described above for derivative accounting in accordance with ASC 815-40, Derivatives and Hedging embedded in the modified notes payable for derivative accounting in accordance with the criteria for classification in stockholders' equity.
On August 27, 2014, we issued a $50,000 convertible note. The note bears interest at 10%, had an initial maturity of January 2, 2015 (subsequently extended to January 15, 2016), and is convertible into shares of our common stock at $1.00 per share. The investor also received 50,000 shares of our common stock.
The proceeds were allocated between the securities issued based on their relative fair values, as follows:
| | | | |
|
|
|
|
|
Relative fair value of shares
|
|
| $27,778
|
|
Relative fair value of conversion feature
|
|
|
$22,222
|
|
The note has been fully discounted in the amount of $50,000, which is being amortized over the initial term of the note. At December 31, 2014, the unamortized balance on the debt discount is $465.
During October 2014, we issued a $60,000 convertible note. The note bears interest at 10%, had an initial maturity of November 2, 2014 (subsequently extended to January 15, 2016) and is convertible into shares of our common stock at $1.00 per share. The investor also received 150,000 shares of our common stock.
The proceeds were allocated between the securities issued based on their relative fair values, as follows:
| | | | |
| | | | |
Relative fair value of shares
|
|
| $43,448
|
|
Relative fair of note payable
|
|
|
$16,552
|
|
Because the price for recent sales of our common stock exceeded the effective conversion price, we also recognized a beneficial conversion right of $16,552. The total discount on the note of $60,000 has been recognized as additional interest over the initial term of the note.
On November 15, 2012, we issued a $50,000 convertible note. The note bears interest at 10%, with an original maturity of November 15, 2013 (subsequently extended to January 15, 2016), and convertible into shares of our common stock at $1.00 per share.
Note 6 – Notes Payable
During February 2014, we issued a $50,000 note with an initial maturity date of May 1, 2014 (subsequently extended to January 15, 2016). The investor also received 50,000 shares of our common stock.
36
The proceeds were allocated between the securities issued based on their relative fair values, as follows:
| | | | |
| | | | |
|
|
|
|
|
Relative fair value of stock
|
| $
| 25,000
|
|
Relative fair value of note payable
|
| $
| 25,000
|
|
The discount on the note of $25,000 has been recognized as additional interest over the initial term of the note.
The note matured on May 1, 2014 and remains unpaid.
During December 2014, the Company issued a $30,000 note with a maturity date of May 1, 2015. The investor also received 30,000 shares of our common stock. The proceeds were allocated between the securities issued based on their relative fair values, as follows:
| | | | |
Relative fair value of stock
|
| $
| 10,132
|
|
Relative fair value of note payable
|
| $
| 19,868
|
|
The discount of the note of $10,132 is being amortized and recognized as additional interest over the term of the note. At December 31, 2014, the unamortized discount was $8,106.
Note 7 – Notes Payable – Related Party
At December 31 2014, we are indebted to Neil Catania, our vice president, for $360,000, inclusive of $210,000 of convertible notes payable, as described below:
On November 15, 2012, we issued a $160,000 convertible note. The note bears interest at 10% with an initial maturity of November 15, 2014 (subsequently extended to November 15, 2015), and is convertible into shares of our common stock at $1.00 per share.
On February 15, 2013 we issued a $50,000 convertible note. The note bears interest at 10%, with original maturity of May 15, 2014 (subsequently modified to November 15, 2015), and is convertible into shares of our common stock at $1.00 per share.
Note 8 – Shareholders’ Equity
During April 2014, we issued 500,000 of our common stock for $500,000. In connection with the stock sale, we issued warrants to purchase 500,000 shares at an exercise price of $0.50 per share. The warrants have a one-year term.
During September 2014, we issued 150,000 shares of our common stock for $150,000. In connection with the stock sale, we issued warrants to purchase 150,000 shares of our common stock at an exercise price of $0.20 per share. The warrants have a one-year term.
During November 2014, we issued 30,000 shares of common stock for $30,000.
During 2014, we issued 70,000 shares of our common stock for services, which had a fair value of $77,311.
37
Note 9 – Commitments & Contingencies
Operating Lease
We lease our office and warehouse facilities under an operating lease in Coconut Creek, Florida. The lease expires in February 2016. The minimum lease payments required for the remaining term of the lease are as follows:
| |
12/31/15
| 12/31/16
|
$43,947
| $7,360
|
Contractual Obligations
During January 2014, we were granted a license to market nutritional supplements under the TapouT XT name to retail locations worldwide. Under the license agreement, we were required to pay a royalty fee to Nutra Evolution of 12.5% of net sales. The agreement provided us with an initial test period of four years, until January 31, 2018, to distribute the product. We paid $85,000 in conjunction with the license. At the expiration of this four year period, we had the option to extend the license for three (3) consecutive three (3) year terms.
The agreement originally required the company to pay minimum royalties of $400,000 during the first contract year; $750,000 during the second contract year and $1,000,000 each year thereafter. Subsequent to December 31, 2014, we terminated the license agreement and no longer are obligated to pay the minimum royalties.
In late April 2014, we entered into an agreement with Sullivan Media Group, a Nevada corporation, to conduct market research in promotion of our NutraFuels brand, at a cost of $104,500.
On May 26, 2014, we entered into a 36-month agreement with SRC Sales Inc., a Massachusetts corporation (“SRC Sales”), as the exclusive distributor of our products to certain retailers (the “Retailer Accounts”, defined as a retailer with more than 200 locations) in the United States and Canada. We agreed to pay a 7% commission based on sales derived from any Retailer Account obtained from the efforts of SRC Sales. As part of the agreement, we will issue 50,000 restricted shares of our common stock to SRC Sales for each new Retailer Account, and 50,000 shares for each order of $500,000.
Contingencies
In the normal course of business, we may become subject to lawsuits and other claims and proceedings. Such matters are subject to uncertainty and outcomes are not predictable with assurance. We not aware of any pending or threatened lawsuits or proceedings which would have a material effect on our financial position, liquidity, or results of operations.
Note 10 – Income Taxes
Deferred income taxes are determined using the liability method for the temporary differences between the financial reporting basis and income tax basis of our assets and liabilities. Deferred income taxes are measured based on the tax rates expected to be in effect when the temporary differences are included in our tax return. Deferred tax assets and liabilities are recognized based on anticipated future tax consequences attributable to differences between financial statement carrying amounts of assets and liabilities and their respective tax bases.
38
| | | | |
| | 2014
| | 2013
|
Net operating loss carryforward
| | $ 1,623,122
| | $ 917,505
|
Fixed Assets
| | (3,465)
| | (483)
|
Valuation Allowance
| | (1,623,250)
| | (917,022)
|
| | $ -
| | $ -
|
With respect to the cumulative net operating loss carryforward of $1,623,122, we have established valuation allowances equal to the full amount of the deferred tax assets due to the uncertainty of our utilization of the operating losses in future periods. A reconciliation of our effective tax rate as a percentage of income before taxes and federal statutory rate for the period ended December 31, 2014 and 2013 is summarized as follows:
| | | | |
| | 2014
| | 2013
|
Tax on income before income tax
| | 34.00%
| | 34.00%
|
Effect of non-temporary differences
| | (0.17)%
| | (0.12)%
|
Change in valuation allowance
| | (33.83)%
| | (33.88)%
|
| | -
| | -
|
The total amount of unrecognized tax benefits can change due to tax examination activities, lapse of applicable statutes of limitations and the recognition and measurement criteria. We cannot predict if any significant increases or decreases will occur within the next twelve months.
We file income tax returns in the United States federal jurisdiction and no other jurisdiction.
Note 11 – Subsequent Events
In February 2015, we issued 25,000 shares of our common stock to an investor for $25,000, or $1.00 per share.
In March 2015, we issued 60,000 shares of our common stock for services performed.
During the first quarter of 2015, we issued notes payable aggregating to $190,000.
In April 2015 we issued a convertible note for $250,000.00
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
On March 9, 2015, we terminated our former auditor, Malone Bailey, LLP and engaged Daszkal Bolton, LLP as our auditors.
Our financial statements as of and for the year ended December 31, 2013, respectively included in this report have been audited by Malone Bailey, LLP as set forth in this Report on Form 10-K.
Our financial statements as of and for the year ended December 31, 2014, respectively included in this report have been audited by Daszkal Bolton LLP as set forth in this Report on Form 10-K.
There have been no disagreements with Malone Bailey LLP regarding accounting and financial disclosure.
39
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Pursuant to Rule 13a-15(b) under the Securities Exchange Act of 1934 (“Exchange Act”), the Company carried out an evaluation, with the participation of the Company’s management, including the Company’s President, Chief Financial Officer, Secretary, Treasurer and Director, of the effectiveness of the Company’s disclosure controls and procedures (as defined under Rule 13a-15(e) under the Exchange Act) as of the end of the period covered by this report. Based upon that evaluation, the Company’s CEO and CFO concluded that the Company’s disclosure controls and procedures were not effective to ensure that information required to be disclosed by the Company in the reports that the Company files or submits under the Exchange Act, is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to the Company’s management, including the Company’s CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure for the reasons discussed below.
Management's Annual Report on Internal Control over Financial Reporting
The management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting for the Company. Our internal control system was designed to, in general, provide reasonable assurance to the Company’s management and board regarding the preparation and fair presentation of published financial statements, but 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.
Our management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2014. The framework used by management in making that assessment was the criteria set forth in the document entitled “ Internal Control – Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on that assessment, our President and Chief Financial Officer have determined and concluded that, as of December 31, 2014, the Company’s internal controls over financial reporting were not effective.
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement 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 our financial reporting as of December 31, 2014, the Company determined that the following items constituted a material weakness:
·
The Company does not have an independent audit committee in place, which would provide oversight of the Company’s officers, operations and financial reporting function;
·
The Company’s accounting department, which consists of a limited number of personnel, does not provide adequate segregation of duties; and
·
The Company does not have effective controls over period end financial disclosure and reporting processes.
Management believes that the appointment of one or more outside directors, who shall be appointed to a fully functioning audit committee, will remedy the lack of a functioning audit committee and a lack of a majority of
40
outside directors on our Board. Management plans to take action and implementing improvements to our controls and procedures when our financial position permits.
This annual report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by the Company's registered public accounting firm pursuant to the permanent exemption of the Securities and Exchange Commission that permit the Company to provide only management's report in this annual report.
Changes in Internal Control over Financial Reporting
No change in our system of internal control over financial reporting occurred during the period covered by this report, fourth quarter of the fiscal year ended December 31, 2014, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
PART III
Item 10. Directors, Executive Officers and Corporate Governance
The Board of Directors elects our executive officers annually. A majority vote of the directors who are in office are required to fill vacancies. Each director shall be elected for the term of one year, and until his successor is elected and qualified, or until his earlier resignation or removal. Our directors and executive officers are as follows:
| | | | |
| | | | |
|
|
|
|
|
|
|
|
|
|
Name
|
| Age
|
| Position
|
|
|
|
|
|
Edgar Ward
|
| 43
|
| Chief Executive Officer, President, Director
|
|
|
|
|
|
Neil Catania
|
| 52
|
| Vice President
|
Edgar Ward, Chief Executive Officer, President and Director
From April 1, 2010 to present, Edgar Ward has served as our Chief Executive Officer, President and Sole Director. From January 1, 2008, until June 30, 2010, Mr. Ward was the Chief Executive Officer at SkyRockit Records.
Mr. Ward’s services to us include day to day operations of our manufacturing facility and management of our company.
As our Chief Executive Officer, President and Sole Director, Mr. Ward brings his experience in managing our day to day operations.
Neil Catania, Vice President
Neil Catania became our Vice President on November 20, 2012. From May 2004 until Present, Neil Catania has been the Chief Executive Officer of MND LLC, a financial services company located in New York.
Mr. Catania’s services to us include assisting Mr. Ward with our day to day operations. Neil Catania holds Series 7, Series 63, Series 24 and Series 55 licenses from the Financial Industry Regulatory Authority (“FINRA”).
41
As our Vice President Mr. Catania brings his experience in financial services and executive management to our day to day operations.
Family Relationships and Other Matters
Nicholas Ward, the holder of 25,000 shares of our common shares is the adult son of our Chief Executive Officer, President and sole Director, Edgar Ward. Apart from this relationship, there are no family relationships between our shareholders, officers, and directors.
Legal Proceedings
No officer, director, or persons nominated for such positions, promoter or significant employee has been involved in the last ten years in any of the following:
|
·
Any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time;
|
·
Any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offenses);
·
Being subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities;
·
Being found by a court of competent jurisdiction (in a civil action), the Commission or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated;
·
Having any government agency, administrative agency, or administrative court impose an administrative finding, order, decree, or sanction against them as a result of their involvement in any type of business, securities, or banking activity;
·
Being the subject of a pending administrative proceeding related to their involvement in any type of business, securities, or banking activity; and/or
·
Having any administrative proceeding been threatened against you related to their involvement in any type of business, securities, or banking activity.
Corporate Governance
We have one member of our Board of Directors, Edgar Ward who is also our Chief Executive Officer, President and majority shareholder.
42
We do not currently have a Code of Ethics applicable to our principal executive, financial or accounting officer. Our Board of Directors has not established Audit, Compensation, and Nominating or Governance Committees as standing committees. The Board does not have an executive committee or any committees performing a similar function. We are not currently listed on a national securities exchange or in an inter-dealer quotation system that has requirements that a majority of the Board of Directors be independent. Our Sole Director has determined that he is not “independent” under the definition set forth in the listing standards of the NASDAQ Stock Market, Inc., which is the definition that the Board has chosen to use for the purposes of the determining independence, as the OTC Bulletin Board does not provide such a definition. Therefore, our Sole Director is not independent.
Item 11. Executive Compensation
Summary Compensation Table
The table below summarizes all compensation awarded to, earned by, or paid to our Principal Executive Officer, our two most highly compensated executive officers who occupied such position at the end of our latest fiscal year and up to two additional executive officers who would have been included in the table below except for the fact that they were not executive officers at the end of our latest fiscal year, by us, or by any third party where the purpose of a transaction was to furnish compensation, for all services rendered in all capacities to us for the years ended December 31, 2014 and 2013.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Name
|
| Position
|
| Year
|
| Salary
|
| Bonus/ Stock
Awards
|
|
Option
|
|
| Non-equity incentive plan compensation
|
|
| Non-qualified deferred compensation
|
|
| All other Compensation
|
|
| Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Edgar
Ward(1)
|
| Chief Executive Officer President, Director
|
| 2014
|
|
| $188,877
|
| 0
|
|
| 0
|
|
|
|
$0(1)
|
|
|
| 0
|
|
|
| 0
|
|
|
|
$188,877
|
|
|
|
|
| 2013
|
|
|
$107,500
|
| 0
|
|
| 0
|
|
|
|
$600,000(2)
|
|
|
| 0
|
|
|
| 0
|
|
|
|
$707,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Neil
|
| Vice
|
| 2014
|
|
| 0
|
|
|
|
| 0
|
|
|
|
0
|
|
|
| 0
|
|
|
| 0
|
|
|
| 0
|
|
Catania(3)
|
| President,
|
| 2013
|
|
| 0
|
|
|
|
| 0
|
|
|
| $272,300(2)
|
|
|
| 0
|
|
|
| 0
|
|
|
| $272,300
|
|
(1) This amount reflects 1,000,000 common shares we issued to Mr. Ward on September 3, 2013, which we valued at $.35 per share.
(2) This amount reflects 428,571 common shares issued to Neil Catania on May 17, 2013 and 350,000 common issued on September 3, 2013, which we valued at $.35 per share.
43
Summary Equity Awards Table
The following table sets forth certain information for our executive officers concerning unexercised options, stock that has not vested, and equity incentive plan awards as of December 31, 2014.
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END DECEMBER 31, 2012
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Number of Securities Underlying Unexercised Options
(#)
Exercisable
|
|
| Number of Securities Underlying Unexercised Options
(#)
Unexercisable
|
|
| Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options
(#)
|
|
| Option Exercise Price
($)
|
|
| Option Expiration Date
|
|
| Number of Shares or Units of Stock That Have Not Vested
(#)
|
|
| Market Value of Shares or Units of Stock That
Have Not Vested
($)
|
|
| Equity Incentive Plan Awards: Number Of Unearned Shares, Units or Other Rights That Have Not Vested
(#)
|
|
| Equity
Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested
($)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Edgar Ward
|
|
| 0
|
|
|
| 0
|
|
|
| 0
|
|
|
| 0
|
|
|
| 0
|
|
|
| 0
|
|
|
| 0
|
|
|
| 0
|
|
|
| 0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Neil Catania
|
|
| 0
|
|
|
| 0
|
|
|
| 0
|
|
|
| 0
|
|
|
| 0
|
|
|
| 0
|
|
|
| 0
|
|
|
| 0
|
|
|
| 0
|
|
Directors Compensation
Edgar Ward is our Sole Director. Our directors are not compensated for their service as directors.
Narrative Disclosure to Summary Compensation and Option Tables
We do not have written employment agreements with our officers and directors.
We paid our Chief Executive Officer, President and Sole Director Edgar Ward, $188,877 and $107,500 for the years ending December 31, 2014, and 2013, respectively. We based Mr. Ward’s salary and stock bonuses upon the hours committed, his experience and the level of skill required to perform services rendered. Until November 20, 2012, Mr. Ward was our sole officer and director.
On November 26, 2012, 100% of the holders of our membership interests approved our conversion from Florida Limited Liability Company to a Florida corporation. In connection with the foregoing, 100% of the membership interest holders approved our Articles of Incorporation and the Certificate of Designation of our Series A preferred stock. The Certificate of Designation: (i) established 1,000 of the 10,000 authorized shares of preferred stock as the Series A Preferred Stock; (ii) granted the 1,000 shares of our Series A Preferred Stock to our Chief Executive Officer, President and Sole Director, Edgar Ward.
44
On May 5, 2013, we issued 714,285 shares and on September 3, 2013, we issued 1,000,000 shares to Edgar Ward for services which we valued at $.35 per share. On November 26, 2012, we issued 1000 shares of our non-convertible Series A Preferred Shares to Mr. Ward. We valued the Series A Preferred Shares issued to Mr. Ward at $1.00 per share or an aggregate of $1,000. Mr. Ward presently controls 97% of our voting power. As such, both before and after the issuance to Mr. Ward he had the ability to determine the outcome of all matters submitted to a vote of our shareholders.
There are no agreements that require Edgar Ward, our Chief Executive Officer, President and Sole Director or Neil Catania, our Vice President to continue to provide services to us as our officers and directors.
On May 17, 2013, we issued 428,571 common shares and on September 3, 2013, we issued an additional 350,000 common shares to Neil Catania which we valued at $.35 per share, for services rendered.
Mr. Catania received no compensation during 2014.
Our Board of Directors determines the compensation paid to our executive officers based upon the years of service to us, whether services are provided on a full time basis and the experience and level of skill required.
We may award our officers and directors shares of common stock as non-cash compensation as determined by the Board of Directors from time to time. The board will base its decision to grant Common Stock as compensation on the level of skill required to perform the services rendered and time committed to providing services to us.
At no time during the last fiscal year with respect to any person listed in the table above was there:
·
any outstanding option or other equity-based award re-priced or otherwise materially modified (such as by extension of exercise periods, the change of vesting or forfeiture conditions, the change or elimination of applicable performance criteria, or the change of the bases upon which returns are determined);
·
any waiver or modification of any specified performance target, goal or condition to payout with respect to any amount included in non-stock incentive plan compensation or payouts;
·
any option or equity grant;
·
any non-equity incentive plan award made to a named executive officer;
·
any nonqualified deferred compensation plans including nonqualified defined contribution plans; or
·
any payment for any item to be included under All Other Compensation (column (i)) in the Summary Compensation Table.
45
Item 12. Security Ownership of Certain Beneficial Owners and Management
The following tables set forth the ownership, as of the date of April 24, 2015, of our common stock by each person known by us to be the beneficial owner of more than 5% of our outstanding common stock, our directors, and our executive officers as a group. To the best of our knowledge, the persons named have sole voting and investment power with respect to such shares, except as otherwise noted. There are not any pending or anticipated arrangements that may cause a change in control.
The information presented below regarding beneficial ownership of our voting securities has been presented in accordance with the rules of the Securities and Exchange Commission and is not necessarily indicative of ownership for any other purpose. Under these rules, a person is deemed to be a "beneficial owner" of a security if that person has or shares the power to vote or direct the voting of the security or the power to dispose or direct the disposition of the security. A person is deemed to own beneficially any security as to which such person has the right to acquire sole or shared voting or investment power within 60 days through the conversion or exercise of any convertible security, warrant, option or other right. More than one person may be deemed to be a beneficial owner of the same securities. The percentage of beneficial ownership by any person as of a particular date is calculated by dividing the number of shares beneficially owned by such person, which includes the number of shares as to which such person has the right to acquire voting or investment power within 60 days, by the sum of the number of shares outstanding as of such date. Consequently, the denominator used for calculating such percentage may be different for each beneficial owner. Except as otherwise indicated below and under applicable community property laws, we believe that the beneficial owners of our common stock listed below have sole voting and investment power with respect to the shares shown. The business address of the shareholders is 6601 Lyons Road, L 6 Coconut Creek, FL 33073.
46
| | | | | |
Title of
Class
|
Position
|
Amount
Beneficial
Ownership (1)
|
Direct Ownership
|
Indirect Ownership
|
Percent of Class
|
COMMON
| Edgar Ward (2) Chief Executive Officer Director
|
6,103,385
|
6,103,385
|
0
|
27.57%
|
COMMON
| Neil Catania (3) Vice - President
| 3,654,941
| 3,654,941
| 0
| 16.51%
|
COMMON
| Mike Caputo
| 1,147,451
| 1,147,451
| 0
| 5.18%
|
COMMON
| Lee White
| 2,687,475
| 2,687,475
| 0
| 12.14%
|
COMMON
| Craig Hetherington (4)
| 2,278,385
| 2,278,385
| 0
| 10.29%
|
COMMON
| All officers and directors as a Group (2 persons)
| -
| -
| 0
| -
|
SERIES A PREFERRED SHARES
| Edgar Ward (2) Chief Executive Officer
| 1,000
| 1,000
| 0
| 100%
|
SERIES A PREFERRED SHARES
| Neil Catania Vice-President
| 0
| 0
| 0
| 0%
|
SERIES A PREFERRED SHARES
| All officers and directors as a Group (2 persons)
| 1,000
| 1,000
| 0
| 100%
|
(1)
This table is based upon information derived from our stock records. Applicable percentages are based upon 22,142,115 shares of common stock outstanding.
(2)
As a result of Mr. Ward’s ownership of 6,103,385 common shares and 1,000 Series A preferred shares he holds 97.5% of the votes on all matters submitted to a vote of our stockholders.
(3)
The amount reflected for Neil Catania includes 3,403,571 shares held directly and 251,370 shares issuable upon conversion of outstanding promissory notes at the per share price of $1.00.
(4)
The amount reflected for Craig Hetherington includes 578,571 common shares held directly, 1,000,000 warrants, half of which are exercisable at the price of $.75 per share and half at $.50 per share and 699,814 shares issuable upon conversion of outstanding promissory notes at the conversion price of $1.00 per share.
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Unless otherwise indicated in the footnotes to this table are subject to community property laws where applicable, each of the shareholders named in this table has sole or shared voting and investment power with respect to the shares indicated as beneficially owned.
Item 13. Certain Relationships and Related Transactions, and Director Independence.
Stock Issuances to Management
On May 5, 2013, we issued 714,285 shares and on September 3, 2013, we issued 1,000,000 shares to Edgar Ward for services which we valued at $.35 per share.
On May 17, 2013, we issued 428,571 common shares and on September 3, 2013, we issued an additional 350,000 common shares to Neil Catania which we valued at $.35 per share, for services.
Loans from Management & Shareholders
At December 31 2014, we are indebted to Neil Catania, our vice president, for $360,000, inclusive of $210,000 of convertible notes payable, as described below:
On November 15, 2012, we issued a $160,000 convertible note to Neil Catania. As amended, the note bears interest at 10% and is due on November 15, 2015. The note is convertible into shares of our common stock at $1.00 per share.
On February 15, 2013 we issued a $50,000 convertible note to Neil Catania. As amended, the note bears interest at 10%, and is due on November 15, 2015. The note is convertible into shares of our common stock at $1.00 per share.
On June 7, 2013, we issued a $100,000 convertible note to Craig Hetherington. As amended, the note bears interest 10% and is due June 1, 2015. The note is convertible into shares of our common stock at $1.00 per share.
On August 26, 2013, we issued a $200,000 note to Craig Hetherington. As amended, the note bears interest at 15%, and is due and payable on August 26, 2015. In connection with the investment, Mr. Hetherington received 250,000 common shares and warrants to purchase 500,000 shares of our common stock at $0.75 per share at any time prior to August 26, 2015.
During February 20, 2014, we issued a $50,000 note to Dennis Poland with a maturity date of May 1, 2014 (subsequently extended to January 15, 2016. Mr. Poland also received 50,000 shares of our common stock.
On March 26, 2014, we issued a $290,000 convertible note to Craig Hetherington. As amended, the note bears interest at the rate of 10%, and is due and payable on January 15, 2016. The note is convertible into shares of our common stock at $1.00 per share. In connection with the investment, Mr. Hetherington also received warrants to purchase 500,000 shares of our common stock at $0.50 per share until March 26, 2016.
On April 25, 2014, we sold 500,000 Units with notes to William J. Ferri in exchange for $500,000. Each one (1) unit includes 500,000 shares of common stock and warrants to purchase 500,000 common shares. Each warrant was convertible into one (1) share of our common stock at the price of $.50 at any time before April 25, 2015. To date, no warrants have been exercised.
On June 23, 2014, we issued a $30,000 convertible note to Craig Hetherington. The note bears interest at 10%, matures on June 23, 2015, and is convertible into shares of our Company at $1.00 per share.
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On August 27, 2014, we issued a $50,000 convertible note to John Hampton. The note bears interest at 10%. As amended, the note is due January 2, 2016. The note is convertible into shares of our common stock at $1.00 per share. Mr. Hampton also received 50,000 shares of our common stock in connection with the investment.
On October 3, 2014, we issued a $60,000 convertible note to John Hampton. As amended, the note bears interest at the rate of 10%, and is due and payable on January 15, 2016. The note is convertible into shares of our common stock at the price of $1.00 per share. Mr. Hampton also received 150,000 shares of our common stock.
During December 2, 2014, we issued a $30,000 note to Dennis Poland with a maturity date of May 1, 2015. Mr. Poland also received 30,000 shares of our common stock.
On April 21, 2015 we sold 250,000 Units with notes to William Ferri in exchange for $250,000. Each one (1) unit contains: (i) 250,000 shares of common stock; (ii) 250,000 options (iii) and a promissory note in the amount of $250,000. The note bears interest at the rate of $10%. The options are exercisable at the higher of twenty five cents ($.25) or fifty percent (50%) of the average closing price of the Company’s shares as reported by the OTC Markets for the 10 trading days prior to the day of conversion.
Corporate Governance and Director Independence
Our Board of Directors has not established Audit, Compensation, and Nominating or Governance Committees as standing committees. The Board does not have an executive committee or any committees performing a similar function. We are not currently listed on a national securities exchange or in an inter-dealer quotation system that has requirements that a majority of the Board of Directors be independent. Our Sole Director has determined that he is not “independent” under the definition set forth in the listing standards of the NASDAQ Stock Market, Inc., which is the definition that the Board has chosen to use for the purposes of the determining independence, as the OTC Bulletin Board does not provide such a definition. Therefore, our Sole Director is not independent.
We do not have any independent directors. Because our common stock is not currently listed on a national securities exchange, we have used the definition of “independence” of The NASDAQ Stock Market to make this determination. NASDAQ Listing Rule 5605(a)(2) provides that an “independent director” is a person other than an officer or employee of the company or any other individual having a relationship which, in the opinion of the Company’s Board of Directors, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. The NASDAQ listing rules provide that a director cannot be considered independent if:
·
the director is, or at any time during the past three years was, an employee of the company;
·
the director or a family member of the director accepted any compensation from the company in excess of $120,000 during any period of 12 consecutive months within the three years preceding the independence determination (subject to certain exclusions, including, among other things, compensation for board or board committee service);
·
a family member of the director is, or at any time during the past three years was, an executive officer of the company;
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·
the director or a family member of the director is a partner in, controlling stockholder of, or an executive officer of an entity to which the company made, or from which the company received, payments in the current or any of the past three fiscal years that exceed 5% of the recipient’s consolidated gross revenue for that year or $200,000, whichever is greater (subject to certain exclusions);
·
the director or a family member of the director is employed as an executive officer of an entity where, at any time during the past three years, any of the executive officers of the company served on the compensation committee of such other entity; or
·
the director or a family member of the director is a current partner of the company’s outside auditor, or at any time during the past three years was a partner or employee of the company’s outside auditor, and who worked on the company’s audit.
We do not currently have a separately designated audit, nominating or compensation committee.
Item 14. Principal Accounting Fees and Services
Audit Fees
For our fiscal years ended December 31, 2014 and December 31, 2013, we were billed approximately $32,500 and $16,750 respectively, for professional services rendered for the audit and reviews of our financial statements.
Audit Related Fees
The Company did not incur any audit related fees, other than the fees discussed in Audit Fees, above, for services related to our audit for the fiscal years ended December 31, 2014 and December 31, 2013.
Tax Fees
None
All Other Fees
None
Pre-Approval of Services
We do not have an audit committee. As a result, our Board of Directors performs the duties of an audit committee. Our Board of Directors evaluates and approves in advance the scope and cost of the engagement of an auditor before the auditor renders the audit and non-audit services. We do not rely on pre-approval policies and procedures.
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PART IV
Item 15. Exhibits, Financial Statement Schedules
Exhibit No. Description
3.1 Articles of Organization of Nutrafuels, LLC, a Florida Limited Liability Company (1)
3.2 Certificate of Conversion from a Florida Limited Liability Company to a Florida Corporation (1)
3.3 Articles of Incorporation of Nutrafuels, Inc., a Florida Corporation (1)
3.4 Certificate of Designation of Series A Preferred Shares (1)
3.5 Bylaws of Nutrafuels, Inc (1)
4.1 Form of Convertible Note and Warrant. (1)
4.2 Form of Subscription Agreement (1)
4.3 Form of Convertible Note (1)
10.1. Agreement between Nutra Evolution LLC and NutraFuels Inc (1)
10.2. Agreement between AMS Health Services LLC and NutraFuels Inc. (1)
10.3. February 12, 2012 Agreement between NutraFuels, Inc. and Neil Catania (2)
10.4. November 12, 1012 Agreement between Nutafuels, Inc. and Neil Catania (2)
10.5. November 15, 2012 Agreement between Nutafuels, Inc. and Mike Smyth (2)
10.6. November 15, 2012 Agreement between Nutafuels, Inc. and Donald Brennick (2)
10.7. June 7, 2013 Agreement between Nutrafuels, Inc. and Craig Hetherington (2)
10.8. August 26, 2013 Agreement between Nutafuels, Inc. and Craig Hetherington (2)
10.9. Form of Purchase Order Alpine (3)
10.10. Core-Mark Vendor Program Agreement (3)
10.11. Form of Invoice (3)
10.12 Note Agreement Dennis Poland (4)
10.13 Unit Subscription Agreement with William J. Fieri (4) dated March 15, 2014
10.14 Amendment to Tapout Agreement dated January 29, 2014 (4)
10.15 Agreement with Uptick Capital (5)
10.16 Agreement with Benchmark Advisory (5)
10.17 Agreement with GenCap Securities (5)
10.18 Amended March 26, 2014 note - Craig Hetherington (5)
10.19 Amended January 15, 2015 note -Dennis Polland (5)
10.20 Amended August 27, 2014 note - John Hampton (5)
10.21 Amended November 15, 2012 note - Mike Smyth (5)
10.22 Amended October 3, 2014 note - John Hampton (5)
10.23 Unit Subscription Agreement with William J. Fieri dated d April 20, 2015(5)
31.1
Certification of Principal Executive Officer and Principal Financial Officer, pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002(5)
32.1
Certification of Principal Executive Officer and Principal Financial Officer, pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002(5)
(1) Incorporated by reference to our Form S-1 Registration Statement filed with the Securities and Exchange Commission on September 26, 2013.
(2) Incorporated by reference to our Form S-1 Registration Statement filed with the Securities and Exchange Commission on October 31, 2013.
(3) Incorporated by reference to our Form S-1 Registration Statement filed with the Securities and Exchange Commission on December 5, 2013.
(4) Incorporated by reference to our Form 10-K annual report for the year ending December 31, 2013, filed with Securities and Exchange Commission on May 5, 2015.
(5) Filed herewith.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Date: April 27, 2015
NutraFuels, Inc.
/s/ Edgar Ward
Name: Edgar Ward
Position: Chief Executive Officer
Principal Executive Officer
Chief Financial Officer, Principal Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Signature/s/ Edgar Ward____________
Edgar Ward
Title:
Chief Executive Officer
Principal Executive Officer
Chief Financial Officer, Principal Financial Officer
April 27, 2015
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