TRUTANKLESS, INC.
10-Ks and 10-Qs
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended
December 31, 2012
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number
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0-54219
BOLLENTE COMPANIES INC.
(Exact name of registrant as specified in its charter)
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Nevada
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26-2137574
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(State or other jurisdiction of incorporation or organization)
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(I.R.S. Employer Identification No.)
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Gainey Center II, 8501 North Scottsdale Road, Suite 165
Scottsdale, Arizona 85253-2740
(Address of principal executive offices) (Zip Code)
(480) 275-7572
(Registrant's telephone number, including area code)
Copies of Communications to:
Stoecklein Law Group, LLP.
401 West A Street
Suite 1150
San Diego, CA 92101
(619) 704-1310 • Fax (619) 704-1325
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $0.001 par value
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes
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No
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Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes
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No
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes
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No
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Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes
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No
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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405) is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.
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Indicate by check mark whether the registrant a large accelerated filer, an accelerated filer, a non-accelerated filer, or a small reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "small reporting company" in Rule 12b-2 of the Exchange Act.
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Large accelerated filer
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Accelerated filer
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Non-accelerated filer
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(Do not check if a smaller reporting company)
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Smaller reporting company
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes
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No
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The aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of June 30, 2012 (the last business day of the registrant's most recently completed second fiscal quarter) was $1,662,754 based on a share value of $1.00.
The number of shares of Common Stock, $0.001 par value, outstanding on April 15, 2013 was 8,152,456 shares.
DOCUMENTS INCORPORATED BY REFERENCE: None.
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BOLLENTE COMPANIES INC.
FOR THE FISCAL YEAR ENDED
DECEMBER 31, 2012
Index to Report on Form 10-K
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PART I
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Page
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Item 1.
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Business
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4
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Item 1A.
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Risk Factors
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10
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Item 1B.
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Unresolved Staff Comments
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17
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Item 2.
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Properties
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17
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Item 3.
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Legal Proceedings
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17
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PART II
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Item 5.
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Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
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17
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Item 6.
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Selected Financial Data
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19
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Item 7.
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Management’s Discussion and Analysis of Financial Condition and Results of Operations
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19
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Item 7A.
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Quantitative and Qualitative Disclosures About Market Risk
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20
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Item 8.
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Financial Statements and Supplementary Data
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23
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Item 9.
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Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
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23
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Item 9A (T)
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Controls and Procedures
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23
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Item 9B.
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Other Information
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PART III
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Item 10.
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Directors, Executive Officers and Corporate Governance
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24
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Item 11.
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Executive Compensation
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27
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Item 12.
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Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
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29
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Item 13.
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Certain Relationships and Related Transactions, and Director Independence
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29
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Item 14
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Principal Accounting Fees and Services
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30
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PART IV
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Item 15.
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Exhibits, Financial Statement Schedules
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31
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FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K contains forward-looking statements and involves risks and uncertainties that could materially affect expected results of operations, liquidity, cash flows, and business prospects. These statements include, among other things, statements regarding:
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our ability to diversify our operations;
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inability to raise additional financing for working capital;
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the fact that our accounting policies and methods are fundamental to how we report our financial condition and results of operations, and they may require our management to make estimates about matters that are inherently uncertain;
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our ability to attract key personnel;
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our ability to operate profitably;
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deterioration in general or regional economic conditions;
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adverse state or federal legislation or regulation that increases the costs of compliance, or adverse findings by a regulator with respect to existing operations;
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changes in U.S. GAAP or in the legal, regulatory and legislative environments in the markets in which we operate;
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the inability of management to effectively implement our strategies and business plan;
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inability to achieve future sales levels or other operating results;
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the unavailability of funds for capital expenditures;
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other risks and uncertainties detailed in this report;
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as well as other statements regarding our future operations, financial condition and prospects, and business strategies. Forward-looking statements may appear throughout this report, including without limitation, the following sections: Item 1 “Business,” Item 1A “Risk Factors,” and Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Forward-looking statements generally can be identified by words such as “anticipates,” “believes,” “estimates,” “expects,” “intends,” “plans,” “predicts,” “projects,” “will be,” “will continue,” “will likely result,” and similar expressions. These forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties, which could cause our actual results to differ materially from those reflected in the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in this Annual Report on Form 10-K, and in particular, the risks discussed under the caption “Risk Factors” in Item 1A and those discussed in other documents we file with the Securities and Exchange Commission (SEC). We undertake no obligation to revise or publicly release the results of any revision to these forward-looking statements, except as required by law. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements.
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As used herein, “Bollente,” “BOLC,” “the Company,” “we,” “our,” and similar terms include Bollente Companies Inc. and its subsidiaries, unless the context indicates otherwise.
Business Development
Bollente Companies Inc. is a development stage company incorporated in the state of Nevada in March of 2008. On September 23, 2010, we changed our name from Alcantara Brands Corporation to Bollente Companies Inc.
On March 7, 2011, we entered into a reverse triangular merger (the “Merger”) by and among Woodmans Lumber and Millworks Peru (“Woodmans”), a Nevada corporation and our wholly-owned subsidiary, and Bollente, Inc., a Nevada corporation, Woodmans and Bollente, Inc. being the constituent entities in the Merger. On May 16, 2011, we completed the acquisition of 100% of the issued and outstanding common stock of Bollente, Inc. in exchange for 4,707,727 shares of our common stock. Pursuant to the terms of the Merger, Woodmans was merged with Bollente, Inc. wherein Woodmans ceased to exist and Bollente, Inc. became our wholly owned subsidiary.
As a result of the closing of the Merger, our main focus has been redirected to the research and development of high quality, whole-house, electric tankless water heater that is more energy efficient than conventional products.
Business of Issuer
On February 24, 2011, Bollente, Inc. accepted an assignment of an engineering services contract from Perigon Companies, LLC, a Delaware limited liability company (“Perigon”), which is also a lender for Bollente, Inc. Perigon started to create an electric tankless water heater and the technology is in research and development. Perigon is owned and controlled by an individual who is a family member of one of the stockholders of the Company. Bollente agreed to accept the assignment for a promissory note of $500,000. The promissory note is due on February 24, 2014 and bears interest at 8% per annum. There are quarterly interest payments of $10,000 with a balloon payment of the principal balance and any accrued interest at the maturity date. In the event of default, the interest rate increases to 18% per annum.
Bollente’s first product is a high quality, whole-house, electric tankless water heater. The residential whole-house version and commercial version have been in research and development since late 2009; with early modeling and design work completed the remaining development has begun. Several novel and patentable technologies are currently in testing and initial prototype work has already begun on this primary line of tankless water heating products. We anticipate development work on the whole-house residential and commercial tankless water heaters will be substantially completed by our current engineering consultants. Once the management’s testing and certification criteria have been met, our engineering consultants will transition the product line to a contract manufacturer, who will begin full-scale production at which point we will be able to commence shipments.
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We are committed to manufacturing and distributing a new, high-quality, highly efficient electric tankless water heater that will exceed American consumer performance expectations for large quantities of hot water and delivery of hot water at consistent temperatures with an affordable, durable and reliable design. We have several features and design innovations which are new to the electric tankless water heater market that we believe will give our products a sustainable competitive advantage over our rivals in the market.
Our tankless water heaters will be designed to provide an endless hot water supply because they are designed to heat water as it flows through the system. We believe that our products are capable of higher temperature rise than competitive units at given flow rates because of its improved design and greater efficiency. Our tankless water heaters can save energy and reduce operating costs compared to tank systems because unlike tanks, if there is no hot water demand, no energy is being used. In addition, we intend to improve life-cycle costs with an improved design conceived not only to increase efficiency, but also the longevity of our products versus competitive units. Generally, a typical tank water heater lasts about 11 years, whereas gas tankless systems may last longer, but require routine maintenance. Our product line is designed to last longer than tank water heaters without any routine maintenance required under most conditions.
For forty years, the Japanese have been manufacturing and using gas powered tankless water heaters for residential and commercial use. Companies that sell gas tankless brands in the U.S. are usually sourced from Japanese suppliers, such as Noritz, Rinnai, Takagi, and Paloma, none of which manufacture or sell electric tankless products. Gas tankless manufacturers have had an appreciable impact on the U.S. water heater market in recent years, gaining market share and partnering with well known companies in the space to further increase market share. Manufacturers of electric tankless water heaters have not achieved significant sales relative to gas tankless manufacturers despite the increased awareness for tankless water heaters in general. We expect that Bollente’s tankless electric water heaters will fill the electric tankless market segment as the industry and consumers become aware of our improved technology. Bollente’s products are being engineered to provide quality, functionality, and performance at an attractive price point. The company expects to sell primarily through traditional plumbing wholesale distribution channels, as well as directly to national homebuilders and large plumbing wholesalers. Additionally, we believe licensing and co-branding opportunities are available in the industry.
Introduction to our Business Development Strategy
We have determined that as part of our growth strategy, we will seek to partner with or acquire entities operating in various fields, with a bias towards green and "clean-tech" sectors. Our management has experience in marketing, product launches, business development strategies, and certain other areas specific to the success of growth companies. We will operate with a view towards identifying acquisition candidates as we seek the rights to provide the market with products and services geared toward environmental responsibility.
We have identified several agents who are well suited to provide consulting to high-growth technology and consumer products companies. We are currently negotiating with several agents possessing technical expertise related to planning, structuring, and capitalizing growth companies in the green and "clean-tech" sectors who will be tasked with creating additional revenues and assist the Company with our own planning, structure, and capitalization.
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We have identified several entities that fit our criteria. We are focused on adding value to these companies and acquiring either the entity or its business, maintaining and growing that business, and hiring and utilizing existing management where appropriate. We have begun the design of a website which we believe will help us attract relationships with possible acquisition targets.
Intellectual Property & Proprietary Rights
Upon completion of our brand development, we will regard substantial elements of our brands and underlying intellectual property as proprietary and attempt to protect them by relying on trademark, service mark and trade secret laws, restrictions on disclosure and transferring title and other methods.
Our plans are to actively pursue patent and trademark protection for all of newly developed products, both domestically and abroad. We have novel and proprietary technologies related to our product line and the central focus of our patent counsel has been to work with our engineers to build a defensible patent portfolio.
To date, we have filed and received a United States federal trademark registration for trutankless® and our logo design with the help of our outside marketing and branding experts and have acquired several unique domain registrations reflective of our online marketing strategy. We intend to file a formal patent application with the USPTO under the guidance of patent counsel, upon completion of our engineered prototype. There is no guarantee that we will be able to obtain a patent for our tankless water heater. We will continue to protect our intellectual property through confidentiality agreements with vendors and consultants and trade secret protocols employed by employees, consultants, and contractors.
Product Overview
We are currently in a research and development phase to design a product line of tankless water heaters. We are strategizing a branding and marketing strategy for a tankless water heater product line. The whole-house and commercial series of water heaters will be marketed by the Company when the research and development is substantially completed. Management believes our products will deliver increased functionality and energy efficiency to consumers, and that our products are superior to other competing products in the market, but at a lower cost to the end user. In addition, we are working to identify partners in the contract manufacturing space and believe we will enter production through one of these contract manufacturing firms in the next 12 months. There are currently several prototypes, components, and various assemblies and technologies being examined and tested by our engineering contactors for use in our product lines.
Tankless Industry Overview
The U.S. gas tankless, whole-house, water heater market is dominated by five brands; Noritz, Rinnai, Takagi, Aqua Star by Bosch and Paloma by Rheem. The U.S. electric tankless, whole-house, water heater market is dominated by four brands; Seisco by Microtherm, Inc., Stiebel Eltron, Eemax and Power Star by Bosch. Until just a few years ago, there were only a few tankless water heater manufacturers with a presence in the United States, but that is changing. Now, several Japanese and European manufacturers have begun marketing products in the United States, and since 2003, gas tankless products have experienced dramatic growth. Electric tankless systems have not experienced comparable growth due to several factors, primarily product performance, capacity, product quality and electrical power supply and installation issues.
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Manufacturers of tank heaters have a competitive advantage due largely to their product category’s long established use, name recognition, established distribution and brand position in the marketplace. Many plumbers and other building industry professionals were opposed to changing brands or to tankless systems because many tankless water heaters have been poorly designed in the past. As a result there is a perception among some contractors that these water heaters are more complicated and generally less dependable than traditional tank heaters. This perception is often passed along to consumers when making buying decisions or inquiring about switching to a tankless water heater. In recent years however, the industry has experienced a contraction in sales of products and services for new building projects. Consequently, higher ticket, higher margin products, such as tankless and solar water heating systems have become a primary growth driver for many plumbers and companies who had traditionally avoided emerging technologies.
While we believe that our products will have superior performance, such as endless hot water, superior longevity, greater efficiency and lower “life-cycle” costs than traditional tank water heaters, the Company’s success will depend to a large degree on the successful conversion of traditional water heater buyers to tankless water heater buyers. The acquisition price of tankless water heaters (both gas and electric) is greater than traditional tank water heaters, but the overall cost of ownership will be less than that of traditional tank technologies under typical circumstances. Although the public’s awareness of tankless systems has not been strong historically, sales growth in the sector is suggestive of increasing awareness.
Our marketing and promotion plans have been developed to increase the awareness of the Company’s brand as the preferred option to traditional tank systems. Bollente intends to position itself and its brand to capitalize on the paradigm shift to green-conscious living and development.
Target Markets
The United States market for residential tank water heaters in 2010 was approximately 7.65 million units according to data released by the Air-Conditioning, Heating, and Refrigeration Institute (AHRI). Almost 50% of those shipments were electric water heaters, and the company has found in comparing those statistics with government data, that over 90% of tank water heaters shipped in 2010 were intended for “replacement” installations.
Bollente will initially market its products to builders, remodelers and distributors in the southern and western U.S. These areas of the country have been selected because of generally higher ground water temperatures, which improves the effects of the performance and capacity of all brands of tankless water heaters. This area of the country also traditionally has the largest share of population growth and new housing starts, accounting for almost two-thirds of all housing starts in 2010, according to government data. Additionally, the southern U.S., and specifically the southeastern U.S., has the highest usage of electric water heaters.
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Overview of Potential Markets and Summary of Marketing Plan
Management intends to focus on the United States residential market initially. For decades Americans have used only tank type water heaters. For most homes, the units hold an average of 40 to 80 gallons of water in a storage tank, are gas or electric fueled and consume excessive energy to keep water hot continuously. In fact, water heaters expend up to 25% of the total energy used by a typical household representing the second largest use of energy in most homes. Depending on household usage, approximately 25 – 50% of the heat created is lost through the walls of the tank and connecting pipes.
There are other problems inherent with traditional tank water heaters:
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Due to the high temperatures and corrosive aspects of water, a typical water heater has a life span of 10.7 years.
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Unless replaced beforehand, more than two thirds of water heaters eventually corrode and leak or burst, often resulting in extensive and costly water and mold related damage.
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Due to the large size and other installation requirements often result in the units being installed in garages and utility rooms on the opposite side of the home from the bathroom fixtures. Because of this, an estimated 10,000 gallons of water per household goes down the drain while users wait on the water to get hot at the faucet.
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Traditional tank water heaters take up to 6 to 9 square feet of floor space, which can be especially valuable in multi-family or commercial applications.
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To reduce operating costs, many people adjust the temperature on their water heaters down. Unfortunately, lower temperatures increase the possibility of unhealthy, water born bacteria growth.
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To increase water heating capacity, many people will adjust the temperature of their water heaters up
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In addition to using more energy, this practice can be dangerous by posing a greater risk of scalding.
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Tankless water heaters are becoming increasingly popular in America because they:
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Produce a continuous, unlimited supply of hot water
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Expend only the energy needed to heat the water used with no “standby” energy loss
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Can last more than twice as long as tank heaters
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Are small and require very little space.
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Are not conducive to bacterial growth
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Are considered very “green” by green conscious builders and consumers.
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Electric tankless water heaters have additional benefits over gas powered models because they can be installed almost anywhere in a home (closets, attics, utility rooms, etc.) where hot water is needed which improves flexibility of floor plan design for builders, architects, and remodelers. In addition, gas tankless water heaters may not be suitable for many applications due to challenges with adequate fuel supply, the need for exhaust vents with specific requirements, and other code-related requirements. In spite of these issues, gas tankless water heaters have enjoyed significant growth in North America because of the efficiency and performance they provide.
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Distribution Plan
Initially, we will be distributing our first product line throughout the southern and western U.S. using an existing network of plumbing and electrical wholesalers (distributors), manufacturers’ representatives and dealers. We believe that once the product has been launched, we will be able to partner with major companies in the building and plumbing industries to rapidly expand awareness of Bollente and our products in the water heater market in the U.S and Canada.
Sales will be pursued through the following channels:
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Regional and national plumbing and electrical wholesalers (also called “distributors”);
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Plumbers and electricians on a direct basis, in those areas where wholesalers have not yet been set up; and,
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Builders on a direct basis, in those areas where wholesalers & mechanical contractors have not yet been set up.
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We will expand sales of the product further by marketing the product directly to consumers over the internet with a series of aggressive and ongoing marketing initiatives. We intend to market to industry professionals and end-users through more traditional marketing efforts as well, including print advertising, attendance of select national trade shows, and attendance of select regional consumer shows. We also expect Bollente will be successful in providing education, training, and support to our sales and installer networks as part of our distribution and marketing efforts.
We believe our products will be a differentiating factor for industry professionals and builders as they market to their customers. Additionally, our electric tankless products are expected to provide these professionals and their companies with a mechanism to increase revenue and improve gross margin as compared to more traditional water heating products.
Employees
As of December 31, 2012, we have one part-time employee, Robertson James Orr, who is also our sole officer and director. We are using and will continue to use independent consultants and contractors to perform various professional services. We believe that this use of third-party service providers may enhance our ability to contain operating and general expenses, and capital costs.
Available Information
Our periodic reports filed with the SEC, which include Form 10-K, Form 10-Q, Form 8-K and amendments thereto, may be accessed by the public free of charge from the SEC. Electronic copies of these reports can be accessed at the SEC’s website (
http://www.sec.gov
). Copies of these reports may also be obtained, free of charge, upon written request to: Bollente Companies Inc., Gainey Center II, 8501 North Scottsdale Road, Suite 165, Scottsdale, Arizona 85253, Attn: Corporate Secretary. The public may read or obtain copies of these reports from the SEC at the SEC’s Public Reference Room at 450 Fifth Street N.W., Washington, D.C. 20549 (1-800-SEC-0330).
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An investment in our common stock involves a high degree of risk. You should carefully consider the risks described below, together with all of the other information included in this report, before making an investment decision. If any of the following risks actually occurs, our business, financial condition or results of operations could suffer. In that case, the trading price of our common stock could decline, and you may lose all or part of your investment. You should read the section entitled “Special Note Regarding Forward Looking Statements” above for a discussion of what types of statements are forward-looking statements, as well as the significance of such statements in the context of this report.
We are a development stage company organized in March 2008 and have recently commenced operations, which makes an evaluation of us extremely difficult. At this stage of our business operations, even with our good faith efforts, we may never become profitable or generate any significant amount of revenues, thus potential investors have a high probability of losing their investment.
We were incorporated in March of 2008 as a Nevada corporation. As a result of our start-up operations we have; (i) generated no revenues, (ii) accumulated deficits of $3,272,117 for the period ended December 31, 2012, and (iii) we have incurred losses of $3,272,117 from our inception through the period ended December 31, 2012. We have been focused on organizational and start-up activities and business plan development. There is nothing at this time on which to base an assumption that our business operations will prove to be successful or that we will ever be able to operate profitably. Our future operating results will depend on many factors, including our ability to raise adequate working capital, demand for our products, the level of our competition and our ability to attract and maintain key management and employees.
If we are unable to attract and retain key personnel, our business could be harmed.
If any of our key employees were to leave, we could face substantial difficulty in hiring qualified successors and could experience a loss in productivity while any successor obtains the necessary training and experience. Our employment relationships are generally at-will. We cannot assure that one or more key employees will not leave in the future. We intend to continue to hire additional highly qualified personnel, but may not be able to attract, assimilate or retain qualified personnel in the future. Any failure to attract, integrate, motivate and retain these employees could harm our business.
We are subject to federal legislation to protect investors against corporate fraud.
Federal legislation, such as the Sarbanes-Oxley Act of 2002 and the Dodd- Frank Act, has resulted in the adoption of various corporate governance measures designed to promote the integrity of the corporate management and the securities markets. Some of these measures have been adopted in response to legal requirements. Others have been adopted by companies in response to the requirements of national securities exchanges, such as the NYSE, or the Nasdaq Stock Market, on which their securities are listed. Among the corporate governance measures that are required under the rules of national securities exchanges and NASDAQ are those that address board of directors’ independence, audit committee oversight, and the adoption of a code of ethics.
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We have not yet adopted any of these corporate governance measures such as an audit or other independent committees of our board of directors as we presently have one director. Additionally, since our securities are not yet listed on a national securities exchange or NASDAQ, we are not required to do so. If we expand our board membership in future periods to include independent directors, we may seek to establish an audit and other committees of our board of directors. It is possible that if we were to adopt some or all of these corporate governance measures, stockholders would benefit from somewhat greater assurances that internal corporate decisions were being made by disinterested directors and that policies had been implemented to define responsible conduct. For example, in the absence of audit, nominating and compensation committees comprised of at least a majority of independent directors, decisions concerning matters such as compensation packages to our senior officers and recommendations for director nominees are made by a majority of directors who have an interest in the outcome of the matters being decided. Prospective investors should consider our current lack of corporate governance measures in making their investment decisions, in addition to the fact that we currently have only one director.
We are an “emerging growth company” under the JOBS Act of 2012, and we cannot be certain if the reduced disclosure requirements applicable to emerging growth companies will make our common stock less attractive to investors.
We are an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act of 2012 (“JOBS Act”), and we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies” including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved. We cannot predict if investors will find our common stock less attractive because we may rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile.
In addition, Section 107 of the JOBS Act also provides that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an “emerging growth company” can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We are choosing to take advantage of the extended transition period for complying with new or revised accounting standards. As a result, our financial statements may not be comparable to those of companies that comply with public company effective dates.
We will remain an “emerging growth company” for up to five years, although we will lose that status sooner if our revenues exceed $1 billion, if we issue more than $1 billion in non-convertible debt in a three year period, or if the market value of our common stock that is held by non-affiliates exceeds $700 million.”
Even if we no longer qualify as an “emerging growth company”, we may still be subject to reduced reporting requirements so long as we are considered a “Smaller Reporting Company.”
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Many of the exemptions available for emerging growth companies are also available to smaller reporting companies like us that have less than $75 million of worldwide common equity held by non-affiliates. So, although we may no longer qualify as an emerging growth company, we may still be subject to reduced reporting requirements.
We are subject to significant competition from large, well-funded companies.
The industry we compete in is characterized by intense competition and rapid and significant technological advancements. Many companies are working in a number of areas similar to our primary field of interest to develop new products; some of which may be similar and/or competitive to our products.
Most of the companies with which we compete have substantially greater financial, technical, manufacturing, marketing, sales and distribution and other resources than us. If a competitor enters the tankless water heater industry and establishes a greater market share in the direct-selling channel, our business and operating results will be adversely affected.
Our auditors have substantial doubt about our ability to continue as a going concern. Additionally, our auditor’s report reflects that the ability of the Company to continue as a going concern is dependent upon our ability to raise additional capital from the sale of common stock and, ultimately, the achievement of significant operating revenues.
Our financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. Our auditor’s report reflects that the ability of the Company to continue as a going concern is dependent upon our ability to raise additional capital from the sale of common stock and, ultimately, the achievement of significant operating revenues. If we are unable to continue as a going concern, stockholders will lose their investment. We will be required to seek additional capital to fund future growth and expansion. No assurance can be given that such financing will be available or, if available, that it will be on commercially favorable terms. Moreover, favorable financing may be dilutive to investors.
We will require additional financing in order to implement our business plan. In the event we are unable to acquire additional financing, we may not be able to implement our business plan resulting in a loss of revenues and ultimately the loss of your investment.
Due to our very recent start-up nature, we will have to incur the costs of product development, import expenses, advertising, in addition to hiring new employees and commencing additional marketing activities for product sales and distribution. To fully implement our business plan we will require substantial additional funding.
We will need to raise additional funds to expand our operations. We plan to raise additional funds through private placements, registered offerings, debt financing or other sources to maintain and expand our operations. Adequate funds for this purpose on terms favorable to us may not be available, and if available, on terms significantly more adverse to us than are manageable. Without new funding, we may be only partially successful or completely unsuccessful in implementing our business plan, and our stockholders may lose part or all of their investment.
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RISKS RELATED TO OUR INTELLECTUAL PROPERTY AND TECHNOLOGY
If we fail to secure or protect our intellectual property rights, our products and competitors may be able to use our designs, each of which could harm our reputation, reduce our revenues and increase our costs.
We will rely on intellectual property laws to protect our proprietary rights with respect to our trademarks and pending patent. We are susceptible to injury from patent infringement, which may harm our reputation for producing high-quality products or force us to incur additional expense in enforcing our rights. It is difficult and expensive to detect and prevent patent infringement. Despite our efforts to protect our intellectual property, some may attempt to violate our intellectual property rights by using our trademarks and imitating our products, which could potentially harm our brand, reputation and financial condition.
We may face significant expenses and liability in connection with the protection of our intellectual property rights. Infringement claims and lawsuits likely would be expensive to resolve and would require substantial management time and resources. Any adverse determination in litigation could subject us to the loss of our rights to a particular trademark, which could prevent us from manufacturing, selling or using certain aspects of our products or could subject us to substantial liability, any of which would harm our results of operations. Aside from infringement claims against us, if we fail to secure or protect our intellectual property rights, our competitors may be able to use our designs. If we are unable to successfully protect our intellectual property rights or resolve any conflicts, our results of operations may be harmed.
Our reliance on intellectual property and other proprietary information subjects us to the risk that these key ingredients of our business could be copied by competitors.
Our success depends, in significant part, on the proprietary nature of our technology. If a competitor is able to reproduce or otherwise capitalize on our technology, despite the safeguards we have in place, it may be difficult, expensive or impossible for us to obtain necessary legal protection. In addition to patent protection of intellectual property rights, we consider elements of our product designs and processes to be proprietary and confidential. We rely upon employee, consultant and vendor non-disclosure agreements and contractual provisions and a system of internal safeguards to protect our proprietary information. However, any of our registered or unregistered intellectual property rights may be challenged or exploited by others in the industry, which might harm our operating results.
Our internal controls may be inadequate, which could cause our financial reporting to be unreliable and lead to misinformation being disseminated to the public.
Our management is responsible for establishing and maintaining adequate internal control over financial reporting. As defined in Exchange Act Rule 13a-15(f), internal control over financial reporting is a process designed by, or under the supervision of, the principal executive and principal financial officer and effected by the board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that: (i) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company, and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.
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Mr. Orr has limited experience in running a public company. The lack of experience in operating a public company could impact our return on investment, if any.
As a result of our reliance on Mr. Orr, and his lack of experience in operating a public company, our investors are at risk in losing their entire investment. Mr. Orr intends to hire personnel in the future, when sufficiently capitalized, who may have the experience required to manage our company; however, such management is not anticipated until the occurrence of future financing. Until such future financing occurs, and until such management is in place, we are reliant upon Mr. Orr to make the appropriate management decisions.
Mr. Orr may become involved with other businesses and there can be no assurance that he will continue to provide services to us. Mr. Orr’s limited time devotion to the Company could have the effect on our operations of preventing us from being a successful business operation, which ultimately could cause a loss of stockholder investment.
As compared to many other public companies, we do not have the depth of managerial or technical personnel. Mr. Orr is currently involved in other businesses, which have not, and are not expected in the future to interfere with Mr. Orr’s ability to work on behalf of our Company. Mr. Orr may in the future be involved with other businesses and there can be no assurance that he will continue to provide services to us. Mr. Orr will devote only a portion of his time to our activities.
We depend on certain key employees, and believe the loss of any of them would have a material adverse effect on our business.
We will be dependent on the continued services of our management team, as well as our outside consultants. While we have no assurance that our current management will produce successful operations, the loss of such personnel could have an adverse effect on meeting our production and financial performance objectives. We have no assurance that we will not lose the services of these or other key personnel and may not be able to timely replace any personnel if we do lose their services.
Our ability to attract qualified sales and marketing personnel is critical to our future success, and any inability to attract such personnel could harm our business.
Our future success may also depend on our ability to attract and retain additional qualified design and sales and marketing personnel. We face competition for these individuals and may not be able to attract or retain these employees, which could have a material adverse effect on our results of operations and financial condition.
RISKS RELATING TO OUR COMMON STOCK
There is no current public market for our common stock; therefore you may be unable to sell your securities at any time, for any reason, and at any price, resulting in a loss of your investment.
Currently there is no public market for our common stock. Although we intend to file for inclusion of our common stock on the OTCQB, there can be no assurance that FINRA will approve the inclusion of our common stock. Furthermore, if our securities are not quoted on the OTCQB, or elsewhere, there can be no assurance that a market will develop for the common stock or that a market in the common stock will be maintained. As a result of the foregoing, our stockholders may be unable to liquidate their investment for any reason.
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The application of the “penny stock” rules to our common stock could limit the trading and liquidity of the common stock, adversely affect the market price of our common stock and increase your transaction costs to sell those shares.
As long as the trading price of our common stock is below $5.00 per share, the open-market trading of our common stock will be subject to the “penny stock” rules, unless we otherwise qualify for an exemption from the “penny stock” definition. The “penny stock” rules impose additional sales practice requirements on certain broker-dealers who sell securities to persons other than established customers and accredited investors (generally those with assets in excess of $1,000,000 (excluding personal residence in accordance with the Dodd-Frank act of 2010) or annual income exceeding $200,000 or $300,000 together with their spouse). These regulations if they apply, require the delivery, prior to any transaction involving a “penny stock,” of a disclosure schedule explaining the “penny stock” market and associated risks. Under these regulations, certain brokers who recommend such securities to persons other than established customers or certain accredited investors must make a special written suitability determination regarding such a purchaser and receive the purchaser’s written agreement to a transaction prior to sale. These regulations may have the effect of limiting the trading activity of our common stock, reducing the liquidity of an investment in our common stock and increasing the transaction costs for sales and purchases of our common stock as compared to other securities.
If we fail to remain current on our reporting requirements with the SEC, we could be removed from the OTC Quotation Board, which would limit the ability of broker dealers to sell our securities and the ability of stockholders to sell their securities in the secondary market.
Companies trading on the OTC Quotation Board generally must be reporting issuers under Section 12 of the Securities Exchange Act of 1934, as amended, and must be current in their reports under Section 13, in order to maintain price quotation privileges on the OTC Quotation Board. More specifically, FINRA has enacted Rule 6530, which determines eligibility of issuers quoted on the OTC Quotation Board by requiring an issuer to be current in its filings with the Commission. Pursuant to Rule 6530(e), if we file our reports late with the Commission three times in a two year period or our securities are removed from the OTC Bulletin Board for failure to timely file twice in a two year period, then we will be ineligible for quotation on the OTC Quotation Board. As a result, the market liquidity for our securities could be severely adversely affected by limiting the ability of broker dealers to sell our securities and the ability of stockholders to sell their securities in the secondary market. As of the date of this filing, we have no late filings reported by FINRA.
Our internal controls may be inadequate which could cause our financial reporting to be unreliable and lead to misinformation being disseminated to the public.
Our management is responsible for establishing and maintaining adequate internal control over financial reporting. As defined in Exchange Act Rule 13a-15(f), internal control over financial reporting is a process designed by, or under the supervision of, the principal executive and principal financial officer and effected by the board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. The Exchange Act Rule includes those policies and procedures that: (i) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of Creative, and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.
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We have one individual performing the functions of all officers, and single director. Our sole officer and director has developed internal control procedures and is responsible for monitoring and ensuring compliance with those procedures. Management has determined that our internal controls are, at this time, adequate and effective. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Investors relying upon this misinformation may make an uninformed investment decision.
Because our common stock could remain under $5.00 per share, it could continue to be deemed a low-priced “Penny” stock, an investment in our common stock should be considered high risk and subject to marketability restrictions.
Since our common stock is currently under $5.00 per share, it is considered a penny stock, as defined in Rule 3a51-1 under the Securities Exchange Act, it will be more difficult for investors to liquidate their investment even if and when a market develops for the common stock. If the trading price of the common stock stays below $5.00 per share, trading in the common stock is subject to the penny stock rules of the Securities Exchange Act specified in rules 15g-1 through 15g-10. Those rules require broker-dealers, before effecting transactions in any penny stock, to:
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Deliver to the customer, and obtain a written receipt for, a disclosure document;
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Disclose certain price information about the stock;
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Disclose the amount of compensation received by the broker-dealer or any associated person of the broker-dealer;
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Send monthly statements to customers with market and price information about the penny stock; and
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In some circumstances, approve the purchaser’s account under certain standards and deliver written statements to the customer with information specified in the rules.
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Consequently, the penny stock rules may restrict the ability or willingness of broker-dealers to accept the common stock for deposit into an account or, if accepted for deposit, to sell the common stock and these restrictions may affect the ability of holders to sell their common stock in the secondary market and the price at which such holders can sell any such securities. These additional procedures could also limit our ability to raise additional capital in the future.
FINRA sales practice requirements may also limit a stockholder's ability to buy and sell our stock.
In addition to the “penny stock” rules described above, the Financial Industry Regulatory Authority (FINRA) has adopted rules that require that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative low priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer's financial status, tax status, investment objectives and other information. Under interpretations of these rules, FINRA believes that there is a high probability that speculative low priced securities will not be suitable for at least some customers. The FINRA requirements make it more difficult for broker-dealers to recommend that their customers buy our common stock, which may limit your ability to buy and sell our stock and have an adverse effect on the market for our shares.
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We have one individual performing the functions of all officers and directors. Mr. Orr, our president, has developed our internal control procedures and is responsible for monitoring and ensuring compliance with those procedures. As a result, our internal controls may be inadequate or ineffective, which could cause our financial reporting to be unreliable and lead to misinformation being disseminated to the public. Investors relying upon this misinformation may make an uninformed investment decision.
None.
We currently maintain an executive office 8501 North Scottsdale Road, Suite 165, Scottsdale, Arizona, which consists of approximately 577 square feet. Our monthly rent for this office is $3,500. On January 3, 2013, we signed a sublease with Perigon Companies, LLC, a Delaware limited liability company (“Perigon”), wherein we agreed to sublease 197 square feet to Perigon for $3,500 per month. The sublease is on a month to month basis and terminates 30 days after receipt of written notice by either party.
As a result of our method of operations and business plan we do not require personnel other than Mr. Orr to conduct our business. In the future we anticipate requiring additional office space and additional personnel; however, it is unknown at this time how much space or how many individuals will be required.
We are not a party to any material legal proceedings.
Market Information
On April 3, 2013, our symbol “BOLC” was deleted from the OTC:QB due to quoting inactivity under SEC Rule 15c2-11 as a result of being dropped by our market maker. As a result, we intend to file for inclusion of our common stock on the Over-the-Counter Quotation Board; however, there can be no assurance that FINRA will approve the inclusion of the common stock. Prior to the date of this report, our common stock was traded under to symbol “BOLC”.
Inclusion on the OTCQB permits price quotations for our shares to be published by that service. Although we have submitted an application to a market maker for the OTCQB, we do not anticipate that our shares will immediately be traded in the public market. Also, secondary trading of our shares may be subject to certain state imposed restrictions. Except for the application we submitted to a market maker for the OTCQB, there are no plans, proposals, arrangements or understandings with any person concerning the development of a trading market in any of our securities. There can be no assurance that our shares will be accepted for trading on the OTCQB or any other recognized trading market. Also, there can be no assurance that a public trading market will develop in the future or, if such a market does develop, that it can be sustained.
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Without an active public trading market, a stockholder may not be able to liquidate their shares. If a market does develop, the price for our securities may be highly volatile and may bear no relationship to our actual financial condition or results of operations. Factors we discuss in this report, including the many risks associated with an investment in our securities, may have a significant impact on the market price of our common stock.
The ability of individual stockholders to trade their shares in a particular state may be subject to various rules and regulations of that state. A number of states require that an issuer's securities be registered in their state or appropriately exempted from registration before the securities are permitted to trade in that state. Presently, we have no plans to register our securities in any particular state.
Holders of Common Stock
As of April 15, 2013, we had approximately 92 stockholders of record of the 8,152,456 shares outstanding. The closing bid stock price on April 15, 2013 was $0.88.
Dividends
The payment of dividends is subject to the discretion of our Board of Directors and will depend, among other things, upon our earnings, our capital requirements, our financial condition, and other relevant factors. We have not paid or declared any dividends upon our common stock since our inception and, by reason of our present financial status and our contemplated financial requirements, do not anticipate paying any dividends upon our common stock in the foreseeable future.
We have never declared or paid any cash dividends. We currently do not intend to pay cash dividends in the foreseeable future on the shares of common stock. We intend to reinvest any earnings in the development and expansion of our business. Any cash dividends in the future to common stockholders will be payable when, as and if declared by our Board of Directors, based upon the Board’s assessment of:
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our financial condition;
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earnings;
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need for funds;
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capital requirements;
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prior claims of preferred stock to the extent issued and outstanding; and
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other factors, including any applicable laws.
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Therefore, there can be no assurance that any dividends on the common stock will ever be paid.
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Recent Sales of Unregistered Securities
Stock Issuances pursuant to Subscription Agreements
On November 21, 2012, we issued 550,000 common shares, which were sold last quarter to a total of six accredited investors for a total purchase price of $275,000, all of which was paid in cash.
We made the above common stock issuance in reliance upon the exemption from registration under Section 4(2) of the Securities Act for private offerings not involving a public distribution.
Stock Issuance Pursuant to Consulting Services
On December 18, 2012, the Company issued 510,000 shares of restricted common stock valued at $2.50 - $2.65 per share to a total of five consultants as compensation in exchange for services pursuant to their consulting agreements.
We made the above common stock issuance in reliance upon the exemption from registration under Section 4(2) of the Securities Act for private offerings not involving a public distribution.
Stock Issuance Pursuant to Employment Agreement
On December 18, 2012, the Company issued 15,000 shares of restricted common stock to our President and Chief Executive Officer as compensation pursuant to his employment agreement, wherein the corporation is obligated to issue 15,000 shares on a quarterly basis for his executive services.
We made the above common stock issuance in reliance upon the exemption from registration under Section 4(2) of the Securities Act for private offerings not involving a public distribution.
Issuer Purchases of Equity Securities
The Company did not repurchase any of its equity securities during the fourth quarter ended December 31, 2012.
This item is not applicable, as we are considered a smaller reporting company.
OVERVIEW AND OUTLOOK
Bollente Companies Inc. was formed as a Nevada corporation in March 2008. On September 23, 2010, the Company changed its name from Alcantara Brands Corporation to Bollente Companies Inc. Effective May 16, 2011, we completed the acquisition of Bollente, Inc. through the acquisition of 100% of the issued and outstanding common stock of Bollente, Inc.
Our Operations
As a result of completing the acquisition of Bollente, Inc. on May 16, 2011, our entire operations is currently based upon the operations of our wholly-owned subsidiary Bollente, Inc., which is involved in researching and manufacturing a green technology centered on a tankless water heater system for residential and commercial purposes. Our first branded product is a high quality, whole-house, electric tankless water heater that is more energy efficient than conventional products.
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Operation Plan
Our plan is to focus on continued research and development to improve the performance of our electric tankless water heater line, finishing the main elements of our branding strategy and launching a website introducing the features and benefits of tankless water heaters to the market. Subject to availability of capital and once we have substantially completed research and development of the tankless line, we will implement a marketing and sales program in order to begin filling the sales pipeline with potential customers, outside sales companies, and identify candidates within the plumbing and construction industries who will be interested in utilizing our electric tankless technology.
In order to increase production and increase returns for our stockholders, we will also be seeking licensing partners and private label opportunities. Depending on availability of capital, and other constraints, our goal is to increase stockholder value by acquiring stakes in companies, product licenses, and/or joint ventures which will yield additional products or services related to our tankless water heater line which we will offer to our customers or which will yield additional customers to whom we can offer out tankless water heater line.
We expect to achieve these results by:
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Testing new, proprietary technologies for integration into our electric tankless water heating products;
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Filing for patent for our electric tankless water heater line and obtaining trademark protection for our brand;
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Launching our product website to educate retail consumers about our products;
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Installing and testing prototype water heaters in the field in a variety of applications;
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Designing a secondary website geared towards providing service and technical guidance to industry professionals, trade persons, and wholesale sales companies on the benefits of offering our products to their customers; and,
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Identifying additional candidates in the plumbing and building industry in select markets to support our initial marketing and sales efforts.
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In addition to raising additional capital we plan to begin discussions with various acquisition targets whose technologies and product offerings may augment our planned product offerings. This economic strategy may allow us to acquire or license green product lines and generally expand our existing operations.
Because of our limited operating history we have yet to generate any revenues. Our activities have been limited to raising capital, closing the recent merger, negotiating with consultants, and finalizing our consumer website design, and conducting research and testing on competitive technologies in the market place.
Our future financial results will depend primarily on: (i) our ability to raise necessary capital; (ii) obtaining required certifications to sell our products in the domestic market place; (iii) our success in obtaining patent protection for our intellectual property; and (iv) our ability to monetize our intellectual property. There can be no assurance that we will be successful in any of these respects, or that we will be able to obtain additional funding to increase our currently limited capital resources.
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RESULTS OF OPERATIONS
Revenue.
During the years ended December 31, 2012 and 2011, we did not generate revenues.
General and Administrative
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General and administrative expenses increased $25,263, or 111%, to $47,925 for the fiscal year ended December 31, 2012 from $22,662 for the fiscal year ended December 31, 2011. The increase was as a result of the change in management and different visions for the Company.
Executive Compensation
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Executive compensation decreased $88,150, or 36%, to $154,776 in the fiscal year ended December 31, 2012 from $242,926 for the fiscal year ended December 31, 2011. The decrease in executive compensation was the result of the renegotiated employment agreement with Robertson Orr.
Research and Development.
Research and development expenses decreased $13,980, or 23% to 45,550 in the fiscal year ended December 31, 2012 from $59,530 for the fiscal year ended December 31, 2011. The decrease in research and development was due primarily to spending less on the development of new products.
Professional Fees
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Professional fees decreased $615,310, or 234%, to $878,477 in the fiscal year ended December 31, 2012 from $263,167 for the fiscal year ended December 31, 2011. The increase in professional fees was the result of legal and outside accounting fees incurred.
Interest Expense – Related Party
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Interest expense – related party increased $6,585, or 18% to $43,382 in the fiscal year ended December 31, 2012 from $36,797 for the fiscal year ended December 31, 2011. The increase was the result of the additional borrowings during the year. The most significant increase is due to the loan for $500,000.
Interest Expense
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Interest expense decreased $25,402, or 89% to $3,100 in the fiscal year ended December 31, 2012 from $28,502 for the fiscal year ended December 31, 2011. The decrease was the result of less borrowings during the year and expenses related to the conversion of accounts payable.
Net Loss
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In the fiscal year ended December 31, 2012, we generated a net loss of $1,173,210, a increase of $519,626, or 80%, from $653,584 for the period ended December 31, 2011. The increase was the result of a change in management and change in the business operations of the Company.
Going Concern
The financial statements included in this filing have been prepared in conformity with generally accepted accounting principles that contemplate the continuance of the Company as a going concern. The Company may not have a sufficient amount of cash required to pay all of the costs associated with operating and marketing of its products. Management intends to use borrowings and security sales to mitigate the effects of cash flow deficits, however no assurance can be given that debt or equity financing, if and when required, will be available. The financial statements do not include any adjustments relating to the recoverability and classification of recorded assets and classification of liabilities that might be necessary should the Company be unable to continue existence.
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Liquidity and Capital Resources
As of December 31, 2012, we had $3,872 in cash, $100,362 in prepaid expenses and $1,166,000 in prepaid stock compensation. The following table provides detailed information about our net cash flow for all financial statement periods presented in this Annual Report. To date, we have financed our operations through the issuance of stock and borrowings.
The following table sets forth a summary of our cash flows for the periods indicated:
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Fiscal Year Ended
December 31,
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2012
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2011
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Net cash used in operating activities
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$ | (367,247 | ) | $ | (185,364 | ) | ||
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Net cash used in investing activities
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$ | (3,500 | ) | $ | (550 | ) | ||
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Net cash provided by financing activities
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$ | 373,755 | $ | 186,730 | ||||
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Net increase/(decrease) in Cash
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$ | 3,008 | $ | 816 | ||||
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Cash, beginning of year
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$ | 864 | $ | 48 | ||||
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Cash, end of year
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$ | 3,872 | $ | 864 | ||||
Operating activities
Net cash used in operating activities was $367,247 for the year ended December 31, 2012, as compared to $185,364 used in operating activities for the same period in 2011. The increase in net cash used in operating activities was primarily due to the increase in stock based compensation.
Investing activities
Net cash used in investing activities was $3,500 for the period ended December 31, 2012, as compared to $550 used in investing activities for the same period in 2011. The net cash used in investing activities for the current period was primarily due to development of the website.
Financing activities
Net cash provided by financing activities for the year ended December 31, 2012 was $373,755, as compared to $186,730 for the same period of 2011. The increase of net cash provided by financing activities was mainly attributable to proceeds from borrowing and the sale of unregistered securities through private placements.
As of December 31, 2012, we continue to use traditional and/or debt financing to provide the capital we need to run the business.
Since inception, we have financed our cash flow requirements through issuance of common stock and debt financing. As we expand our activities, we may, and most likely will, continue to experience net negative cash flows from operations, pending receipt of product sales. Additionally, we anticipate obtaining additional financing to fund operations through common stock offerings, to the extent available, or to obtain additional financing to the extent necessary to augment our working capital. In the future we need to generate sufficient revenues from product sales in order to eliminate or reduce the need to sell additional stock or obtain additional loans. There can be no assurance we will be successful in raising the necessary funds to execute our business plan.
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We anticipate that we will incur operating losses in the next twelve months. Our lack of operating history makes predictions of future operating results difficult to ascertain. Our prospects must be considered in light of the risks, expenses and difficulties frequently encountered by companies in their early stage of development. Such risks for us include, but are not limited to, an evolving and unpredictable business model and the management of growth. To address these risks, we must, among other things, obtain a customer base, implement and successfully execute our business and marketing strategy, continually develop our line of products, respond to competitive developments, and attract, retain and motivate qualified personnel. There can be no assurance that we will be successful in addressing such risks, and the failure to do so can have a material adverse effect on our business prospects, financial condition and results of operations.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.
This item in not applicable as we are currently considered a smaller reporting company.
See Index to Financial Statements and Financial Statement Schedules appearing on page F-1 through F-17 of this Form 10-K.
We have had no disagreements with our independent auditors on accounting or financial disclosures.
Evaluation of Disclosure Controls and Procedures
Our Principal Executive Officer and Principal Financial Officer, Robertson James Orr, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended) as of the end of the period covered by this Report. Based on his evaluation, Mr. Orr concluded that our disclosure controls and procedures are not designed at a reasonable assurance level and are not effective to provide reasonable assurance that information we are required to disclose in the reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our chief executive officer and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
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Management’s Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control, as is defined in the Securities Exchange Act of 1934. These internal controls are designed to provide reasonable assurance that the reported financial information is presented fairly, that disclosures are adequate and that the judgments inherent in the preparation of financial statements are reasonable. There are inherent limitations in the effectiveness of any system of internal controls, including the possibility of human error and overriding of controls. Consequently, an effective internal control system can only provide reasonable, not absolute, assurance with respect to reporting financial information.
Our internal control over financial reporting includes policies and procedures that: (i) pertain to maintaining records that in reasonable detail accurately and fairly reflect our transactions; (ii) provide reasonable assurance that transactions are recorded as necessary for preparation of our financial statements in accordance with generally accepted accounting principles and the receipts and expenditures of company assets are made and in accordance with our management and directors authorization; and (iii) provide reasonable assurance regarding the prevention or timely detection of unauthorized acquisition, use or disposition of assets that could have a material effect on our financial statements.
Management has undertaken an assessment of the effectiveness of our internal control over financial reporting based on the framework and criteria established in the Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). Based upon this evaluation, management concluded that our internal control over financial reporting was not effective as of December 31, 2012.
This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to the temporary rules 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
There were no changes in our internal control over financial reporting that occurred during our most recent fiscal quarter that have materially affected, or reasonably likely to materially affect, our internal control over financial reporting.
Subsequent to the year ended December 31, 2012, on April 3, 2013, our symbol “BOLC” was deleted from the OTCQB due to quoting inactivity under SEC Rule 15c2-11 as a result of being dropped by our market maker.
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The members of our board of directors serve for one year terms and are elected at the next annual meeting of stockholders, or until their successors have been elected. The officers serve at the pleasure of the board of directors.
Information as to our current directors and executive officers is as follows:
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Name
|
Age
|
Title
|
Since
|
|
Robertson James Orr
|
38
|
President, Secretary, Treasurer, Director
|
May 12, 2010
|
Duties, Responsibilities and Experience
Robertson James Orr
,
has been our President, Treasurer and Secretary since May 12, 2010. Mr. Orr attended Arizona State University and graduated with a BA in Business Management. In 1998, Mr. Orr assisted in the founding of bluemedia, Inc., a successful large format digital printing company based in Tempe, Arizona. Mr. Orr led bluemedia to profitability 9 years ago while overseeing the company's sales department and business development, and since then the company has continued to grow by more than 28% annually. In 2005, Mr. Orr and his Partners in bluemedia started a non-traditional ad agency called Blind Society, which is responsible for the direct to consumer marketing efforts of companies like AT&T, K-Swiss, and Activision. In addition to his entrepreneurial successes, Mr. Orr has been involved with supporting numerous local charitable causes through his work with the Boys & Girls Clubs of Phoenix, St. Joseph the Worker, the MDA and the ADA. He is also on the Board of Directors for the Tempe Chamber of Commerce and is active in the Phoenix 40.
Indemnification of Directors and Officers
Our Articles of Incorporation and Bylaws both provide for the indemnification of our officers and directors to the fullest extent permitted by Nevada law.
Limitation of Liability of Directors
Pursuant to the Nevada General Corporation Law, our Articles of Incorporation exclude personal liability for our Directors for monetary damages based upon any violation of their fiduciary duties as Directors, except as to liability for any breach of the duty of loyalty, acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, or any transaction from which a Director receives an improper personal benefit. This exclusion of liability does not limit any right which a Director may have to be indemnified and does not affect any Director’s liability under federal or applicable state securities laws. We have agreed to indemnify our directors against expenses, judgments, and amounts paid in settlement in connection with any claim against a Director if he acted in good faith and in a manner he believed to be in our best interests.
Election of Directors and Officers
Directors are elected to serve until the next annual meeting of stockholders and until their successors have been elected and qualified. Officers are appointed to serve until the meeting of the Board of Directors following the next annual meeting of stockholders and until their successors have been elected and qualified.
25
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), requires our executive officers and directors, and persons who beneficially own more than ten percent of our common stock, to file initial reports of ownership and reports of changes in ownership with the SEC. Executive officers, directors and greater-than-ten-percent beneficial owners are required by SEC regulations to furnish us with copies of all Section 16(a) forms they file. Based upon a review of the copies of such forms furnished to us and written representations from our executive officers and directors, we believe that as of the date of this filing they were not current in their filings.
Code of Ethics
A code of ethics relates to written standards that are reasonably designed to deter wrongdoing and to promote:
|
(1)
|
Honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships;
|
|
(2)
|
Full, fair, accurate, timely and understandable disclosure in reports and documents that are filed with, or submitted to, the Commission and in other public communications made by an issuer;
|
|
(3)
|
Compliance with applicable governmental laws, rules and regulations;
|
|
(4)
|
The prompt internal reporting of violations of the code to an appropriate person or persons identified in the code; and
|
|
(5)
|
Accountability for adherence to the code.
|
We have not adopted a corporate code of ethics that applies to our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions.
Our decision to not adopt such a code of ethics results from our having a small management for the Company. We believe that the limited interaction which occurs having such a small management structure for the Company eliminates the current need for such a code, in that violations of such a code would be reported to the party generating the violation.
Corporate Governance
We currently do not have standing audit, nominating and compensation committees of the board of directors, or committees performing similar functions. Until formal committees are established, our entire board of directors, perform the same functions as an audit, nominating and compensation committee.
Involvement in Certain Legal Proceedings
To the best of our knowledge, none of our directors or executive officers has, during the past five years:
|
·
|
been convicted in a criminal proceeding or been subject to a pending criminal proceeding (excluding traffic violations and other minor offences);
|
26
|
·
|
had any bankruptcy petition filed by or against the business or property of the person, or of any partnership, corporation or business association of which he was a general partner or executive officer, either at the time of the bankruptcy filing or within two years prior to that time;
|
|
·
|
been subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction or federal or state authority, permanently or temporarily enjoining, barring, suspending or otherwise limiting, his involvement in any type of business, securities, futures, commodities, investment, banking, savings and loan, or insurance activities, or to be associated with persons engaged in any such activity;
|
|
·
|
been found by a court of competent jurisdiction in a civil action or by the SEC 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;
|
|
·
|
been the subject of, or a party to, any federal or state judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended or vacated (not including any settlement of a civil proceeding among private litigants), relating to an alleged violation of any federal or state securities or commodities law or regulation, any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order, or any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or
|
|
·
|
been the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined in Section 3(a)(26) of the Exchange Act (15 U.S.C. 78c(a)(26))), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act (7 U.S.C. 1(a)(29))), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member.
|
Overview of Compensation Program
We currently have not appointed members to serve on the Compensation Committee of the Board of Directors. Until a formal committee is established, our entire Board of Directors has responsibility for establishing, implementing and continually monitoring adherence with the Company’s compensation philosophy. The Board of Directors ensures that the total compensation paid to the executives is fair, reasonable and competitive.
Compensation Philosophy and Objectives
The Board of Directors believes that the most effective executive compensation program is one that is designed to reward the achievement of specific annual, long-term and strategic goals by the Company and that aligns executives’ interests with those of the stockholders by rewarding performance above established goals, with the ultimate objective of improving stockholder value. As a result of the size of the Company and only having one officer, the Board evaluates both performance and compensation on an informal basis. Upon hiring additional executives, the Board intends to establish a Compensation Committee to evaluate both performance and compensation to ensure that the Company maintains its ability to attract and retain superior employees in key positions and that compensation provided to key employees remains competitive relative to the compensation paid to similarly-situated executives of peer companies. To that end, the Board believes executive compensation packages provided by the Company to its executives, including the named executive officers, should include both cash and stock-based compensation that reward performance as measured against established goals.
27
Role of Executive Officers in Compensation Decisions
The Board of Directors makes all compensation decisions for, and approves recommendations regarding equity awards to, the executive officers and Directors of the Company. Decisions regarding the non-equity compensation of other employees of the Company are made by management.
On March 1, 2011, we entered into a one year employment agreement with Mr. Orr. Mr. Orr will receive annual compensation of $42,000, due monthly. For the fiscal year ended December 31, 2011, Mr. Orr earned $35,000, of which $26,521 was accrued. Additionally, Mr. Orr received 50,000 shares of common stock valued at $40,000 during the year ended December 31, 2011. As of December 31, 2011, Mr. Orr was owed a total of 100,000 shares of common stock valued at $164,000. The 100,000 shares were subsequently issued in March 2012.
On March 1, 2012, we renegotiated Mr. Orr’s employment agreement and the annual compensation is $12,000. Mr. Orr has the option to convert the unpaid compensation to shares of common stock at a $1.00 per share. Additionally, he will receive 15,000 shares of common stock per quarter which will be valued based on the fair value of the common stock on the date the shares are earned. Mr. Orr’s employment agreement was renewed on February 1, 2013 under the same terms.
Summary Compensation Table
The table below summarizes the total compensation paid to or earned by our current Executive Officers for the fiscal year ended December 31, 2012
.
|
SUMMARY COMPENSATION TABLE
|
|||||||||
|
Name and Principal Positions
|
Year
|
Salary
($)
|
Bonus
($)
|
Stock Awards
($)
|
Option Awards
($)
|
Non-Equity Incentive Plan Compen-sation
($)
|
Non-qualified Deferred Compensation Earnings
($)
|
All Other Compen-sation
($)
|
Total
($)
|
|
Robertson James Orr
(1)
,
|
|||||||||
|
President, Secretary,
|
2012
|
17,000
|
-0
|
126,100
(3)
|
-0
|
-0
|
-0
|
-0
|
143,100
|
|
Treasurer & Director
|
2011
|
35,000
(2)
|
-0-
|
204,000
(4)
|
-0-
|
-0-
|
-0-
|
-0-
|
239,000
|
|
(1)
|
Mr. Orr was appointed President, Secretary, Treasurer, and Director of the Company on May 12, 2010.
|
|
(2)
|
During the year ended December 31, 2011, our sole Officer and Director earned compensation totaling $35,000 for his role associated as the Company’s officers, of which $26,521 was accrued.
|
|
(3)
|
Amount represents the fair market value of 95,000 shares of common stock issued for services as an employee.
|
|
(4)
|
Amount represents the fair market value of 150,000 shares of common stock issued for services as an employee.
|
Termination of Employment
There are no compensatory plans or arrangements, including payments to be received from the Company, with respect to any person which would in any way result in payments to any such person because of his resignation, retirement, or other termination of such person’s employment with the Company or its subsidiaries, or any change in control of the Company, or a change in the person’s responsibilities following a change in control of the Company, except with respect to a breach of contract on the part of the Company.
Option Grants in Last Fiscal Year
During the years ended December 31, 2012 and 2011, we did not grant any options to our officers and directors.
28
The following table sets forth information, to the best of our knowledge, about the beneficial ownership of our common stock on April 15, 2013 relating to the beneficial ownership of our common stock by those persons known to beneficially own more than 5% of our capital stock and by our directors and executive officers. The percentage of beneficial ownership for the following table is based on 8,152,460 shares of common stock outstanding.
Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission and does not necessarily indicate beneficial ownership for any other purpose. Under these rules, beneficial ownership includes those shares of common stock over which the stockholder has sole or shared voting or investment power. It also includes shares of common stock that the stockholder has a right to acquire within 60 days after April 15, 2013 pursuant to options, warrants, conversion privileges or other right. The percentage ownership of the outstanding common stock, however, is based on the assumption, expressly required by the rules of the Securities and Exchange Commission, that only the person or entity whose ownership is being reported has converted options or warrants into shares of our common stock.
Security Ownership of Management, Directors and Certain Beneficial Owners
|
Title of Class
|
Name of Beneficial Owner
(1)
|
Number
Of Shares
|
Percent
Beneficially
Owned
|
|
Common
|
Robertson James Orr – Sole Officer and Director
(2)
|
386,327
|
4.7%
|
|
Common
|
Envision Growth Partners, LLC
(3)
|
604,500
|
7.5%
|
|
Common
|
All Directors, Officers and Principal Stockholders as a Group
|
990,827
|
12.2%
|
|
(1)
|
As used in this table, “beneficial ownership” means the sole or shared power to vote, or to direct the voting of, a security, or the sole or shared investment power with respect to Common Stock (i.e., the power to dispose of, or to direct the disposition of, a security).
|
|
(2)
|
Robertson James Orr is a natural person directly holding 100% voting power over the shares. Mr. Orr’s address is located at 312 West Macaw Drive, Chandler, AZ 85255.
|
|
(3)
|
Envision Growth Partners, LLC is owned 100% by Joshua Allred. The address is located at PO Box 722, Mesa, AZ 85211.
|
Changes in Control
There are no arrangements, known to the Company, including any pledge by any person of securities of the Company, the operation of which may at a subsequent date result in a change in control of the Company.
Transactions with Related Persons
As of December 31, 2012, the Company had a note payable totaling $500,000 due to a stockholder of the Company. The note payable is unsecured and due February 2014.
Promoters and Certain Control Persons
We did not have any promoters at any time since our inception in March 2008.
29
Director Independence
We currently do not have any independent directors, as the term “independent” is defined in Section 803A of the NYSE Amex LLC Company Guide. Since the OTCQB does not have rules regarding director independence, the Board makes its determination as to director independence based on the definition of “independence” as defined under the rules of the New York Stock Exchange (“NYSE”) and American Stock Exchange (“Amex”).
|
(1)
|
AUDIT FEES
|
Audit and Non-Audit Fees
The following table sets forth the fees paid or accrued by us for the audit and other services provided by De Joya Griffith, LLC for the audit of our annual financial statements for the years ended December 31, 2012 and December 31, 2011:
|
Fiscal Year Ended
December 31, 2012
|
Fiscal Year Ended
December 31, 2011
|
|||||||||||
|
Audit Fees
(1)
|
$ | 18,000 | $ | 19,000 | ||||||||
|
Audit-Related Fees
|
$ | - | - | |||||||||
|
Tax Fees
|
$ | - | - | |||||||||
|
All Other Fees
|
$ | - | - | |||||||||
|
Total
|
$ | 18,000 | $ | 19,000 | ||||||||
|
(1)
|
Audit Fees: This category represents fees for professional services provided in connection with the audit of our financial statements and review of our quarterly financial statements.
|
(2) AUDIT-RELATED FEES
None.
(3) TAX FEES
See table above.
(4) ALL OTHER FEES
None.
30
(5) AUDIT COMMITTEE POLICIES AND PROCEDURES
We do not have an audit committee.
(6) If greater than 50 percent, disclose the percentage of hours expended on the principal accountant's engagement to audit the registrant's financial statements for the most recent fiscal year that were attributed to work performed by persons other than the principal accountant's full-time, permanent employees.
Not applicable.
|
(a)
|
We have filed the following documents as part of this Annual Report on Form 10-K:
|
|
1.
|
The financial statements listed in the "Index to Consolidated Financial Statements" on page 33 are filed as part of this report.
|
|
2.
|
Financial statement schedules are omitted because they are not applicable or the required information is shown in the financial statements or notes thereto.
|
|
3.
|
Exhibits included or incorporated herein: See index to Exhibits.
|
Exhibit Index
|
Incorporated by reference
|
|||||||||
|
Exhibit
Number
|
Exhibit Description
|
Filed
herewith
|
Form
|
Period
ending
|
Exhibit
|
Filing date
|
|||
|
31.1
|
Certification pursuant to Section 302 of the Sarbanes-Oxley Act
|
X
|
|||||||
|
32.1
|
Certification pursuant to Section 906 of the Sarbanes-Oxley Act
|
X
|
|||||||
|
101.INS**
|
XBRL Instance Document
|
X
|
|||||||
|
101.SCG**
|
XBRL Taxonomy Extension Schema
|
X
|
|||||||
|
101.CAL**
|
XBRL Taxonomy Extension Calculation Linkbase
|
X
|
|||||||
|
101.DEF
|
XBRL Taxonomy Extension Definition Linkbase
|
X
|
|||||||
|
101.LAB**
|
XBRL Taxonomy Extension Label Linkbase
|
X
|
|||||||
|
101.PRE**
|
XBRL Taxonomy Extension Presentation Linkbase
|
X
|
|||||||
|
**
|
XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.
|
||||||||
31
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.
BOLLENTE COMPANIES INC.
By
:/S/ Robertson James Orr
Robertson James Orr, President
Date: April 16, 2013
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
|
Title
|
Date
|
|
/S/ Robertson James Orr
|
Chairman of the Board of Directors,
|
April 16
, 2013
|
|
Robertson James Orr
|
Chief Executive Officer (Principal Executive Officer)
|
|
|
and Principal Financial Officer
|
||
32
BOLLENTE COMPANIES INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011
|
PAGES
|
|
|
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
|
F-1
|
|
CONSOLIDATED BALANCE SHEETS
|
F-2
|
|
CONSOLIDATED STATEMENTS OF OPERATIONS
|
F-3
|
|
CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT
|
F-4
|
|
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
F-5
|
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
F-6 – F-16
|
33
Office Locations
Las Vegas, NV
New York, NY
Pune, India
Beijing, China
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders
Bollente Companies, Inc.
We have audited the accompanying balance sheets of Bollente Companies, Inc. (A Development Stage Company) (the "Company") as of December 31, 2012 and 2011 and the related statements of operations, stockholders’ equity (deficit), and cash flows for the years ended December 31, 2012 and 201, and for the periods from inception (March 8, 2008) to December 31, 2012. Bollente Companies, Inc.’s management is responsible for these financial statements. 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 the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over the 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 Bollente Companies, Inc.(A Development Stage Company) as of December 31, 2012 and 2011, and the result of its operations and its cash flows for the years ended December 31, 2012 and 2011, and for the periods from inception (March 8, 2008) to December 31, 2012, in conformity with accounting principles generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company has suffered recurring losses from operations, which raise substantial doubt about its ability to continue as a going concern. Management’s plans regarding these matters are also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ De Joya Griffith, LLC
Henderson, Nevada
April 11, 2013
De Joya Griffith, LLC ● 2580 Anthem Village Dr. ● Henderson, NV ● 89052
Telephone (702) 563-1600 ● Facsimile (702) 920-8049
www.dejoyagriffith.com
F-1
|
BOLLENTE COMPANIES, INC.
|
||||||||
|
(A DEVELOPMENT STAGE COMPANY)
|
||||||||
|
|
||||||||
|
(audited)
|
||||||||
|
December 31,
|
December 31,
|
|||||||
|
2012
|
2011
|
|||||||
|
ASSETS
|
||||||||
|
Current assets:
|
||||||||
|
Cash
|
$ | 3,872 | $ | 864 | ||||
|
Prepaid expenses
|
100,362 | 163 | ||||||
|
Prepaid stock compensation
|
1,166,000 | 369,375 | ||||||
|
Total current assets
|
1,270,234 | 370,402 | ||||||
|
Other assets:
|
||||||||
|
Deferred financing cost, net
|
- | 1,980 | ||||||
|
Security deposits
|
1,500 | 1,500 | ||||||
|
Trademarks
|
550 | 550 | ||||||
|
Website
|
3,500 | - | ||||||
|
Total other assets
|
5,550 | 4,030 | ||||||
|
Total assets
|
$ | 1,275,784 | $ | 374,432 | ||||
|
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
|
||||||||
|
Current liabilities:
|
||||||||
|
Accounts payable
|
$ | 28,941 | $ | 66,103 | ||||
|
Accrued salaries - related party
|
9,169 | 26,521 | ||||||
|
Accrued payroll taxes
|
11,891 | 3,060 | ||||||
|
Notes payable - related party
|
450 | 250 | ||||||
|
Accrued interest payable
|
621 | - | ||||||
|
Accrued interest payable - related party
|
5,153 | 3,284 | ||||||
|
Line of credit - related party
|
17,936 | 51,881 | ||||||
|
Notes payable
|
42,010 | 41,110 | ||||||
|
Total current liabilities
|
116,171 | 192,209 | ||||||
|
Long-term liabilities:
|
||||||||
|
Notes payable - related party
|
500,000 | 500,000 | ||||||
|
Total long-term liabilities
|
500,000 | 500,000 | ||||||
|
Total liabilities
|
616,171 | 692,209 | ||||||
|
Stockholders' equity (deficit):
|
||||||||
|
Preferred stock, $0.001 par value, 10,000,000 shares
|
||||||||
|
authorized, no shares issued and outstanding
|
||||||||
|
as of December 31, 2012 and December 31, 2011, respectively
|
- | - | ||||||
|
Common stock, $0.001 par value, 100,000,000 shares
|
||||||||
|
authorized, 8,152,456 and 6,497,456 shares issued and outstanding
|
||||||||
|
as of December 31, 2012 and December 31, 2011, respectively
|
8,153 | 6,498 | ||||||
|
Additional paid-in capital
|
3,916,077 | 1,610,632 | ||||||
|
Subscriptions payable
|
7,500 | 164,000 | ||||||
|
Deficit accumulated during development stage
|
(3,272,117 | ) | (2,098,907 | ) | ||||
|
Total stockholders' equity (deficit)
|
659,613 | (317,777 | ) | |||||
|
Total liabilities and stockholders' equity (deficit)
|
$ | 1,275,784 | $ | 374,432 | ||||
|
See accompanying notes to consolidated financial statements.
|
||||||||
F-2
|
BOLLENTE COMPANIES, INC.
|
||||||||||||
|
(A DEVELOPMENT STAGE COMPANY)
|
||||||||||||
|
|
||||||||||||
|
(audited)
|
||||||||||||
|
Inception
|
||||||||||||
|
(March 7, 2008)
|
||||||||||||
|
For the years ended
|
to
|
|||||||||||
|
December 31,
|
December 31,
|
|||||||||||
|
2012
|
2011
|
2012
|
||||||||||
|
Revenue
|
$ | - | $ | - | $ | - | ||||||
|
Operating expenses:
|
||||||||||||
|
General and administrative
|
47,925 | 22,662 | 126,895 | |||||||||
|
Executive compensation
|
154,776 | 242,926 | 397,702 | |||||||||
|
Product development - related party
|
- | - | 336,014 | |||||||||
|
Research and development
|
45,550 | 59,530 | 105,080 | |||||||||
|
Professional fees
|
878,477 | 263,167 | 2,193,772 | |||||||||
|
Total operating expenses
|
1,126,728 | 588,285 | 3,159,463 | |||||||||
|
Other expenses:
|
||||||||||||
|
Interest expense - related party
|
(43,382 | ) | (36,797 | ) | (81,052 | ) | ||||||
|
Interest expense
|
(3,100 | ) | (28,502 | ) | (31,602 | ) | ||||||
|
Total other expenses
|
(46,482 | ) | (65,299 | ) | (112,654 | ) | ||||||
|
Net loss
|
$ | (1,173,210 | ) | $ | (653,584 | ) | $ | (3,272,117 | ) | |||
|
Net loss per common share - basic
|
$ | (0.17 | ) | $ | (0.17 | ) | ||||||
|
Weighted average number of common shares
|
6,789,145 | 3,917,125 | ||||||||||
|
outstanding - basic
|
||||||||||||
|
See accompanying notes to consolidated financial statements.
|
||||||||||||
F-3
|
BOLLENTE COMPANIES, INC.
|
||||||||||||||||||||||||||||||||||||
|
(A DEVELOPMENT STAGE COMPANY)
|
||||||||||||||||||||||||||||||||||||
|
STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
|
||||||||||||||||||||||||||||||||||||
|
(audited)
|
||||||||||||||||||||||||||||||||||||
|
Deficit
|
||||||||||||||||||||||||||||||||||||
|
Accumulated
|
||||||||||||||||||||||||||||||||||||
|
Additional
|
During
|
Total
|
||||||||||||||||||||||||||||||||||
|
Preferred Shares
|
Common Shares
|
Paid-In
|
Subscriptions
|
Subscriptions
|
Development
|
Stockholders'
|
||||||||||||||||||||||||||||||
|
Shares
|
Amount
|
Shares
|
Amount
|
Capital
|
Receivable
|
Payable
|
Stage
|
Equity (Deficit)
|
||||||||||||||||||||||||||||
|
March 7, 2008
|
||||||||||||||||||||||||||||||||||||
|
Issuance of common stock for cash on organization of the Company
|
- | $ | - | 150,000 | 150 | 7,350 | - | - | - | 7,500 | ||||||||||||||||||||||||||
|
March 14, 2008
|
||||||||||||||||||||||||||||||||||||
|
Issuance of common stock for professional fees
|
20,000 | 20 | 9,980 | 10,000 | ||||||||||||||||||||||||||||||||
|
September 30, 2008
|
||||||||||||||||||||||||||||||||||||
|
Issuance of common stock for cash, net offering costs
|
110,000 | 110 | 49,890 | (500 | ) | 49,500 | ||||||||||||||||||||||||||||||
|
Net loss
|
(77,464 | ) | (77,464 | ) | ||||||||||||||||||||||||||||||||
|
Balance, December 31, 2008
|
- | $ | - | 280,000 | 280 | 67,220 | (500 | ) | - | (77,464 | ) | (10,464 | ) | |||||||||||||||||||||||
|
March 4, 2009
|
||||||||||||||||||||||||||||||||||||
|
Donated capital
|
1,000 | 1,000 | ||||||||||||||||||||||||||||||||||
|
October 27, 2009
|
||||||||||||||||||||||||||||||||||||
|
Issuance of common stock for cash
|
16,762 | 17 | 214,515 | 214,532 | ||||||||||||||||||||||||||||||||
|
November 2, 2009
|
||||||||||||||||||||||||||||||||||||
|
Cash received for sale of common stock
|
50,000 | 50,000 | ||||||||||||||||||||||||||||||||||
|
December 17, 2009
|
||||||||||||||||||||||||||||||||||||
|
Cash received for sale of common stock
|
30,000 | 30,000 | ||||||||||||||||||||||||||||||||||
|
December 31, 2009
|
||||||||||||||||||||||||||||||||||||
|
Expenses paid for by an officer of the Company
|
2,555 | 2,555 | ||||||||||||||||||||||||||||||||||
|
Net loss
|
(346,637 | ) | (346,637 | ) | ||||||||||||||||||||||||||||||||
|
Balance, December 31, 2009
|
- | $ | - | 296,762 | 297 | 285,290 | (500 | ) | 80,000 | (424,101 | ) | (59,014 | ) | |||||||||||||||||||||||
|
February 9, 2010
|
||||||||||||||||||||||||||||||||||||
|
Issuance of common stock for services
|
10,000 | 10 | 194,990 | 195,000 | ||||||||||||||||||||||||||||||||
|
February 28, 2010
|
||||||||||||||||||||||||||||||||||||
|
Donated capital
|
3,555 | 3,555 | ||||||||||||||||||||||||||||||||||
|
March 3, 2010
|
||||||||||||||||||||||||||||||||||||
|
Issuance of warrants for services
|
308,176 | 308,176 | ||||||||||||||||||||||||||||||||||
|
March 22, 2010
|
||||||||||||||||||||||||||||||||||||
|
Issuance of common stock for services
|
1,000 | 1 | 14,999 | 15,000 | ||||||||||||||||||||||||||||||||
|
May 5, 2010
|
||||||||||||||||||||||||||||||||||||
|
Issuance of common stock for cash
|
11,967 | 12 | 122,988 | 500 | (80,000 | ) | 43,500 | |||||||||||||||||||||||||||||
|
June 9, 2010
|
||||||||||||||||||||||||||||||||||||
|
Issuance of common stock for services
|
35,000 | 35 | 174,965 | 175,000 | ||||||||||||||||||||||||||||||||
|
June 17, 2010
|
||||||||||||||||||||||||||||||||||||
|
Issuance of common stock for services
|
20,000 | 20 | 79,980 | 80,000 | ||||||||||||||||||||||||||||||||
|
July 1, 2010
|
||||||||||||||||||||||||||||||||||||
|
Shares issuable for services
|
25,000 | 25,000 | ||||||||||||||||||||||||||||||||||
|
October 1, 2010
|
||||||||||||||||||||||||||||||||||||
|
Shares issuable for services
|
25,000 | 25,000 | ||||||||||||||||||||||||||||||||||
|
December 31, 2010
|
||||||||||||||||||||||||||||||||||||
|
Recapitalization for merger with Bollente, Inc.
|
34,275 | 34,275 | ||||||||||||||||||||||||||||||||||
|
Net loss
|
(1,021,222 | ) | (1,021,222 | ) | ||||||||||||||||||||||||||||||||
|
Balance, December 31, 2010
|
- | $ | - | 374,729 | 375 | 1,219,218 | - | 50,000 | (1,445,323 | ) | (175,730 | ) | ||||||||||||||||||||||||
|
February 17, 2011
|
||||||||||||||||||||||||||||||||||||
|
Issuance to settle accounts payable
|
250,000 | 250 | 137,250 | 137,500 | ||||||||||||||||||||||||||||||||
|
February 24, 2011
|
||||||||||||||||||||||||||||||||||||
|
Deemed distribution
|
(516,563 | ) | (516,563 | ) | ||||||||||||||||||||||||||||||||
|
May 1, 2011
|
||||||||||||||||||||||||||||||||||||
|
Issuance for employment agreement
|
50,000 | 50 | 39,950 | 40,000 | ||||||||||||||||||||||||||||||||
|
May 16, 2011
|
||||||||||||||||||||||||||||||||||||
|
Recapitalization for merger with Bollente, Inc.
|
4,707,727 | 4,708 | (4,708 | ) | - | |||||||||||||||||||||||||||||||
|
June 21, 2011
|
||||||||||||||||||||||||||||||||||||
|
Issuance for consulting services
|
375,000 | 375 | 299,625 | 300,000 | ||||||||||||||||||||||||||||||||
|
September 30, 2011
|
||||||||||||||||||||||||||||||||||||
|
Issuance for cash
|
400,000 | 400 | 99,600 | 100,000 | ||||||||||||||||||||||||||||||||
|
September 30, 2011
|
||||||||||||||||||||||||||||||||||||
|
Issuance for subscriptions payable
|
10,000 | 10 | 49,990 | (50,000 | ) | - | ||||||||||||||||||||||||||||||
|
September 30, 2011
|
||||||||||||||||||||||||||||||||||||
|
Issuance for enticement related to note payable
|
30,000 | 30 | 6,570 | - | 6,600 | |||||||||||||||||||||||||||||||
|
November 17, 2011
|
||||||||||||||||||||||||||||||||||||
|
Issuance for consulting services
|
100,000 | 100 | 149,900 | 150,000 | ||||||||||||||||||||||||||||||||
|
November 30, 2011
|
||||||||||||||||||||||||||||||||||||
|
Shares issuable for employment agreement
|
164,000 | 164,000 | ||||||||||||||||||||||||||||||||||
|
December 31, 2011
|
||||||||||||||||||||||||||||||||||||
|
Issuance for cash
|
100,000 | 100 | 24,900 | 25,000 | ||||||||||||||||||||||||||||||||
|
December 31, 2011
|
||||||||||||||||||||||||||||||||||||
|
Issuance for consulting services
|
100,000 | 100 | 104,900 | 105,000 | ||||||||||||||||||||||||||||||||
|
Net loss
|
(653,584 | ) | (653,584 | ) | ||||||||||||||||||||||||||||||||
|
Balance, December 31, 2011
|
- | $ | - | 6,497,456 | 6,498 | 1,610,632 | - | 164,000 | (2,098,907 | ) | (317,777 | ) | ||||||||||||||||||||||||
|
February 29, 2012
|
||||||||||||||||||||||||||||||||||||
|
Shares issuable for employment agreement
|
- | - | - | 50,500 | 50,500 | |||||||||||||||||||||||||||||||
|
March 19, 2012
|
||||||||||||||||||||||||||||||||||||
|
Issuance for subscriptions payable
|
150,000 | 150 | 214,350 | (214,500 | ) | - | ||||||||||||||||||||||||||||||
|
March 31, 2012
|
||||||||||||||||||||||||||||||||||||
|
Issuance for cash
|
50,000 | 50 | 24,950 | 25,000 | ||||||||||||||||||||||||||||||||
|
April 30, 2012
|
||||||||||||||||||||||||||||||||||||
|
Issuance for cash
|
120,000 | 120 | 59,880 | 60,000 | ||||||||||||||||||||||||||||||||
|
May 29, 2012
|
||||||||||||||||||||||||||||||||||||
|
Issuance for consulting services
|
120,000 | 120 | 191,880 | 192,000 | ||||||||||||||||||||||||||||||||
|
May 31, 2012
|
||||||||||||||||||||||||||||||||||||
|
Issuance for cash
|
30,000 | 30 | 14,970 | 15,000 | ||||||||||||||||||||||||||||||||
|
May 31, 2012
|
||||||||||||||||||||||||||||||||||||
|
Shares issuable for employment agreement
|
- | - | - | 24,000 | 24,000 | |||||||||||||||||||||||||||||||
|
August 31, 2012
|
||||||||||||||||||||||||||||||||||||
|
Issuance for cash
|
50,000 | 50 | 24,950 | 25,000 | ||||||||||||||||||||||||||||||||
|
August 31, 2012
|
||||||||||||||||||||||||||||||||||||
|
Shares issuable for employment agreement
|
- | - | - | 28,350 | 28,350 | |||||||||||||||||||||||||||||||
|
September 28, 2012
|
||||||||||||||||||||||||||||||||||||
|
Issuance for consulting services
|
30,000 | 30 | 74,970 | 75,000 | ||||||||||||||||||||||||||||||||
|
September 28, 2012
|
||||||||||||||||||||||||||||||||||||
|
Issuance for subscriptions payable
|
30,000 | 30 | 52,320 | (52,350 | ) | - | ||||||||||||||||||||||||||||||
|
October 31, 2012
|
||||||||||||||||||||||||||||||||||||
|
Issuance for consulting services
|
10,000 | 10 | 24,990 | 25,000 | ||||||||||||||||||||||||||||||||
|
October 31, 2012
|
||||||||||||||||||||||||||||||||||||
|
Issuance for cash
|
550,000 | 550 | 274,450 | 275,000 | ||||||||||||||||||||||||||||||||
|
November 30, 2012
|
||||||||||||||||||||||||||||||||||||
|
Issuance for consulting services
|
500,000 | 500 | 1,324,500 | 1,325,000 | ||||||||||||||||||||||||||||||||
|
November 30, 2012
|
||||||||||||||||||||||||||||||||||||
|
Issuance for employment agreement
|
15,000 | 15 | 23,235 | 23,250 | ||||||||||||||||||||||||||||||||
|
December 31, 2012
|
||||||||||||||||||||||||||||||||||||
|
Shares issuable for cash
|
7,500 | 7,500 | ||||||||||||||||||||||||||||||||||
|
Net loss
|
(1,173,210 | ) | (1,173,210 | ) | ||||||||||||||||||||||||||||||||
|
Balance, December 31, 2012
|
- | $ | - | 8,152,456 | $ | 8,153 | $ | 3,916,077 | $ | - | $ | 7,500 | $ | (3,272,117 | ) | $ | 659,613 | |||||||||||||||||||
|
See accompanying notes to consolidated financial statements.
|
||||||||||||||||||||||||||||||||||||
F-4
|
BOLLENTE COMPANIES, INC.
|
||||||||||||
|
(A DEVELOPMENT STAGE COMPANY)
|
||||||||||||
|
|
||||||||||||
|
(audited)
|
||||||||||||
|
Inception
|
||||||||||||
|
(March 7, 2008)
|
||||||||||||
|
For the years ended
|
to
|
|||||||||||
|
December 31,
|
December 31,
|
|||||||||||
|
2012
|
2011
|
2012
|
||||||||||
|
CASH FLOWS FROM OPERATING ACTIVITIES
|
||||||||||||
|
Net loss
|
$ | (1,173,210 | ) | $ | (653,584 | ) | $ | (3,272,117 | ) | |||
|
Adjustments to reconcile net loss
|
||||||||||||
|
to net cash used in operating activities:
|
||||||||||||
|
Shares issued for services
|
267,000 | 204,000 | 317,000 | |||||||||
|
Shares issued for employment agreement
|
126,100 | 185,625 | 330,100 | |||||||||
|
Shares issued for prepaid stock compensation and expensed in the current year
|
553,375 | - | 1,214,000 | |||||||||
|
Warrants issued for services
|
- | - | 308,176 | |||||||||
|
Write-off of inventory deposit
|
- | - | 21,000 | |||||||||
|
Non-cash financing cost
|
- | 21,781 | 22,056 | |||||||||
|
Amortization of deferred financing cost
|
1,980 | 4,620 | 6,600 | |||||||||
|
Amortization of debt discount
|
900 | 2,100 | 3,000 | |||||||||
|
Changes in operating assets and liabilities:
|
||||||||||||
|
(Increase) in prepaid expenses
|
(100,199 | ) | (163 | ) | (107,362 | ) | ||||||
|
Decrease in other receivables
|
- | - | (14,000 | ) | ||||||||
|
(Increase) in security deposits
|
- | (1,500 | ) | (1,500 | ) | |||||||
|
Increase (decrease) in accounts payable
|
(37,162 | ) | 19,490 | 113,519 | ||||||||
|
Increase in accounts payable - related party
|
- | - | 343 | |||||||||
|
Increase (decrease) in accrued salaries - related party
|
(17,352 | ) | 26,521 | 9,169 | ||||||||
|
Increase in accrued payroll taxes
|
8,831 | 3,060 | 11,891 | |||||||||
|
Increase in deferred revenue
|
- | - | 14,235 | |||||||||
|
Increase in accrued interest payable
|
621 | - | 621 | |||||||||
|
Increase in accrued interest payable - related party
|
1,869 | 2,686 | 5,153 | |||||||||
|
Net cash used in operating activities
|
(367,247 | ) | (185,364 | ) | (1,018,116 | ) | ||||||
|
CASH FLOWS FROM INVESTING ACTIVITIES
|
||||||||||||
|
Purchase trademarks
|
- | (550 | ) | (550 | ) | |||||||
|
Purchase website costs
|
(3,500 | ) | - | (3,500 | ) | |||||||
|
Payments for due from related party
|
- | - | (44,372 | ) | ||||||||
|
Repayments from due from related party
|
- | - | 40,000 | |||||||||
|
Net cash used in investing activities
|
(3,500 | ) | (550 | ) | (8,422 | ) | ||||||
|
CASH FLOWS FROM FINANCING ACTIVITIES
|
||||||||||||
|
Bank overdraft
|
- | (81 | ) | - | ||||||||
|
Proceeds from notes payable - related party
|
200 | 1,050 | 14,122 | |||||||||
|
Repayments of notes payable - related party
|
- | (1,550 | ) | (1,550 | ) | |||||||
|
Proceeds from line of credit - related party
|
26,500 | 41,950 | 85,270 | |||||||||
|
Repayments of line of credit - related party
|
(60,445 | ) | (6,889 | ) | (67,334 | ) | ||||||
|
Proceeds from notes payable
|
- | 30,000 | 41,760 | |||||||||
|
Repayments for notes payable
|
- | (2,750 | ) | (2,750 | ) | |||||||
|
Proceeds from sale of common stock, net of offering costs
|
407,500 | 125,000 | 953,782 | |||||||||
|
Donated capital
|
- | - | 7,110 | |||||||||
|
Net cash provided by financing activities
|
373,755 | 186,730 | 1,030,410 | |||||||||
|
NET CHANGE IN CASH
|
3,008 | 816 | 3,872 | |||||||||
|
CASH AT BEGINNING OF YEAR
|
864 | 48 | - | |||||||||
|
CASH AT END OF YEAR
|
$ | 3,872 | $ | 864 | $ | 3,872 | ||||||
|
SUPPLEMENTAL INFORMATION:
|
||||||||||||
|
Interest paid
|
$ | 41,111 | $ | - | $ | 75,497 | ||||||
|
Income taxes paid
|
$ | - | $ | - | $ | - | ||||||
|
Non-cash investing and financing activities:
|
||||||||||||
|
Reclass accounts payable related party to accounts payable
|
$ | - | $ | 343 | $ | 343 | ||||||
|
Reclass notes payable related party to notes payable
|
$ | - | $ | 11,760 | $ | 11,760 | ||||||
|
Shares issued as settlement of accounts payable
|
$ | - | $ | 115,718 | $ | 115,718 | ||||||
|
Shares issued for prepaid stock compensation
|
$ | 1,350,000 | $ | 369,375 | $ | 1,719,375 | ||||||
|
Warrants issued for services
|
$ | - | $ | - | $ | 308,176 | ||||||
|
Deemed distribution to majority shareholder
|
$ | - | $ | (516,563 | ) | $ | (516,563 | ) | ||||
|
See accompanying notes to consolidated financial statements.
|
||||||||||||
F-5
BOLLENTE COMPANIES, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Organization
The Company was incorporated on March 7, 2008 (Date of Inception) under the laws of the State of Nevada, as Alcantara Brands Corporation. On October 5, 2010, the Company amended its articles of incorporation and changed its name to Bollente Companies, Inc.
The Company has not commenced significant operations and, in accordance with ASC Topic 915, the Company is considered a development stage company.
Nature of operations
The Company’s business model is to add to existing business by expanding operations in the green and clean-tech sectors. The company has prepaid inventory involving the fulfillment of purchase orders for natural resources harvested in Peru, and will continue to explore opportunities in this sector. During the year ended December 31, 2010, the Company started to explore the consumer products industry with a focus on products and services that feature superior cost/benefit to the end user while achieving greater efficiencies with regard to residential and commercial utility usage and operating costs. Management
expects
the Company will realize a material increase revenues and improved operating margins upon entry into the market
with new, proprietary technologies and services.
Use of estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ significantly from those estimates.
Cash and cash equivalents
For the purpose of the statements of cash flows, all highly liquid investments with an original maturity of three months or less are considered to be cash equivalents. The carrying value of these investments approximates fair value.
Website
The Company capitalizes the costs associated with the development of the Company’s website pursuant to ASC Topic 350. Other costs related to the maintenance of the website are expensed as incurred. Amortization is provided over the estimated useful lives of 3 years using the straight-line method for financial statement purposes. The Company plans to commence amortization upon completion and release of the Company’s fully operational website.
Fair value of financial instruments
Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management as of December 31, 2012 and 2011. The respective carrying value of certain on-balance-sheet financial instruments approximated their fair values. These financial instruments include cash, prepaid expenses and accounts payable. Fair values were assumed to approximate carrying values for cash and payables because they are short term in nature and their carrying amounts approximate fair values or they are payable on demand.
Level 1:
The preferred inputs to valuation efforts are “quoted prices in active markets for identical assets or liabilities,” with the caveat that the reporting entity must have access to that market. Information at this level is based on direct observations of transactions involving the same assets and liabilities, not assumptions, and thus offers superior reliability. However, relatively few items, especially physical assets, actually trade in active markets.
F-6
BOLLENTE COMPANIES, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Fair value of financial instruments (continued)
Level 2
:
FASB acknowledged that active markets for identical assets and liabilities are relatively uncommon and, even when they do exist, they may be too thin to provide reliable information. To deal with this shortage of direct data, the board provided a second level of inputs that can be applied in three situations.
Level 3: If inputs from levels 1 and 2 are not available, FASB acknowledges that fair value measures of many assets and liabilities are less precise. The board describes Level 3 inputs as “unobservable,” and limits their use by saying they “shall be used to measure fair value to the extent that observable inputs are not available.” This category allows “for situations in which there is little, if any, market activity for the asset or liability at the measurement date”. Earlier in the standard, FASB explains that “observable inputs” are gathered from sources other than the reporting company and that they are expected to reflect assumptions made by market participants.
Stock-based compensation
The Company records stock based compensation in accordance with the guidance in ASC Topic 505 and 718 which requires the Company to recognize expenses related to the fair value of its employee stock option awards. This eliminates accounting for share-based compensation transactions using the intrinsic value and requires instead that such transactions be accounted for using a fair-value-based method. The Company recognizes the cost of all share-based awards on a graded vesting basis over the vesting period of the award.
Revenue Recognition
The Company's revenues are anticipated to be derived from multiple sources. Primarily revenues will be earned upon shipment of products.
Advertising Costs
Advertising costs are anticipated to be expensed as incurred; however there were no advertising costs included in general and administrative expenses for the years ended December 31, 2012 and 2011.
Income taxes
The Company follows ASC Topic 740 for recording the provision for income taxes. Deferred tax assets and liabilities are computed based upon the difference between the financial statement and income tax basis of assets and liabilities using the enacted marginal tax rate applicable when the related asset or liability is expected to be realized or settled. Deferred income tax expenses or benefits are based on the changes in the asset or liability each period. If available evidence suggests that it is more likely than not that some portion or all of the deferred tax assets will not be realized, a valuation allowance is required to reduce the deferred tax assets to the amount that is more likely than not to be realized. Future changes in such valuation allowance are included in the provision for deferred income taxes in the period of change.
Deferred income taxes may arise from temporary differences resulting from income and expense items reported for financial accounting and tax purposes in different periods. Deferred taxes are classified as current or non-current, depending on the classification of assets and liabilities to which they relate. Deferred taxes arising from temporary differences that are not related to an asset or liability are classified as current or non-current depending on the periods in which the temporary differences are expected to reverse.
F-7
BOLLENTE COMPANIES, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Income taxes (continued)
The Company applies a more-likely-than-not recognition threshold for all tax uncertainties. ASC Topic 740 only allows the recognition of those tax benefits that have a greater than fifty percent likelihood of being sustained upon examination by the taxing authorities. As of December 31, 2012 and 2011, the Company reviewed its tax positions and determined there were no outstanding, or retroactive tax positions with less than a 50% likelihood of being sustained upon examination by the taxing authorities, therefore this standard has not had a material affect on the Company.
The Company does not anticipate any significant changes to its total unrecognized tax benefits within the next 12 months.
The Company classifies tax-related penalties and net interest as income tax expense. As of December 31, 2012 and 2011, no income tax expense has been incurred.
Earnings per share
The Company follows ASC Topic 260 to account for the earnings per share. Basic earnings per common share (“EPS”) calculations are determined by dividing net income by the weighted average number of shares of common stock outstanding during the year. Diluted earnings per common share calculations are determined by dividing net income by the weighted average number of common shares and dilutive common share equivalents outstanding. During periods when common stock equivalents, if any, are anti-dilutive they are not considered in the computation.
Principles of consolidation
The consolidated financial statements include the accounts of Bollente Companies, Inc. and its wholly owned subsidiaries. On May 16, 2010, the Company acquired 100% of the outstanding stock of Bollente, Inc. On the date of acquisition, Bollente, Inc. was 2.78% owned and controlled 100% by Robertson J. Orr, a majority shareholder and officer and director of Bollente Companies, Inc. and the acquisition was accounted for by means of a pooling of the entities from the date of inception of Bollente Companies, Inc. on March 7, 2008 because the entities were under common control. All significant inter-company transactions and balances have been eliminated.
Reclassifications
Certain reclassifications have been made to the prior quarters’ financial statements to conform to the current quarter presentation. These reclassifications had no effect on previously reported results of operations. The Company reclassified payroll and compensation to its executive from general and administrative expense to executive compensation. The company also reclassified interest payable – related party to interest payable, as the loan holder is no longer considered a related party.
Recent pronouncements
The Company has evaluated the recent accounting pronouncements through March 2013 and believes that none of them will have a material effect on the company’s financial statements.
F-8
BOLLENTE COMPANIES, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the recoverability of assets and the satisfaction of liabilities in the normal course of business. As noted above, the Company is in the development stage and, accordingly, has not yet generated revenues from operations. Since its inception, the Company has been engaged substantially in financing activities and developing its business plan and incurring start up costs and expenses. As a result, the Company incurred accumulated net losses from Inception (March 7, 2008) through the period ended December 31, 2012 of ($3,272,117). In addition, the Company’s development activities since inception have been financially sustained through debt and equity financing.
The ability of the Company to continue as a going concern is dependent upon its ability to raise additional capital from the sale of common stock and, ultimately, the achievement of significant operating revenues. These financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts, or amounts and classification of liabilities that might result from this uncertainty.
On March 7, 2011, the Company entered into a reverse triangular merger by and among Woodmans Lumber and Millworks Peru (“Woodmans”), a Nevada corporation and wholly owned subsidiary of the Registrant, and Bollente, Inc., a Nevada corporation, Woodman’s and Bollente being the constituent entities in the merger, whereby the Company intends to issue 4,707,727 shares of its 144 restricted common stock in exchange for 100% of Bollente’s outstanding membership interest. Pursuant to the terms of the merger, Woodman’s will be merged with Bollente wherein Woodmans shall cease to exist and Bollente will become a wholly owned subsidiary of the Company. Subject to the terms and conditions set forth in the Merger Agreement, the Merger is anticipated to become effective on or before April 15, 2011. The Merger with Bollente, upon closing, will provide the Company with the ownership of 100% of Bollente. On May 17, 2011, the Company issued 4,707,727 shares of common stock and the merger closed.
On the date of acquisition, Bollente, Inc. was 2.78% owned and controlled 100% by Robertson J. Orr, a majority shareholder and officer and director of Bollente Companies, Inc. and the acquisition was accounted for by means of a pooling of the entities under GAAP because the entities were under common control at the time of the transaction. Accordingly the accompanying financial statements include the results of Bollente, Inc. from the date of inception of Bollente Companies, Inc. on March 7, 2008.
On the date of acquisition Bollente, Inc. did not have any material assets and liabilities.
The consideration for the purchase of Bollente, Inc. was 4,707,727 shares of Bollente Companies, Inc.. Robertson J. Orr, a shareholder and officer and director of Bollente, Inc. is also a shareholder in Bollente Companies, Inc., holding 10,000 shares of the 674,733 shares outstanding at the date of the acquisition.
F-9
BOLLENTE COMPANIES, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Website consists of the following at:
|
December 31,
2012
|
December 31, 2011
|
|||||||
|
Website
|
$ | 3,500 | $ | - | ||||
|
Less: Accumulated amortization
|
- | - | ||||||
|
Website, net
|
$ | 3,500 | $ | - | ||||
Amortization expense for the years ended December 31, 2012 and 2011 was $0 and $0, respectively.
Notes payable consist of the following at:
|
December 31,
2012
|
December 31, 2011
|
|||||||
|
Note payable to an officer, director and shareholder, unsecured, 0% interest, due upon demand
|
$ | 450 | $ | 250 | ||||
|
Notes Payable – Current
|
$ | 450 | $ | 250 | ||||
|
December 31, 2012
|
December 31, 2011
|
|||||||
|
Line of credit for up to $150,000, from a shareholder, unsecured, 5% interest, due December 2012
|
$ | 17,936 | $ | 51,881 | ||||
|
Line of credit – Current
|
$ | 17,936 | $ | 51,881 | ||||
Interest expense for the years ended December 31, 2012 and 2011 was $2,714 and $2,013, respectively.
F-10
BOLLENTE COMPANIES, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Notes payable consist of the following at:
|
December 31,
2012
|
December 31, 2011
|
|||||||
|
Note payable to an entity owned and controlled by a former officer and director of the Company, unsecured, 0% interest, due upon demand
|
$ | 9,400 | $ | 9,400 | ||||
|
Note payable to a former officer, director and shareholder, unsecured, 0% interest, due upon demand
|
160 | 160 | ||||||
|
Note payable to an entity owned and controlled by a former officer and director of the Company, unsecured, 10% interest, due July 2010, in default as of September 30, 2012
|
800 | 800 | ||||||
|
Note payable to an entity owned and controlled by a former officer and director of the Company, unsecured, 10% interest, due August 2010, in default as of September 30, 2012
|
1,400 | 1,400 | ||||||
|
Note payable to an unrelated third party, unsecured, $3,000 in debt discount, due May 2012, in default as of September 30, 2012
|
30,250 | 30,250 | ||||||
|
Unamortized debt discount
|
- | (900 | ) | |||||
|
Notes Payable – Current
|
$ | 42,010 | $ | 41,110 | ||||
Interest expense, including the amortization of the debt discount and the amortization of the deferred financing cost for the years ended December 31, 2012 and 2011 was $3,100 and $6,940, respectively.
Notes payable consists of the following at:
|
December 31, 2012
|
December 31, 2011
|
|||||||
|
Note payable with a shareholder, unsecured, 5% interest, due February 2014
|
$ | 500,000 | $ | 500,000 | ||||
|
Notes Payable – Long Term
|
$ | 500,000 | $ | 500,000 | ||||
Interest expense for the years ended December 31, 2012 and 2011 was $40,667 and $34,556, respectively.
The Company is authorized to issue 10,000,000 shares of it $0.001 par value preferred stock and 100,000,000 shares of its $0.001 par value common stock.
On May 11, 2009, the Company effected a 10-for-1 forward stock split of its $0.001 par value common stock. On October 22, 2010, the Company effected a 1-for-50 reverse stock split of its $0.001 par value common stock.
F-11
BOLLENTE COMPANIES, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 8 – STOCKHOLDERS’ EQUITY (DEFICIT) (CONTINUED)
All shares and per share amounts have been retroactively restated to reflect the split discussed above.
Common Stock
On February 5, 2010 and March 9, 2010, the Company received cash totaling $25,000 from an investor for the purchase of 2,500 shares of common stock. On May 5, 2010, the shares were issued.
On February 9, 2010, the Company executed a consulting agreement for an initial period of six months with automatically renewed six month terms. The compensation for this agreement was 10,000 shares of common stock. On February 18, 2010, the shares were issued.
On March 12, 2010, the Company received cash of $18,000 from an investor for the purchase of 1,800 shares of common stock. On May 5, 2010, the shares were issued.
During the three months ended March 31, 2010, an officer, director and shareholder of the Company paid for expenses totaling $3,555 on behalf of the Company. The officer does not expect to be repaid for these expenses and have been recorded to additional paid in capital.
On April 26, 2010, the Company issued 1,000 shares of common stock for consulting services totaling $15,000 to be performed over a period of six months. The shares were valued according to the fair value of the common stock.
During the three months ended June 30, 2010, the Company issued a total of 11,967 shares of common stock for cash received during the year ended December 31, 2009 and the three months ended March 31, 2010. The Company recorded the transaction as a reduction of subscriptions payable of $123,000.
During the three months ended June 30, 2010, the Company received $500 from an investor and reduced the balance of subscriptions receivable.
On June 3, 2010, the Company agreed to issue 15,000 shares of common stock for consulting services totaling $75,000 to be performed over a period of six months. The shares were valued according to the fair value of the common stock. On June 25, 2010, the shares were issued.
On June 9, 2010, the Company agreed to issue 20,000 shares of common stock for consulting services totaling $100,000 to be performed over a period of six months. The shares were valued according to the fair value of the common stock. On June 25, 2010, the shares were issued.
On June 9, 2010, the Company agreed to issue 20,000 shares of common stock for consulting services totaling $80,000 to be performed over a period of six months. The shares were valued according to the fair value of the common stock. On June 25, 2010, the shares were issued.
On February 17, 2011, the Company agreed to issue 30,000 shares of common stock issued in connection with a promissory note. The shares were valued according to the fair value of the common stock at $6,600, the value was capitalized as deferred financing cost and will be amortized until date of maturity which is May 2012. During the quarter ended September 30, 2011, the shares were issued and $6,600 was reduced from stock payable.
On March 23, 2011, the Company issued 250,000 shares of common stock to settle account payable totaling $115,718. The shares were valued according to the fair value of the common stock as of March 7, 2011. The fair value of the shares exceeded the value of the accounts payable by $21,782 which was recorded in the statement of operations as interest expense.
F-12
BOLLENTE COMPANIES, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 8 – STOCKHOLDERS’ EQUITY (DEFICIT) (CONTINUED)
On May 1, 2011, the Company issued 50,000 shares of common stock to an officer, director and shareholder of the Company as part of his employment agreement totaling $40,000. The shares were valued according to the fair value of the common stock as of May 31, 2011.
On May 16, 2011, the Company issued a total of 4,707,727 shares of common stock for the acquisition of Bollente, Inc.
On June 21, 2011, the Company issued a total of 375,000 shares of common stock issued as part of consulting agreements with various entities and individuals totaling $300,000. The shares were valued according to the fair value of the common stock. The value of the shares was recorded as prepaid expense and will be amortized over one year which is the related service period of the respective agreements.
On August 31, 2011, the Company recorded a stock payable totaling $87,500 for 50,000 shares of common stock owed to an officer, director and shareholder of the Company as part of his employment agreement. The shares were valued according to the fair value of the common stock as of August 31, 2011.
On September 30, 2011, the Company issued 10,000 shares of common stock to a consultant for services rendered. The fair value of the shares were recorded in the period that the shares were earned which totaled $50,000. The Company reduced the balance in stock payable by $50,000 when the shares were issued.
During the three months ended September 30, 2011, the Company issued a total of 400,000 shares of common stock for cash of $100,000.
On November 17, 2011, the Company issued 100,000 shares of common stock issued as part of a consulting agreement totaling $150,000. The shares were valued according to the fair value of the common stock. The value of the shares was recorded as prepaid expense and will be amortized over one year which is the related service period of the respective agreements.
On November 30, 2011, the Company recorded a stock payable totaling $76,500 for 50,000 shares of common stock owed to an officer, director and shareholder of the Company as part of his employment agreement. The shares were valued according to the fair value of the common stock as of November 30, 2011.
On December 12, 2011, the Company issued a total of 100,000 shares of common stock for cash of $25,000.
On February 29, 2012, the Company recorded a stock payable totaling $50,500 for 50,000 shares of common stock owed to an officer, director and shareholder of the Company as part of his employment agreement. The shares were valued according to the fair value of the common stock as of February 29, 2012. The shares were issued on March 31, 2012, along with the 100,000 shares valued at $164,000 recorded as payable in during 2011.
During the three months ended March 31, 2012, the Company sold a total of 70,000 shares of common stock to three investors for cash totaling $35,000. Of the total, the Company issued a total of 50,000 shares of common stock. The remaining 20,000 shares were issued on April 26, 2012.
During the three months ended June 30, 2012, the Company sold a total of 130,000 shares of common stock to two investors for cash totaling $65,000.
F-13
BOLLENTE COMPANIES, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
On May 29, 2012, the Company issued 120,000 shares of common stock to consultant as a bonus which was part of his consulting agreement. The shares were valued according to the fair value of the common stock as of May 29, 2012.
On May 31, 2012, the Company recorded a stock payable totaling $24,000 for 15,000 shares of common stock owed to an officer, director and shareholder of the Company as part of his employment agreement. The shares were valued according to the fair value of the common stock as of May 31, 2012. The shares were issued on September 28, 2012 and the balance in stock payable was reduced to $0.
During the three months ended September 30, 2012, the Company sold 50,000 shares of common stock to an investor for cash totaling $25,000.
On August 31, 2012, the Company recorded a stock payable totaling $38,350 for 15,000 shares of common stock owed to an officer, director and shareholder of the Company as part of his employment agreement. The shares were valued according to the fair value of the common stock as of August 31, 2012. The shares were issued on September 28, 2012 and the balance in stock payable was reduced to $0.
On September 28, 2012, the Company issued 30,000 shares of common stock to consultant as a bonus which was part of his consulting agreement. The shares were valued according to the fair value of the common stock as of September 28, 2012.
On October 1, 2012, the Company issued 100,000 shares of common stock issued as part of a consulting agreement totaling $25,000. The shares were valued according to the fair value of the common stock.
During the month ended October 31, 2012, the Company sold 550,000 shares of common stock to several investors for cash totaling $275,000.
During the month ended November 30, 2012, the Company issued a total of 500,000 shares of common stock as part of a consulting agreements totaling $1,325,000. The shares were valued according to the fair value of the common stock. The value of the shares was recorded as prepaid expense and will be amortized over one year which is the related service period of the respective agreements. For the year ended December 31, 2012, the Company expensed $159,000 as professional fees with a remaining prepaid expense amount totaling $1,166,000 at December 31, 2012.
On November 30, 2012, the Company issued 15,000 shares of common stock to an officer, director and shareholder of the Company as part of his employment agreement. The shares were valued according to the fair value of the common stock as of November 30, 2012.
During the month ended December 31, 2012, the Company sold 15,000 shares of common stock to an investor for cash totaling $7,500. As of the date of this filing, the shares have not been issued and are recorded to stock payable.
F-14
BOLLENTE COMPANIES, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following is a summary of the status of all of the Company’s stock warrants as of December 31, 2012 and 2011 and changes during the years ended on that date:
|
|
Number
of Warrants
|
Weighted-Average
Exercise Price
|
||||||
|
Outstanding at January 1, 2011
|
20,000 | $ | 15.50 | |||||
|
Granted
|
- | $ | 0.00 | |||||
|
Exercised
|
- | $ | 0.00 | |||||
|
Cancelled
|
- | $ | 0.00 | |||||
|
Outstanding at December 31, 2011
|
20,000 | $ | 15.50 | |||||
|
Granted
|
- | $ | 0.00 | |||||
|
Exercised
|
- | $ | 0.00 | |||||
|
Cancelled
|
- | $ | 0.00 | |||||
|
Outstanding at December 31, 2012
|
20,000 | $ | 15.50 | |||||
|
Warrants exercisable at December 31, 2012
|
20,000 | $ | 15.50 | |||||
|
Warrants exercisable at December 31, 2011
|
20,000 | $ | 15.50 | |||||
The following table summarizes information about stock warrants outstanding and exercisable at December 31, 2012:
|
STOCK WARRANTS OUTSTANDING AND EXERCISABLE
|
||||||||||||||
|
Exercise Price
|
Number of
Warrants
Outstanding
|
Weighted-Average
Remaining
Contractual
Life in Years
|
Weighted-
Average
Exercise Price
|
|||||||||||
| $ | 15.50 | 20,000 | 0.17 | $ | 15.50 | |||||||||
At December 31, 2012 and 2011, the Company had a federal operating loss carryforward of $1,071,185 and $847,330, which begins to expire in 2028.
Components of net deferred tax assets, including a valuation allowance, are as follows at December 31, 2012 and 2011:
|
2012
|
2011
|
|||||||
|
Deferred tax assets:
|
||||||||
|
Net operating loss carryforward
|
$ | 374,915 | $ | 296,566 | ||||
|
Total deferred tax assets
|
374,915 | 296,566 | ||||||
|
Less: Valuation allowance
|
(374,915 | ) | (296,566 | ) | ||||
|
Net deferred tax assets
|
$ | - | $ | - | ||||
F-15
BOLLENTE COMPANIES, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The valuation allowance for deferred tax assets as of December 31, 2012 and 2011 was $374,915 and $296,566, respectively, which will begin to expire 2028. In assessing the recovery of the deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income in the periods in which those temporary differences become deductible. Management considers the scheduled reversals of future deferred tax assets, projected future taxable income, and tax planning strategies in making this assessment. As a result, management determined it was more likely than not the deferred tax assets would not be realized as of December 31, 2012 and 2011 and maintained a full valuation allowance.
Reconciliation between the statutory rate and the effective tax rate is as follows at December 31, 2012 and 2011:
|
2012
|
2011
|
|||||||
|
Federal statutory rate
|
(35.0 | )% | (35.0 | )% | ||||
|
State taxes, net of federal benefit
|
(0.00 | )% | (0.00 | )% | ||||
|
Change in valuation allowance
|
35.0 | % | 35.0 | % | ||||
|
Effective tax rate
|
0.0 | % | 0.0 | % | ||||
Lease Agreement
On January 3, 2011, the Company executed a sublease agreement with Perigon Companies, LLC, a related party. The lease term is month to month at a rate of $1,500 per month. The Company paid a refundable security deposit of $1,500. During January 2012, the Company renegotiated its sublease agreement with Perigon Companies, LLC for a period of one year at a rate of $3,500 per month. Rent expense for the year ended December 31, 2012 was $42,000.
Employment Agreement
Effective March 1, 2012, the Company entered into an amended employment agreement with the President of the Company. The officer will receive annual compensation of $12,000 due monthly. Additionally, the Company will issue 15,000 shares of common stock per quarter starting from the three months ended May 31, 2012. Compensation expense for the years ended December 31, 2012 and 2011 was $143,100 and $239,000.
Consulting Agreements
On June 3, 2010, the Company executed a consulting and financial advisory agreement with an entity to assist the Company with financial and management consulting services. The Company agreed to issue 15,000 shares of common stock upon execution of the agreement. The agreement expires on December 2, 2010. On June 25, 2010, the Company issued 15,000 shares. Additionally, the Company agreed to a fixed quarterly fee of 5,000 shares of common stock which will be due on July 1, 2010 and October 1, 2010. As of September 30, 2011, the Company issued 10,000 shares of common stock and reduced the subscriptions payable.
As of December 31, 2012, the Company had notes payable with related parties. See Note 5 – Notes Payable – Related Parties.
As of December 31, 2011, the Company had accounts payable totaling $343 due to an entity that is owned and controlled by a former officer, director and shareholder of the Company.
F-16
TABLE OF CONTENTS
Part IItem 1. BusinessItem 1A. Risk FactorsItem 1B. Unresolved Staff CommentsItem 2. PropertiesItem 3. Legal ProceedingsPart IIItem 5. Market For Common Equity and Related Stockholder Matters and Small Business Issuer Purchase Of Equity SecuritiesItem 6. Selected Financial DataItem 7. Management S Discussion and Analysis Of Financial Condition and Results Of OperationsItem 7A. Quantitative and Qualitative Disclosures About Market RiskItem 8. Financial Statements and Supplementary DataItem 9. Changes in and Disagreements with Accountants on Accounting and Financial DisclosureItem 9A (t) Controls and ProceduresItem 9B. Other InformationPart IIIItem 10. Directors, Executive Officers and Corporate GovernanceItem 11. Executive CompensationItem 12. Security Ownership Of Certain Beneficial Owners and Management and Related Stockholder MattersItem 13. Certain Relationships and Related Transactions, and Director IndepndenceItem 14. Principal Accounting Fees and ServicesItem 15. Exhibits, Financial Statement SchedulesNote 1 Summary Of Significant Accounting PoliciesNote 1 Summary Of Significant Accounting Policies (continued)Note 2 Going ConcernNote 3 Acquisition Of Bollente, IncNote 4 WebsiteNote 5 Notes Payable Related PartiesNote 6 Notes PayableNote 7 Long Term Notes Payable Related PartyNote 8 Stockholders Equity (deficit)Note 8 Stockholders Equity (deficit) (continued)Note 9 WarrantsNote 10 Income TaxesNote 10 Income Taxes (continued)Note 11 AgreementsNote 12 Related Party Transactions