REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders
of Avalanche International, Corp.
We have audited the accompanying consolidated balance sheet of
Avalanche International, Corp
. (the “Company”) as of November 30, 2015, and the related consolidated statements of operations, changes in stockholders’ deficit and cash flows for the year then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement
.
The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of
Avalanche International, Corp.
, as of November 30, 2015, and the consolidated results of its operations and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America
.
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As more fully discussed in Note 2 to the financial statements, the Company has incurred net losses since inception and needs to raise additional funds to meet its obligations and sustain its operations. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ Marcum
llp
Marcum
llp
New York, NY
April 28, 2017
GILLESPIE & ASSOCIATES, PLLC
CERTIFIED PUBLIC ACCOUNTANTS
10544 ALTON AVE NE
SEATTLE, WA 98125
206.353.5736
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors
Avalanche International Corporation and Subsidiary
We have audited the accompanying restated consolidated balance sheet of Avalanche International Corporation and Subsidiary as of November 30, 2014 and the related restated statements of operations, stockholders’ deficit and cash flows for the period then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit. The financial statements of Avalanche International Corporation and Subsidiary as of November 30, 2013 were audited by other auditors whose report dated February 12, 2014, expressed an unqualified opinion on those statements.
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 audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Avalanche International Corporation and Subsidiary for the restated period ended November 30, 2014 and the restated results of its operations and cash flows for the period then ended in conformity with generally accepted accounting principles 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, although the Company has limited operations it has yet to attain profitability. This raises substantial doubt about its ability to continue as a going concern. Management’s plan in regard to these matters is also described in Note #2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/S/ GILLESPIE & ASSOCIATES, PLLC
Seattle, Washington
October 18, 2015
AVALANCHE INTERNATIONAL CORP. AND SUBSIDIARY
|
|
|
|
|
|
|
|
|
Consolidated Balance Sheets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
November 30,
|
|
|
November 30,
|
|
|
|
2015
|
|
|
2014
|
|
ASSETS
|
|
|
|
|
(Restated)
|
|
|
|
|
|
|
|
|
CURRENT ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
405
|
|
|
$
|
2,247
|
|
Accounts receivable, related party
|
|
|
17,222
|
|
|
|
—
|
|
Other receivable
|
|
|
705
|
|
|
|
—
|
|
Inventory
|
|
|
—
|
|
|
|
25,900
|
|
TOTAL CURRENT ASSETS
|
|
|
18,332
|
|
|
|
28,147
|
|
|
|
|
|
|
|
|
|
|
Other assets
|
|
|
—
|
|
|
|
526
|
|
TOTAL ASSETS
|
|
$
|
18,332
|
|
|
$
|
28,673
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' DEFICIT
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT LIABILITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable and accrued expenses
|
|
$
|
177,004
|
|
|
$
|
87,217
|
|
Accounts payable, related party
|
|
|
63,699
|
|
|
|
88,572
|
|
Due to related parties
|
|
|
—
|
|
|
|
6,927
|
|
Derivative liability
|
|
|
1,313,012
|
|
|
|
—
|
|
Convertible notes payable, net of discount of $202,325 and 9,040, respectively
|
|
|
416,975
|
|
|
|
54,210
|
|
Notes payable
|
|
|
135,031
|
|
|
|
18,300
|
|
TOTAL CURRENT LIABILITIES
|
|
|
2,105,721
|
|
|
|
255,226
|
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES
|
|
|
2,105,721
|
|
|
|
255,226
|
|
|
|
|
|
|
|
|
|
|
COMMITMENTS AND CONTINGENCIES
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS' DEFICIT
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock, $0.001 par value: 10,000,000 shares authorized;
|
|
|
|
|
|
|
|
|
Class A Preferred Stock, $0.001 par value; 50,000 shares designated,
|
|
|
|
|
|
|
|
|
nil and 14,000 shares issued and outstanding, respectively, stated value
$5 per share
|
|
|
—
|
|
|
|
14
|
|
Common stock, $0.001 par value: 75,000,000 shares authorized;
|
|
|
|
|
|
|
|
|
6,309,635 and 5,144,400 shares issued and outstanding, respectively
|
|
|
6,310
|
|
|
|
5,144
|
|
Additional paid-in capital
|
|
|
1,119,118
|
|
|
|
203,445
|
|
Accumulated deficit
|
|
|
(3,212,817
|
)
|
|
|
(435,156
|
)
|
TOTAL STOCKHOLDERS' DEFICIT
|
|
|
(2,087,389
|
)
|
|
|
(226,553
|
)
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT
|
|
$
|
18,332
|
|
|
$
|
28,673
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
|
|
AVALANCHE INTERNATIONAL CORP. AND SUBSIDIARY
|
|
|
|
|
|
|
|
|
Consolidated Statements of Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended November 30,
|
|
|
|
2015
|
|
|
2014
|
|
|
|
|
|
|
(Restated)
|
|
|
|
|
|
|
|
|
Revenue - related party
|
|
$
|
34,086
|
|
|
$
|
27,000
|
|
Revenue
|
|
|
4,814
|
|
|
|
19,131
|
|
Total Revenue
|
|
|
38,900
|
|
|
|
46,131
|
|
Cost of revenue
|
|
|
32,231
|
|
|
|
45,146
|
|
Gross profit
|
|
|
6,669
|
|
|
|
985
|
|
|
|
|
|
|
|
|
|
|
Operating expenses
|
|
|
|
|
|
|
|
|
General and administrative
|
|
|
1,400,956
|
|
|
|
394,129
|
|
Total operating expense
|
|
|
1,400,956
|
|
|
|
394,129
|
|
|
|
|
|
|
|
|
|
|
Loss from operations
|
|
|
(1,394,287
|
)
|
|
|
(393,144
|
)
|
|
|
|
|
|
|
|
|
|
Other expenses
|
|
|
|
|
|
|
|
|
Interest expense, including penalties
|
|
|
(76,029
|
)
|
|
|
(985
|
)
|
Interest expense - debt discount
|
|
|
(357,450
|
)
|
|
|
—
|
|
Loss on issuance of convertible debt
|
|
|
(472,033
|
)
|
|
|
—
|
|
Change in fair value of derivative liability
|
|
|
(360,666
|
)
|
|
|
—
|
|
Total other expenses
|
|
|
(1,266,178
|
)
|
|
|
(985
|
)
|
|
|
|
|
|
|
|
|
|
Loss before income taxes
|
|
|
(2,660,465
|
)
|
|
|
(394,129
|
)
|
|
|
|
|
|
|
|
|
|
Income tax expense
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
(2,660,465
|
)
|
|
|
(394,129
|
)
|
|
|
|
|
|
|
|
|
|
Preferred dividends
|
|
|
(117,196
|
)
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
Loss available to common shareholders
|
|
$
|
(2,777,661
|
)
|
|
$
|
(394,129
|
)
|
|
|
|
|
|
|
|
|
|
Basic and diluted net loss per common share
|
|
$
|
(0.49
|
)
|
|
$
|
(0.08
|
)
|
|
|
|
|
|
|
|
|
|
Basic and diluted weighted average common shares outstanding
|
|
|
5,622,731
|
|
|
|
5,076,965
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
|
|
AVALANCHE INTERNATIONAL CORP. AND SUBSIDIARY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated Statements of Changes in Stockholders' Deficit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended November 30, 2014 and November 30, 2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series A Convertible
|
|
|
|
|
|
|
|
|
Additional
|
|
|
|
|
|
|
|
|
|
Preferred Stock
|
|
|
Common Stock
|
|
|
Paid-In
|
|
|
Accumulated
|
|
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Deficit
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCES, November 30, 2013
|
|
|
—
|
|
|
$
|
—
|
|
|
|
5,070,000
|
|
|
$
|
5,070
|
|
|
$
|
18,330
|
|
|
$
|
(41,027
|
)
|
|
$
|
(17,627
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock for cash
|
|
|
—
|
|
|
|
—
|
|
|
|
74,400
|
|
|
|
74
|
|
|
|
92,926
|
|
|
|
—
|
|
|
|
93,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of preferred stock for cash
|
|
|
14,000
|
|
|
|
14
|
|
|
|
—
|
|
|
|
—
|
|
|
|
69,986
|
|
|
|
—
|
|
|
|
70,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assumption of liabilities
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
22,203
|
|
|
|
—
|
|
|
|
22,203
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(394,129
|
)
|
|
|
(394,129
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCES, November 30, 2014
|
|
|
14,000
|
|
|
$
|
14
|
|
|
|
5,144,400
|
|
|
$
|
5,144
|
|
|
$
|
203,445
|
|
|
$
|
(435,156
|
)
|
|
$
|
(226,553
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock for cash
|
|
|
—
|
|
|
|
—
|
|
|
|
1,600
|
|
|
|
2
|
|
|
|
1,998
|
|
|
|
—
|
|
|
|
2,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of preferred stock to shareholder for payment of accrued expenses,
related party
|
|
|
15,380
|
|
|
|
15
|
|
|
|
—
|
|
|
|
—
|
|
|
|
76,885
|
|
|
|
—
|
|
|
|
76,900
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock for services
|
|
|
—
|
|
|
|
—
|
|
|
|
440,000
|
|
|
|
440
|
|
|
|
582,685
|
|
|
|
—
|
|
|
|
583,125
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock with convertible notes payable and notes payable
|
|
|
—
|
|
|
|
—
|
|
|
|
133,990
|
|
|
|
134
|
|
|
|
111,194
|
|
|
|
—
|
|
|
|
111,328
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock for conversion of debt
|
|
|
—
|
|
|
|
—
|
|
|
|
61,452
|
|
|
|
62
|
|
|
|
26,214
|
|
|
|
—
|
|
|
|
26,276
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock for conversion of preferred stock
|
|
|
(29,380
|
)
|
|
|
(29
|
)
|
|
|
528,193
|
|
|
|
528
|
|
|
|
116,697
|
|
|
|
—
|
|
|
|
117,196
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred dividends
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(117,196
|
)
|
|
|
(117,196
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(2,660,465
|
)
|
|
|
(2,660,465
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCES, November 30, 2015
|
|
|
—
|
|
|
$
|
—
|
|
|
|
6,309,635
|
|
|
$
|
6,310
|
|
|
$
|
1,119,118
|
|
|
$
|
(3,212,817
|
)
|
|
$
|
(2,087,389
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
|
|
AVALANCHE INTERNATIONAL CORP. AND SUBSIDIARY
|
|
|
|
|
|
|
|
|
Consolidated Statements of Cash Flows
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended November 30,
|
|
|
|
2015
|
|
|
2014
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
Net loss
|
|
$
|
(2,660,465
|
)
|
|
$
|
(394,129
|
)
|
Adjustments to reconcile net loss to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
Amortization expense -- loan fees
|
|
|
53,791
|
|
|
|
—
|
|
Interest expense -- debt discount
|
|
|
357,450
|
|
|
|
—
|
|
Loss on issuance of convertible debt
|
|
|
472,033
|
|
|
|
—
|
|
Change in fair value on derivative liability
|
|
|
360,666
|
|
|
|
—
|
|
Stock-based compensation
|
|
|
583,125
|
|
|
|
—
|
|
Stock issued for loan fees
|
|
|
68,011
|
|
|
|
—
|
|
Bad debt expense
|
|
|
173,688
|
|
|
|
—
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Accounts receivable, related party
|
|
|
(17,222
|
)
|
|
|
—
|
|
Other receivables
|
|
|
(705
|
)
|
|
|
(9,566
|
)
|
Inventories
|
|
|
25,900
|
|
|
|
(25,900
|
)
|
Other assets
|
|
|
526
|
|
|
|
—
|
|
Accounts payable and accrued expenses
|
|
|
256,726
|
|
|
|
180,365
|
|
Accounts payable, related parties
|
|
|
(24,873
|
)
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
Net cash used in operating activities
|
|
|
(351,349
|
)
|
|
|
(249,230
|
)
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
Loan issuance
|
|
|
(12,500
|
)
|
|
|
—
|
|
Loan issuance, related party
|
|
|
(12,500
|
)
|
|
|
|
|
Advance to related party
|
|
|
(202,766
|
)
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities
|
|
|
(227,766
|
)
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
Proceeds from issuance of common stock
|
|
|
2,000
|
|
|
|
93,000
|
|
Proceeds from issuance of preferred stock
|
|
|
—
|
|
|
|
70,000
|
|
Payments to related parties
|
|
|
(6,927
|
)
|
|
|
6,927
|
|
Proceeds from convertible notes payable
|
|
|
508,000
|
|
|
|
63,250
|
|
Proceeds from notes payable
|
|
|
105,000
|
|
|
|
28,300
|
|
Payments on notes payable
|
|
|
(25,500
|
)
|
|
|
|
|
Payments on notes payable, related parties
|
|
|
(5,300
|
)
|
|
|
(10,000
|
)
|
|
|
|
|
|
|
|
|
|
Net cash provided by financing activities
|
|
|
577,273
|
|
|
|
251,477
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash
|
|
|
(1,842
|
)
|
|
|
2,247
|
|
|
|
|
|
|
|
|
|
|
Cash at beginning of period
|
|
|
2,247
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
Cash at end of period
|
|
$
|
405
|
|
|
$
|
2,247
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosures of cash flow information:
|
|
|
|
|
|
|
|
|
Cash paid during the period for interest
|
|
$
|
45
|
|
|
$
|
65
|
|
|
|
|
|
|
|
|
|
|
Non-cash financing activities:
|
|
|
|
|
|
|
|
|
Issuance of common stock in payment of preferred dividends
|
|
$
|
117,196
|
|
|
$
|
-
|
|
Issuance of notes payable in payment of accrued expenses
|
|
$
|
35,074
|
|
|
$
|
-
|
|
Derivative liability recorded in connection with convertible debt
|
|
$
|
952,346
|
|
|
$
|
-
|
|
Common stock issued for conversion of debt
|
|
$
|
26,276
|
|
|
$
|
-
|
|
Issuance of preferred stock to shareholder for payment of accrued expenses
|
|
$
|
76,900
|
|
|
$
|
-
|
|
Reduction in related party accounts payable by offset of advances
|
|
$
|
54,078
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
|
|
Avalanche International, Corp. and Subsidiary
Notes to the Consolidated Financial Statements
1.
|
ORGANIZATION AND DESCRIPTION OF BUSINESS
|
Avalanche International, Corp. (the
“Company”
or
“Avalanche”
) was incorporated under the laws of the State of Nevada on April 14, 2011. The Company had plans to distribute crystallized glass tile in the North American markets to wholesale customers. On May 14, 2014, the Company entered into an Agreement of Conveyance, Transfer and Assignment of Assets and Assumption of Obligations (the
“Agreement”
) with John Pulos, its prior sole officer and director. Pursuant to the Agreement, the Company transferred all assets related to its crystallized glass tile business to Mr. Pulos and in exchange Mr. Pulos assumed and cancelled all liabilities due to him. In conjunction with the Agreement, there was a change in management and the Company began to operate as
a holding company with operations at the subsidiary levels only
. The Company has formed two wholly-owned subsidiaries, Smith and Ramsay Brands, LLC (
“SRB”
) and Restaurant Capital Group, LLC (
“RCG”
). SRB was formed on May 19, 2014, and RCG was formed on October 22, 2015.
SRB was originally formed as a manufacturer and distributor of flavored liquids for electronic vaporizers and eCigarettes and accessories; this business was discontinued in June 2015. RCG was formed to hold the Company’s investments in the restaurant industry.
2.
|
LIQUIDITY AND GOING CONCERN
|
The accompanying consolidated financial statements have been prepared on the basis that the Company will continue as a going concern. The Company has incurred recurring losses and reported loss available to common shareholders for the years ended November 30, 2015 and 2014, totaling $2,777,661 and $394,219, respectively, as well as an accumulated deficit as of November 30, 2015 and 2014, amounting to $3,212,817 and $435,156, respectively. As a result of the Company’s continued losses, at November 30, 2015, the Company’s current liabilities significantly exceed current assets, resulting in negative working capital of $2,087,389. Further, the Company does not have adequate cash to cover projected operating costs for the next 12 months. These factors raise substantial doubt about the ability of the Company to continue as a going concern. In order to ensure the continued viability of the Company, either future equity or debt financings must be obtained or profitable operations must be achieved in order to repay the existing short-term debt and to provide a sufficient source of operating capital. To address its liquidity issues, the Company continues to explore opportunities for additional financing and/or restructuring of its existing debt. No assurances can be made that the Company will be successful obtaining additional equity or debt financing and/or in restructuring existing debt, or that the Company will achieve profitable operations and positive cash flow. The consolidated financial statements do not include any adjustments
to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result should the Company be unable to continue as a going concern
. Further, subsequent to year end the Company has primarily funded its operations through the issuance of additional debt financings (See Note 12).
3.
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
|
Principles of Consolidation
The consolidated financial statements include accounts of Avalanche and its wholly-owned subsidiaries, SRB and RCG, (collectively referred to as the
“Company"
). No operations existed in RCG during the year ended November 30, 2015. All significant intercompany accounts and transactions have been eliminated in consolidation.
Accounting Estimates
The preparation of financial statements, in conformity with accounting principles generally accepted in the United States of America, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The Company’s critical accounting policies that involve significant judgment and estimates include share based compensation, valuation of derivative liabilities and valuation of deferred income taxes. Actual results could differ from those estimates.
Avalanche International, Corp. and Subsidiary
Notes to the Consolidated Financial Statements (Continued)
Cash Equivalents
The Company considers all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents. The recorded carrying amounts of the Company’s cash and cash equivalents approximate their fair value. As of November 30, 2015 and 2014, the Company had no cash equivalents.
Inventory Valuation
Inventory is valued
at the lower of cost or market. Cost is determined using the first-in, first-out method; market value is based upon estimated replacement costs.
Fair Value of Financial Instruments
The Company’s financial instruments are accounts receivable,
inventory,
accounts payable
,
notes payable, and derivative liabilities. The recorded values of accounts receivable,
inventory, and
accounts payable approximate their fair values based on their short-term nature. Notes payable and convertible notes payable are recorded at their issue value or if warrants are attached at their issue value less the proportionate value of the warrant, which approximates their fair value. Convertible notes payable and warrants issued with ratcheting provisions are classified as derivative liabilities and are revalued using the Black-Scholes model each quarter based on changes in the market value of our common stock and unobservable level 3 inputs.
The Company defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. The fair value hierarchy is based on three levels of inputs that may be used to measure fair value, of which the first two are considered observable and the last is considered unobservable:
Level 1: Quoted prices in active markets for identical assets or liabilities.
Level 2: Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3 assumptions: Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities including liabilities resulting from imbedded derivatives associated with certain warrants to purchase common stock.
Derivative Financial Instruments
Derivative liabilities are recognized in the consolidated balance sheets at fair value based on the criteria specified in Financial Accounting Standards Board (
“FASB”
) Accounting Standards Codification (
“ASC”
) Topic 815-15
– Derivatives and Hedging – Embedded Derivatives
(
“ASC 815-15”
).
Pursuant to
ASC Topic 815-15 an evaluation of the embedded conversion feature of convertible debt is evaluated to determine if the bifurcated debt conversion feature is
required to be classified as a derivative liability.
Since the terms of the embedded conversion features of the Company’s convertible debt provides for the issuance of shares of common stock at the election of the holders and the number of shares is subject to adjustment for a decline in the price of the Company’s common stock, the Company determined that the embedded conversion option met the criteria of a derivative liability. The estimated fair value of the embedded conversion feature of debt classified as derivative liabilities are determined using the Black-Scholes option pricing model. The model utilizes Level 3 unobservable inputs to calculate the fair value of the derivative liabilities at each reporting period. The Company determined that using an alternative valuation model such as a Binomial-Lattice model would result in minimal differences.
The fair value of
the embedded conversion feature of debt classified as derivative liabilities
are adjusted for changes in fair value at each reporting period, and the corresponding non-cash gain or loss is recorded
as other income or expense in the consolidated statement of operations. As of November 30, 2015, the embedded conversion feature of $1,313,012 of convertible notes payable was classified as a derivative liability. Each reporting period the embedded conversion feature is re-valued and adjusted through the caption “change in fair value of derivative liabilities” on the consolidated statements of operations.
Avalanche International, Corp. and Subsidiary
Notes to the Consolidated Financial Statements (Continued)
When the Company has determined that the embedded conversion options should not be bifurcated from their host instruments, the Company records, when necessary, discounts to convertible notes for the intrinsic value of conversion options embedded in debt instruments based upon the differences between the fair value of the underlying common stock at the commitment date of the note transaction and the effective conversion price embedded in the note. Debt discounts under these arrangements are amortized over the term of the related debt to their stated date of redemption.
Debt Discounts
The Company accounts for debt discount according to ASC 470-20,
Debt with Conversion and Other Options
. Debt discounts are amortized through periodic charges to interest expense over the term of the related financial instrument using the effective interest method. During the years ended November 30, 2015 and 2014, the Company recorded amortization of debt discounts of $357,450 and nil, respectively.
Revenue Recognition
The Company will recognize revenue when it is realized or realizable and earned. The Company considers revenue realized or realizable and earned when all of the following criteria are met: (i) persuasive evidence of an arrangement exists, (ii) the product has been shipped or the services have been rendered to the customer, (iii) the sales price is fixed or determinable, and (iv) collectability is reasonably assured. During the years ended November 30, 2015 and 2014, the Company’s revenues consisted solely of sales of flavored liquids for electronic vaporizers and eCigarettes and accessories from SRB.
Income Taxes
The Company determines its income taxes under the asset and liability method in accordance with FASB ASC 740,
Income Taxes
(
“ASC 740”
)
, which requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax assets and liabilities are based on the differences between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the fiscal year in which the differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance to the extent management concludes it is more likely than not that the assets will not be realized. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the fiscal years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the Statements of Income and Comprehensive Income in the period that includes the enactment date.
ASC 740 addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. The Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position.
The tax benefit to be recognized is measured as the largest amount of benefit that is greater than fifty percent likely of being realized upon ultimate settlement. To the extent that the final tax outcome of these matters is different than the amount recorded, such differences impact income tax expense in the period in which such determination is made. Interest and penalties, if any, related to accrued liabilities for potential tax assessments are included in income tax expense.
ASC 740
also requires management to evaluate tax positions taken by the Company and recognize a liability if the Company has taken uncertain tax positions that more likely than not would not be sustained upon examination by applicable taxing authorities. Management of the Company has evaluated tax positions taken by the Company and has concluded that as of November 30, 2015, there are no uncertain tax positions taken, or expected to be taken, that would require recognition of a liability that would require disclosure in the financial statements.
Avalanche International, Corp. and Subsidiary
Notes to the Consolidated Financial Statements (Continued)
Stock-Based Compensation
The Company accounts for stock option awards in accordance with FASB ASC Topic No. 718,
Compensation-Stock Compensation
. Under FASB ASC Topic No. 718, compensation expense related to stock-based payments is recorded over the requisite service period based on the grant date fair value of the awards. Compensation previously recorded for unvested stock options that are forfeited is reversed upon forfeiture. The Company uses the Black-Scholes option pricing model for determining the estimated fair value for stock-based awards. The Black-Scholes model requires the use of assumptions which determine the fair value of stock-based awards, including the option’s expected term and the price volatility of the underlying stock.
The Company’s accounting policy for equity instruments issued to consultants and vendors in exchange for goods and services follows the provisions of FASB ASC Topic No. 505-50,
Equity Based Payments to Non-Employees
. Accordingly, the measurement date for the fair value of the equity instruments issued is determined at the earlier of (i) the date at which a commitment for performance by the consultant or vendor is reached or (ii) the date at which the consultant or vendor’s performance is complete. In the case of equity instruments issued to consultants, the fair value of the equity instrument is recognized over the term of the consulting agreement.
Loss per Common Share
The Company utilizes FASB ASC Topic No. 260,
Earnings per Share
. Basic loss per share is computed by dividing loss available to common shareholders by the weighted-average number of common shares outstanding. Diluted loss per share is computed similar to basic loss per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive. Diluted loss per common share reflects the potential dilution that could occur if convertible promissory notes and Class A convertible preferred stock were to be exercised or converted or otherwise resulted in the issuance of common stock that then shared in the earnings of the entity.
Since the effects of outstanding Class A convertible preferred stock and the conversion of convertible debt are anti-dilutive in all periods presented, shares of common stock underlying these instruments have been excluded from the computation of loss per common share.
The following sets forth the number of shares of common stock underlying outstanding Class A convertible preferred stock and convertible debt as of November 30, 2015 and 2014:
|
|
November 30,
|
|
|
|
2015
|
|
|
2014
|
|
Convertible notes payable
|
|
|
3,890,876
|
|
|
|
—
|
|
Class A convertible preferred stock
|
|
|
—
|
|
|
|
14,000
|
|
|
|
|
3,890,876
|
|
|
|
14,000
|
|
Reclassifications
Certain prior year amounts have been reclassified for comparative purposes to conform to the current-year financial statement presentation. These reclassifications had no effect on previously reported results of operations. In addition, certain prior year amounts from the restated amounts have been reclassified for consistency with the current period presentation.
Recent Accounting Standards
In May 2014, the FASB issued
Accounting Standards Update (
“ASU”
) No. 2014-09
"Revenue from Contracts with Customers (Topic 606)"
(
“ASU 2014-09”
). ASU 2014-09 supersedes the revenue recognition requirements in ASC Topic 605,
“Revenue Recognition”
and some cost guidance included in ASC Subtopic 605-35,
“Revenue Recognition – Construction - Type and Production - Type Contracts.”
The core principle of ASU 2014-09 is that revenue is recognized when the transfer of goods or services to customers occurs in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services. ASU 2014-09 requires the disclosure of sufficient information to enable readers of the Company’s financial statements to understand the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts. ASU 2014-09 also requires disclosure of information regarding significant judgments and changes in judgments, and assets recognized from costs incurred to obtain or fulfill a contract. ASU 2014-09 provides two methods of retrospective application. The first method would require the Company to apply ASU 2014-09 to each prior reporting period presented. The second method would require the Company to retrospectively apply ASU 2014-09 with the cumulative effect recognized at the date of initial application.
ASU No. 2014-09 is effective for interim and annual reporting periods beginning after December 15, 2017
as a result of ASU 2015-14,
“Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date,”
which was issued by the FASB in August 2015 and extended the original effective date by one year. The Company is currently evaluating the impact of adopting the available methodologies of ASU 2014-09 and 2015-14 upon its financial statements in future reporting periods. The Company has not yet selected a transition method. The Company is in the process of evaluating the new standard against its existing accounting policies, including the timing of revenue recognition, and its contracts with customers to determine the effect the guidance will have on its financial statements and what changes to systems and controls may be warranted.
Avalanche International, Corp. and Subsidiary
Notes to the Consolidated Financial Statements (Continued)
There have been four new ASUs issued amending certain aspects of ASU 2014-09, ASU 2016-08,
“Principal versus Agent Considerations (Reporting Revenue Gross Versus Net),”
was issued in March, 2016 to clarify certain aspects of the principal versus agent guidance in ASU 2014-09. In addition, ASU 2016-10,
“Identifying Performance Obligations and Licensing,”
issued in April 2016, amends other sections of ASU 2014-09 including clarifying guidance related to identifying performance obligations and licensing implementation. ASU 2016-12,
“Revenue from Contracts with Customers - Narrow Scope Improvements and Practical Expedients”
provides amendments and practical expedients to the guidance in ASU 2014-09 in the areas of assessing collectability, presentation of sales taxes received from customers, noncash consideration, contract modification and clarification of using the full retrospective approach to adopt ASU 2014-09. Finally, ASU 2016-20, “
Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers,”
was issued in December 2016, and provides elections regarding the disclosures required for remaining performance obligations in certain cases and also makes other technical corrections and improvements to the standard. With its evaluation of the impact of ASU 2014-09, the Company will also consider the impact on its financial statements related to the updated guidance provided by these four new ASUs.
In August 2014, the FASB issued ASU No. 2014-15 “
Presentation of Financial Statements—Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern.
”
ASU No. 2014-15 is intended to define management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern and to provide related footnote disclosures
. ASU No. 2014-15 is effective
for annual periods ending after December 15, 2016, and interim periods within annual periods beginning after December 15, 2016
. Early application is permitted. The adoption of this standard is not expected to have a material effect on the Company’s operating results or financial condition.
In July 2015, the FASB issued ASU No. 2015-11, “
Simplifying the Measurement of Inventory
”. Under ASU No. 2015-11 entities should measure inventory that is not measured using last-in, first-out (LIFO) or the retail inventory method, including inventory that is measured using first-in, first-out (FIFO) or average cost, at the lower of cost or net realizable value. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. ASU No. 2015-11 is effective for reporting periods beginning after December 15, 2016 and is to be applied prospectively. The adoption of ASU No. 2015-11 is not expected to have a material effect on our consolidated financial position, results of operations or cash flows.
In August 2015, the FASB issued ASU No. 2015-15, “
Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements
”, which clarifies the guidance set forth in ASU No. 2015-03, “
Simplifying the Presentation of Debt Issuance Costs
”, issued in April 2015. ASU No. 2015-03 requires that debt issuance costs related to a recognized liability be presented on the balance sheet as a direct reduction from the carrying amount of that debt liability, consistent with debt discounts. The recognition and measurement guidance for debt issuance costs are not affected. ASU No. 2015-15 provides additional guidance regarding debt issuance costs associated with line-of-credit arrangements, stating that the SEC staff would not object to an entity deferring and presenting debt issuance costs as an asset and subsequently amortizing the deferred issuance costs ratably over the term of the line-of-credit arrangement. ASU No. 2015-03 is effective for reporting periods beginning after December 15, 2015, with early adoption permitted. The adoption of ASU No. 2015-03 and ASU No. 2015-15 did not have a material effect on our consolidated financial position, results of operations or cash flows.
Avalanche International, Corp. and Subsidiary
Notes to the Consolidated Financial Statements (Continued)
In November 2015, the FASB issued ASU No. 2015-17,
Balance Sheet Classification of Deferred Taxes
. The new guidance requires that all deferred tax assets and liabilities, along with any related valuation allowance, be classified as noncurrent on the balance sheet. This update is effective for annual periods beginning after December 15, 2016 and interim periods within those annual periods. The adoption of ASU No. 2015-17 is not expected to have a material effect on our consolidated financial position, results of operations, or cash flows.
In March 2016, the FASB issued ASU No. 2016-09,
Improvements to Employee Share Based Payment Accounting
, to simplify several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. The guidance will be effective for annual periods beginning after December 15, 2016 and interim periods within those annual periods. Early adoption is permitted, including adoption in an interim period. The Company is currently evaluating the impact of the adoption of this newly issued guidance to its consolidated financial statements. The adoption of ASU No. 2016-09 is not expected to have a material effect on our consolidated financial position, results of operations, or cash flows
In February 2016, the FASB issued ASU No. 2016-02,
Leases
(“ASU 2016-02”), which amends the existing accounting standards for lease accounting, including requiring lessees to recognize most leases on their balance sheets and making targeted changes to lessor accounting. ASU 2016-02 will be effective beginning in the first quarter of 2019. Early adoption of ASU 2016-02 is permitted. The new standard requires a modified retrospective transition approach for all leases existing at, or entered into after, the date of initial application, with an option to use certain transition relief. The Company is currently evaluating the impact of adopting ASU 2016-02 on our consolidated financial statements.
In December 2016, the FASB issued ASU 2016-19,
Technical Corrections and Improvements
, which includes numerous technical corrections and clarifications to GAAP that are designed to remove inconsistencies in the board’s accounting guidance. Several provisions in this accounting guidance are effective immediately which did not have an impact on the Company’s consolidated financial statements. Additional provisions in this accounting guidance are effective for the Company in annual financial reporting periods beginning after December 15, 2016. The Company is currently evaluating the impact that the adoption of the additional provisions in this accounting guidance may have on its consolidated financial statements.
In August 2016, the FASB issued ASU No. 2016-15, which revises the guidance in ASC 230,
Statement of Cash Flows
. The new guidance is intended to reduce the diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows, and is effective for reporting periods (interim and annual) beginning after December 15, 2017, for public companies. The Company is currently assessing the potential impact of this ASU on our consolidated financial position and results of operations.
In January 2017, the FASB issued an ASU 2017-01,
Business Combinations (Topic 805) Clarifying the Definition of a Business
. The amendments in this Update is to clarify the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The definition of a business affects many areas of accounting including acquisitions, disposals, goodwill, and consolidation. The guidance is effective for annual periods beginning after December 15, 2017, including interim periods within those periods. The Company is currently evaluating the impact of adopting this guidance.
In January 2017, the FASB issued ASU 2017-04,
Intangibles - Goodwill and Other (Topic 350)
: Simplifying the Accounting for Goodwill Impairment. ASU 2017-04 removes Step 2 of the goodwill impairment test, which requires a hypothetical purchase price allocation. A goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. This standard, which will be effective for the Company beginning in the first quarter of fiscal year 2021, is required to be applied prospectively. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company is currently evaluating the impact this standard will have on its financial statements.
Avalanche International, Corp. and Subsidiary
Notes to the Consolidated Financial Statements (Continued)
On June 5, 2015, the Company executed a Promissory Note with Aja Cannafacturing, Inc. for $12,500. The note was unsecured, accrued interest at 10% and was due December 31, 2015. As of November 30, 2015, this note was deemed to be uncollectable and was written off to bad debt expense.
5.
|
CONVERTIBLE NOTES PAYABLE
|
Convertible notes payable at November 30, 2015, and November 30, 2014, are comprised of the following:
|
|
November 30,
|
|
|
|
2015
|
|
|
2014
|
|
Notes payable to Adar Bays, LLC
|
|
$
|
115,000
|
|
|
$
|
—
|
|
Notes payable to Union Capital, LLC
|
|
|
115,000
|
|
|
|
—
|
|
Notes payable to Typenex Co-Investment, LLC
|
|
|
87,500
|
|
|
|
—
|
|
Note payable to Gary Gelbfish
|
|
|
100,000
|
|
|
|
—
|
|
Notes payable to JMJ Financial
|
|
|
60,500
|
|
|
|
—
|
|
Notes payable to Black Mountain Equities, Inc.
|
|
|
55,000
|
|
|
|
—
|
|
Notes payable to LG Capital Funding, LLC
|
|
|
50,000
|
|
|
|
63,250
|
|
Note payable to GCEF Opportunity Fund, LLC
|
|
|
27,500
|
|
|
|
—
|
|
Note payable to Lord Abstract, LLC
|
|
|
8,800
|
|
|
|
—
|
|
Total notes payable
|
|
|
619,300
|
|
|
|
63,250
|
|
Less: debt discount
|
|
|
(202,325
|
)
|
|
|
(9,040
|
)
|
Total convertible notes payable, net of discount
|
|
$
|
416,975
|
|
|
$
|
54,210
|
|
During the years ended November 30, 2015 and 2014
, the Company entered into convertible promissory notes with various entities in which it received aggregate proceeds of $508,000 and $47,500, respectively. As consideration for these loans, the Company issued promissory notes in the aggregate principal amount of $632,550, which included loan fees of $47,500 and original issue discounts of $29,550. The convertible promissory notes accrue interest at rates ranging between 8% and 12% per annum. At November 30, 2015, the Company was in default on the LG Capital Funding, LLC, Gary Gelbfish and Typenex Co-Investment, LLC convertible promissory notes and subject to default interest rates of 24%, 10% and 22%, respectively, on these convertible promissory notes. Further, the Company recorded a default penalty of $18,902 on the Typenex Co-Investments, LLC convertible promissory note. On April 4, 2017, the Company and Typenex agreed to a settlement, see Note 12. As of the date of this report, the Company was in default on all of the convertible notes payable.
The table below summarizes the Company’s convertible promissory notes as of November 30, 2014.
|
|
|
|
|
|
Inception
|
|
|
|
|
|
|
Original
|
|
Stock
|
|
Principal
|
|
|
|
Inception
|
|
Due
|
|
Interest
|
|
|
|
|
Loan
|
|
Issue
|
|
Issued in
|
|
Amount of
|
|
|
|
Date
|
|
Date
|
|
Rate
|
|
|
Cash
|
|
Fees
|
|
Discount
|
|
Lieu of Cash
|
|
Note
|
|
LG Capital Funding, LLC
|
|
11/3/2014
|
|
11/3/2015
|
|
|
|
8
|
%
|
|
|
$
|
47,500
|
|
|
$
|
7,500
|
|
|
$
|
8,250
|
|
|
$
|
-
|
|
|
$
|
63,250
|
|
Avalanche International, Corp. and Subsidiary
Notes to the Consolidated Financial Statements (Continued)
The table below summarizes the Company’s convertible promissory notes as of November 30, 2015.
|
|
|
|
|
|
Inception
|
|
|
|
|
|
|
|
|
Original
|
|
|
Stock
|
|
|
Principal
|
|
|
|
Inception
|
|
Due
|
|
Interest
|
|
|
|
|
|
Loan
|
|
|
Issue
|
|
|
Issued in
|
|
|
Amount of
|
|
|
|
Date
|
|
Date
|
|
Rate
|
|
|
Cash
|
|
|
Fees
|
|
|
Discount
|
|
|
Lieu of Cash
|
|
|
Note
|
|
Adar Bays, LLC
|
|
5/12/2015
|
|
5/12/2016
|
|
|
8
|
%
|
|
$
|
100,000
|
|
|
$
|
15,000
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
115,000
|
|
Union Capital, LLC
|
|
5/11/2015
|
|
5/11/2016
|
|
|
8
|
%
|
|
|
100,000
|
|
|
|
15,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
115,000
|
|
Typenex Co-Investment, LLC
|
|
6/2/2015
|
|
7/2/2016
|
|
|
10
|
%
|
|
|
70,000
|
|
|
|
10,000
|
|
|
|
7,500
|
|
|
|
-
|
|
|
|
87,500
|
|
Gary Gelbfish
|
|
4/1/2015
|
|
9/23/2015
|
|
|
10
|
%
|
|
|
100,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
100,000
|
|
JMJ Financial
|
|
4/29/2015
|
|
4/29/2017
|
|
|
12
|
%
|
|
|
55,000
|
|
|
|
-
|
|
|
|
5,500
|
|
|
|
-
|
|
|
|
60,500
|
|
Black Mountain Equities, Inc.
|
|
6/4/2015
|
|
6/4/2016
|
|
|
10
|
%
|
|
|
50,000
|
|
|
|
-
|
|
|
|
5,000
|
|
|
|
-
|
|
|
|
55,000
|
|
LG Capital Funding, LLC
|
|
11/3/2014
|
|
11/3/2015
|
|
|
8
|
%
|
|
|
47,500
|
|
|
|
7,500
|
|
|
|
8,250
|
|
|
|
(13,250
|
)
|
|
|
50,000
|
|
GCEF Opportunity Fund, LLC
|
|
6/30/2015
|
|
6/30/2016
|
|
|
10
|
%
|
|
|
25,000
|
|
|
|
-
|
|
|
|
2,500
|
|
|
|
-
|
|
|
|
27,500
|
|
Lord Abstract, LLC
|
|
6/30/2015
|
|
6/30/2016
|
|
|
10
|
%
|
|
|
8,000
|
|
|
|
-
|
|
|
|
800
|
|
|
|
-
|
|
|
|
8,800
|
|
Total
|
|
|
|
|
|
|
|
|
|
$
|
555,500
|
|
|
$
|
47,500
|
|
|
$
|
29,550
|
|
|
$
|
(13,250
|
)
|
|
$
|
619,300
|
|
As reflected below, at November 30, 2015, the Company’s convertible notes payable were convertible into 3,890,876 shares of the Company’s common stock at the conversion terms below.
|
|
|
|
Shares Issuable
|
|
|
|
|
|
Upon Conversion
|
|
|
|
Conversion terms
|
|
at November 30, 2015
|
|
|
|
|
|
|
|
|
Adar Bays, LLC
|
|
60% of the lowest trading price of the Company's common stock for the 20 days preceding conversion
|
|
|
638,889
|
|
|
|
|
|
|
|
|
Union Capital, LLC
|
|
60% of the lowest trading price of the Company's common stock for the 20 days preceding conversion
|
|
|
638,889
|
|
|
|
|
|
|
|
|
Typenex Co-Investment, LLC
|
|
35% of lowest closing bid price of the Company's common stock for the 20 days preceding conversion
|
|
|
1,013,352
|
|
|
|
|
|
|
|
|
Gary Gelbfish
|
|
50% of the average of the closing price of the Company's common stock for the twenty days preceding conversion
|
|
|
455,063
|
|
|
|
|
|
|
|
|
JMJ Financial
|
|
60% of the lowest trading price of the Company's common stock in the 25 days prior to conversion
|
|
|
403,333
|
|
|
|
|
|
|
|
|
Black Mountain Equities, Inc.
|
|
70% of the average of the three lowest closing prices of the Company's common stock during the twenty days preceding conversion
|
|
|
261,905
|
|
|
|
|
|
|
|
|
LG Capital Funding, LLC
|
|
60% of the lowest trading price of the Company's common stock for the 20 days preceding conversion
|
|
|
277,778
|
|
|
|
|
|
|
|
|
GCEF Opportunity Fund, LLC
|
|
60% of the lowest closing price of the Company's common stock for the 20 days preceding conversion
|
|
|
152,778
|
|
|
|
|
|
|
|
|
Lord Abstract, LLC
|
|
60% of the lowest closing price of the Company's common stock for the 20 days preceding conversion
|
|
|
48,889
|
|
|
|
|
|
|
|
|
Number of shares of common stock underlying
the convertible promissory notes
|
|
|
|
|
3,890,876
|
|
Avalanche International, Corp. and Subsidiary
Notes to the Consolidated Financial Statements (Continued)
The debt conversion features embedded in the Company’s convertible promissory notes are accounted for under ASC Topic 815
– Derivatives and Hedging
. At issuance, the estimated fair value of the debt conversion features utilizing the Black Scholes option pricing model totaled $952,346. However, the fair value of the debt conversion features was limited by the amount of the gross proceeds of the convertible promissory notes of $555,500, and the respective debt discount of $552,101 is being amortized to interest expense over the term of the convertible promissory notes using the effective interest method. The difference between the estimated fair value of the debt conversion feature and the debt discount, of $459,894, was reflected as a loss on issuance of convertible debt. During the year ended November 30, 2015, interest expense of $357,450 was recorded from the debt discount amortization. Additionally, the Company is required to mark to market the value of the conversion feature liability. Therefore, as of November 30, 2015, the Company revalued the fair value of the debt conversion feature for the convertible promissory notes and determined the conversion feature liability to be $1,313,012, an increase of $360,666 from the fair value determined at the date of issuance. Changes in the conversion feature liability are recorded as income or expense during the reporting period that the change occurs.
The tables below summarize the Company’s derivative liabilities and the related non-cash charges at November 30, 2015.
|
|
Estimated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FV of Debt
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Conversion
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt
|
|
|
|
Feature at
|
|
|
|
|
|
Loss on
|
|
|
Debt
|
|
|
Amortization
|
|
|
Discount at
|
|
|
|
Inception
|
|
|
Other Fees
|
|
|
Issuance
|
|
|
Discount
|
|
|
Expense
|
|
|
November 30, 2015
|
|
Adar Bays, LLC
|
|
$
|
203,234
|
|
|
$
|
-
|
|
|
$
|
(103,234
|
)
|
|
$
|
100,000
|
|
|
$
|
(59,589
|
)
|
|
$
|
40,411
|
|
Union Capital, LLC
|
|
|
193,664
|
|
|
|
-
|
|
|
|
(93,664
|
)
|
|
|
100,000
|
|
|
|
(59,904
|
)
|
|
|
40,096
|
|
Typenex Co-Investment, LLC
|
|
|
48,301
|
|
|
|
7,500
|
|
|
|
-
|
|
|
|
55,801
|
|
|
|
(27,671
|
)
|
|
|
28,130
|
|
Gary Gelbfish
|
|
|
116,224
|
|
|
|
41,349
|
|
|
|
(57,573
|
)
|
|
|
100,000
|
|
|
|
(100,000
|
)
|
|
|
-
|
|
JMJ Financial
|
|
|
173,334
|
|
|
|
2,500
|
|
|
|
(118,334
|
)
|
|
|
57,500
|
|
|
|
(12,924
|
)
|
|
|
44,576
|
|
Black Mountain Equities, Inc.
|
|
|
68,362
|
|
|
|
5,000
|
|
|
|
(18,362
|
)
|
|
|
55,000
|
|
|
|
(26,972
|
)
|
|
|
28,028
|
|
LG Capital Funding, LLC
|
|
|
109,773
|
|
|
|
-
|
|
|
|
(62,273
|
)
|
|
|
47,500
|
|
|
|
(47,500
|
)
|
|
|
-
|
|
GCEF Opportunity Fund, LLC
|
|
|
29,889
|
|
|
|
2,500
|
|
|
|
(4,889
|
)
|
|
|
27,500
|
|
|
|
(11,527
|
)
|
|
|
15,973
|
|
Lord Abstract, LLC
|
|
|
9,565
|
|
|
|
800
|
|
|
|
(1,565
|
)
|
|
|
8,800
|
|
|
|
(3,689
|
)
|
|
|
5,111
|
|
|
|
|
952,346
|
|
|
|
59,649
|
|
|
|
(459,894
|
)
|
|
|
552,101
|
|
|
|
(349,776
|
)
|
|
|
202,325
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes payable:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Studio Capital, LLC
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
26,968
|
|
|
|
(7,674
|
)
|
|
|
19,294
|
|
Loss on payment
|
|
|
-
|
|
|
|
-
|
|
|
|
(12,139
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Total
|
|
$
|
952,346
|
|
|
$
|
59,649
|
|
|
$
|
(472,033
|
)
|
|
$
|
579,069
|
|
|
$
|
(357,450
|
)
|
|
$
|
221,619
|
|
|
|
Estimated FV of
|
|
|
|
|
|
|
Debt Conversion Feature at
|
|
|
Change in FV of
|
|
|
|
Inception
|
|
|
November 30, 2015
|
|
|
Debt Conversion Feature
|
|
Adar Bays, LLC
|
|
$
|
203,234
|
|
|
$
|
207,659
|
|
|
$
|
4,425
|
|
Union Capital, LLC
|
|
|
193,664
|
|
|
|
207,536
|
|
|
|
13,872
|
|
Typenex Co-Investment, LLC
|
|
|
48,301
|
|
|
|
380,858
|
|
|
|
332,557
|
|
Gary Gelbfish
|
|
|
116,224
|
|
|
|
118,391
|
|
|
|
2,167
|
|
JMJ Financial
|
|
|
173,334
|
|
|
|
155,017
|
|
|
|
(18,317
|
)
|
Black Mountain Equities, Inc.
|
|
|
68,362
|
|
|
|
81,951
|
|
|
|
13,589
|
|
LG Capital Funding, LLC
|
|
|
109,773
|
|
|
|
94,905
|
|
|
|
(14,868
|
)
|
GCEF Opportunity Fund, LLC
|
|
|
29,889
|
|
|
|
50,532
|
|
|
|
20,643
|
|
Lord Abstract, LLC
|
|
|
9,565
|
|
|
|
16,163
|
|
|
|
6,598
|
|
|
|
$
|
952,346
|
|
|
$
|
1,313,012
|
|
|
$
|
360,666
|
|
Avalanche International, Corp. and Subsidiary
Notes to the Consolidated Financial Statements (Continued)
As reflected in the table below, during the years ended November 30, 2015 and 2014, the Company incurred interest expense, excluding amortization of debt discount, of $43,313 and $374, respectively, on the convertible promissory notes. At November 30, 2015 and 2014, accrued interest on the convertible promissory notes totaled $42,426 and $374, respectively, and is recorded in accounts payable and accrued expenses on the consolidated balance sheets.
|
|
Interest Expense for the Year ended
|
|
|
Accrued Interest at November 30,
|
|
|
|
November 30, 2015
|
|
|
November 30, 2014
|
|
|
2015
|
|
|
2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adar Bays, LLC
|
|
$
|
5,091
|
|
|
$
|
-
|
|
|
$
|
5,091
|
|
|
$
|
-
|
|
Union Capital, LLC
|
|
|
5,117
|
|
|
|
-
|
|
|
|
5,117
|
|
|
|
-
|
|
Typenex Co-Investment, LLC
|
|
|
6,225
|
|
|
|
-
|
|
|
|
6,225
|
|
|
|
-
|
|
Gary Gelbfish
|
|
|
6,795
|
|
|
|
-
|
|
|
|
6,795
|
|
|
|
-
|
|
JMJ Financial
|
|
|
7,260
|
|
|
|
-
|
|
|
|
7,260
|
|
|
|
-
|
|
Black Mountain Equities, Inc.
|
|
|
5,500
|
|
|
|
-
|
|
|
|
5,500
|
|
|
|
-
|
|
LG Capital Funding, LLC
|
|
|
5,778
|
|
|
|
374
|
|
|
|
4,891
|
|
|
|
374
|
|
GCEF Opportunity Fund, LLC
|
|
|
1,172
|
|
|
|
-
|
|
|
|
1,172
|
|
|
|
-
|
|
Lord Abstract, LLC
|
|
|
375
|
|
|
|
-
|
|
|
|
375
|
|
|
|
-
|
|
Total
|
|
$
|
43,313
|
|
|
$
|
374
|
|
|
$
|
42,426
|
|
|
$
|
374
|
|
Notes payable at November 30, 2015, and November 30, 2014, are comprised of the following:
|
|
November 30,
|
|
|
|
2015
|
|
|
2014
|
|
Notes payable to Studio Capital, LLC (a)
|
|
$
|
125,000
|
|
|
$
|
—
|
|
Notes payable to Argent Offset, LLC (b)
|
|
|
16,825
|
|
|
|
13,000
|
|
Notes payable to Strategic IR, Inc. (c)
|
|
|
12,500
|
|
|
|
—
|
|
Notes payable to Cross Click Media, Inc. (d)
|
|
|
—
|
|
|
|
4,200
|
|
Notes payable to MCKEA Holdings, LLC (d)
|
|
|
—
|
|
|
|
1,100
|
|
Total notes payable
|
|
|
154,325
|
|
|
|
18,300
|
|
Less: debt discount
|
|
|
(19,294
|
)
|
|
|
—
|
|
Notes payable
|
|
|
135,031
|
|
|
|
18,300
|
|
(a)
|
On October 8, 2015, Studio Capital, LLC, (
“Studio Capital”
) loaned $100,000 to the Company. As consideration for the loan, the Company issued Studio Capital a promissory note in the aggregate principal amount of $125,000, which included a loan discount of $25,000 (the
“Studio Capital Note”
) with net proceeds of $100,000. The Studio Capital note does not accrue interest; however, the note provides for a loan fee of 5,000 shares of the Company’s common stock and has a maturity date of April 8, 2016. The Studio Capital Note was not repaid on the maturity date and, as a result of this default, subsequent to year end, on April 8, 2016, the Company recorded a default penalty of $25,000, 20% of the outstanding balance of the Studio Capital Note. The Company recorded a debt discount in the amount of $26,968 based on the estimated fair value of the 5,000 shares of common stock, derived from the closing market price of the Company’s common stock on the date of the loan, and the $25,000 loan discount. The debt discount is being amortized as non-cash interest expense over the term of the debt using the effective interest method. During the year ended November 30, 2015, interest expense of $7,674 was recorded from the debt discount amortization.
|
Avalanche International, Corp. and Subsidiary
Notes to the Consolidated Financial Statements (Continued)
(b)
|
On
November 26, 2014, the Company issued Argent Offset, LLC (
“Argent”
) a promissory note in consideration of expenses that it paid on the Company’s behalf in the aggregate principal amount of $13,000 (the
“Argent Note”
). The Argent Note included a $500 loan fee, accrued interest at 10%, compounded monthly, and was due December 5, 2014. A late payment fee of $500 per day was to be incurred from December 6, 2014 through December 7, 2014 and then increases to $1,000 per day. On February 1, 2015, the Company entered into a Temporary Forbearance Agreement with Argent. Under the forbearance agreement, the Company agreed to pay a forbearance fee of $7,000 and to extend the maturity date to August 1, 2015. Argent also advanced the Company an additional $19,825 pursuant to the terms of the Argent Note. As of November 30, 2015, $16,000 has been repaid on the Argent Note. The Argent Note is currently in default. During the years ended November 30, 2015 and 2014, the Company incurred interest expense, excluding loan fees, of $2,050 and $14, respectively, on the Argent Note. At November 30, 2015 and 2014, accrued interest on the Argent Note totaled $2,064 and $14, respectively.
|
(c)
|
On
March 17, 2015, the Company issued Strategic, IR, Inc. (
“Strategic”
) a promissory note in consideration of expenses that it paid on the Company’s behalf in the aggregate principal amount of $12,500 (the
“Strategic Note”
). The Strategic Note included a $1,750 loan fee, accrued interest at 10% and was due April 16, 2015. The Strategic Note is currently in default and accruing interest at the default rate of 21% per annum. During the year ended November 30, 2015, the Company incurred interest expense, excluding loan fees, of $1,742 on the Strategic Note. At November 30, 2015, accrued interest on the Strategic Note totaled $1,742.
|
(d)
|
As of November 30, 2014, the Company owed $4,200 to Cross Click and $1,100 to MCKEA for short-term advances to the Company. During 2015, these advances were repaid. All advances were non-interest bearing, due upon demand and unsecured.
|
(e)
|
During 2015, the Company entered into two short-terms loans, in the aggregate amount of $9,500. The Company received $5,000 in cash and expenses of $4,500 were paid on the Company’s behalf. These
short-term
loans accrued interest at 10% and
during the year ended November 30, 2015, the Company incurred interest expense of $45.
These loans were repaid during 2015.
|
7.
|
FAIR VALUE MEASUREMENTS
|
The following table classifies the Company’s liabilities measured at fair value on a recurring basis into the fair value hierarchy as of
November 30
, 2015:
|
|
Fair value measured at November 30, 2015
|
|
|
|
Fair value at
November 30, 2015
|
|
|
Quoted prices in
active markets
(Level 1)
|
|
|
Significant other
observable
inputs (Level 2)
|
|
|
Significant
unobservable
inputs (Level 3)
|
|
Derivative liabilities
|
|
$
|
1,313,012
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
1,313,012
|
|
There were no transfers between Level 1, 2 or 3 during the year ended
November 30
, 2015.
The following table presents changes in Level 3 liabilities measured at fair value for the year ended
November 30
, 2015. Both observable and unobservable inputs were used to determine the fair value of positions that the Company has classified within the Level 3 category. Unrealized gains and losses associated with liabilities within the Level 3 category include changes in fair value that were attributable to both observable (e.g., changes in market interest rates) and unobservable (e.g., changes in unobservable long-dated volatilities) inputs.
|
|
December 1, 2014
|
|
|
Derivative
Liabilities from
Convertible
Notes Payable
|
|
|
Change in estimated
fair value recognized
in results of operations
|
|
|
November 30, 2015
|
|
Derivative liabilities
|
|
$
|
-
|
|
|
$
|
952,346
|
|
|
$
|
360,666
|
|
|
$
|
1,313,012
|
|
Avalanche International, Corp. and Subsidiary
Notes to the Consolidated Financial Statements (Continued)
The development and determination of the unobservable inputs for Level 3 fair value measurements and fair value calculations are the responsibility of the Company’s management.
A summary of quantitative information about significant unobservable inputs (Level 3 inputs) used in measuring the Company’s derivative liabilities that are categorized within Level 3 of the fair value hierarchy for the year ended
November 30
, 2015 is as follows:
|
|
Date of valuation
|
|
|
|
November 30, 2015
|
|
|
Inception of loan
|
|
Stock price
|
|
$
|
0.45
|
|
|
$
|
0.55 – 1.41
|
|
Conversion price
|
|
$
|
0.10 – 0.22
|
|
|
$
|
0.24 – 1.20
|
|
Volatility
|
|
|
161% – 239%
|
|
|
|
103% – 151%
|
|
Risk free interest rate
|
|
|
.11% – .86%
|
|
|
|
.08% – .74%
|
|
Years to maturity
|
|
|
.45 – 1.74
|
|
|
|
.43 – 2.00
|
|
8.
|
RELATED PARTY TRANSACTIONS
|
During the years ended November 30, 2015 and 2014, the Company sold $34,086 and $27,000, respectively, in products to Vape Nation. These sales represented 87.6% and 69.4%, respectively, of total revenue. Vape Nation, is 50% owned by MCKEA Holdings, LLC
(“MCKEA”
). MCKEA is the majority member of Philou Ventures, LLC, which is the Company’s controlling shareholder. Kristine L. Ault
, the wife of Milton C. Ault III,
Chairman of the Company’s Board of Directors
, is the manager and owner of MCKEA.
During the years ended November 31, 2015 and 2014, Cross Click Media, Inc. (
“Cross Click”
) performed sales, marketing, investor relation and other incidental services on behalf of the Company in the amount of approximately $114,000 and $154,000, respectively, which are included in advertising and marketing expense and general and administrative expense in the statement of operations. MCKEA is the controlling shareholder of Cross Click.
On June 5, 2015, the Company entered into a promissory note with Cross Click for $12,500. The note is unsecured, accrues interest at 10% per annum and is due on December 31, 2015. As of November 30, 2015, this note was deemed to be uncollectable and was written off to bad debt expense.
During 2015, the Company repaid $4,200 to Cross Click and $1,100 to MCKEA for short-term advances that the Company received during 2014.
In addition, during the year ended November 30, 2015, the Company advanced Cross Click $202,766. The Company offset the advances by $54,078 in accounts payable due to Cross Click for sales, marketing, and investor relation services it had performed. The advances were due in one year and accrue interest at 12%. As of November 30, 2015, the advances were deemed to be uncollectable and the remaining balance due from Cross Click of $148,688 was written off to bad debt expense.
Preferred Stock
The Company is authorized to issue 10,000,000 shares of Preferred Stock with a par value of $0.001 per share.
On July 31, 2014, the Board of Directors designated 50,000 shares of its Preferred Stock as “Class A Convertible Preferred Stock” (the
“Class A Preferred Shares”
).
Each share of Class A Preferred Stock has a stated value of $5.00 per share. The holders of Class A Preferred Stock have no voting rights. The holders are entitled to receive cumulative dividends at a rate of 10% of the stated value per annum, payable twice a year, subject to the availability of funds and approval by the Board of Directors. In the discretion of the Board of Directors, dividends may be paid with common stock. In the event of a liquidation or dissolution of the Company each holder of Class A Preferred Stock shall be entitled to be paid in cash $5 per share.
Avalanche International, Corp. and Subsidiary
Notes to the Consolidated Financial Statements (Continued)
At any time after August 31, 2015, a holder of Class A Preferred Stock may, at their option, convert all or a portion of their outstanding shares into common stock. On February 1, 2016, all issued and outstanding preferred stock were to be automatically converted into shares of common stock.
During the year ended November 30, 2014, the Company issued 14,000 shares of Class A Preferred Stock at a price of $5.00 per share for total cash proceeds of $70,000.
On January 30, 2015, the Company issued 15,380 shares of Class A Preferred Stock to
Finiks Capital, LLC
at a price of $5.00 per share for total proceeds of $76,900.
The proceeds from the sale were paid directly to Cross Click, a related party, for accrued expenses.
On September 21, 2015, pursuant to individual Notices of Conversion executed by each of the holders of its Class A Preferred Stock, the Company exchanged all 29,380 shares of its outstanding Class A Preferred Stock, as well as accrued dividends thereon in the amount of $11,558, at a $0.30 conversion ratio per share for a total of 528,193 shares of common stock. The conversion of the Class A Preferred Shares resulted in an additional return to the preferred stockholders of $105,638 based on the difference of the carrying amount of the preferred stock and the fair value of the consideration transferred which is based on the closing price of the Company’s common stock on the date of conversion.
Common Stock
On December 15, 2014, the Company issued 1,600 shares of common stock at a price of $1.25 per share for total cash proceeds of $2,000.
Stock based compensation
During the year ended November 30, 2015, the Company issued 440,000 shares of common stock to service providers for total stock based compensation of $583,125. All of the shares of common stock were valued based on the closing price of the Company’s common stock on the date of grant.
Stock issued for convertible notes payable and notes payable
On March 27, 2015, the Company issued 50,000 shares of common stock to Dr. Gary Gelbfish in connection with the issuance of a convertible promissory note. As a result of this issuance, the Company recognized debt discount of $41,349 based on the fair value of the common stock issued to Dr. Gelbfish relative to the fair value of the convertible promissory note.
On October 8, 2015, the Company entered into a promissory note with Studio Capital. As additional consideration, the Company issued Studio Capital 5,000 shares of its common stock.
As a result of the issuance of 5,000 shares of common stock, the Company recognized debt discount of $1,968 based on the fair value of the common stock issued to Studio Capital relative to the fair value of the promissory note.
Inclusive of the $25,000 loan discount provided for in the Studio Capital Note, the Company recorded aggregate debt discount of $26,968 as a result of the transaction with Studio Capital.
On October 8, 2015, the Company issued 30,000 shares of common stock to an individual for consideration of personally guaranteeing the promissory note to Studio Capital.
The fair value of the common stock issued was determined to be $11,997 based on the closing price of the Company’s common stock on the date of grant.
During the year ended November 30, 2015, in connection with the issuance of certain convertible promissory notes, the Company issued 48,990 shares of its common stock, for total non-cash consideration of $56,013. All of the shares of common stock were valued based on the closing price of the Company’s common stock on the date of grant.
Avalanche International, Corp. and Subsidiary
Notes to the Consolidated Financial Statements (Continued)
Conversion of debt
Between August 19, 2015 and September 21, 2015, the Company issued 61,452 shares of common stock to LG Capital Funding, LLC in conversion of $13,250 of principal and $887 of accrued interest on its convertible promissory note. The shares of common stock were valued $26,276 resulting in a loss on conversion of $12,139.
The Company has fully reserved the net deferred income tax assets by taking a full valuation allowance against these assets. During the years ended November 30, 2015 and 2014, the Company did not recognize any income tax benefit as a result of its net loss. The table below shows the balances for the deferred income tax assets and liabilities as of the date indicated.
|
|
November 30,
|
|
|
|
2015
|
|
|
2014
|
|
Deferred income tax asset:
|
|
|
|
|
|
|
Net operating loss
|
|
$
|
623,354
|
|
|
$
|
138,008
|
|
Other accrued liabilities
|
|
|
21,961
|
|
|
|
—
|
|
Total deferred tax asset
|
|
|
645,315
|
|
|
|
138,008
|
|
Valuation allowance
|
|
|
(645,315
|
)
|
|
|
(138,008
|
)
|
Deferred income tax asset, net of allowance
|
|
$
|
—
|
|
|
$
|
—
|
|
The income tax provision (benefit) consists of the following:
|
|
November 30,
|
|
|
|
2015
|
|
|
2014
|
|
Federal and State
|
|
|
|
|
|
|
Current
|
|
$
|
—
|
|
|
$
|
—
|
|
Deferred
|
|
|
(645,315
|
)
|
|
|
(138,008
|
)
|
Valuation allowance
|
|
|
645,315
|
|
|
|
138,008
|
|
Income tax provision (benefit)
|
|
$
|
—
|
|
|
$
|
—
|
|
During the years ended November 30, 2015 and 2014, the Company did not recognize income tax expense. The Company’s effective tax rate was 0% in both years. The effective tax rate differed primarily due to the change in the valuation allowance. The reconciliation of income tax attributable to operations computed at the U.S. Federal statutory income tax rate of 34% to income tax expense is as follows:
|
|
Year Ended November 30,
|
|
|
2015
|
|
2014
|
Tax benefit at U.S. Federal statutory tax rate
|
|
|
(34.0
|
%)
|
|
|
(34.0
|
%)
|
Increase (decrease) in tax rate resulting from:
|
|
|
|
|
|
|
|
|
Change to valuation allowance
|
|
|
18.3
|
%
|
|
|
34.0
|
%
|
Derivative revaluation expense
|
|
|
14.6
|
%
|
|
|
—
|
|
Nondeductible meals & entertainment expense and other
|
|
|
1.1
|
%
|
|
|
—
|
|
Effective tax rate
|
|
|
0.0
|
%
|
|
|
0.0
|
%
|
At November 30, 2015, the Company had total domestic Federal net operating loss carryovers of approximately $1,833,000 available to offset future taxable income. Federal net operating loss carryovers (
“NOLs”
) expire at various dates between 2022 and 2025. The Company has not filed its 2015 Federal income tax return. The Company will not be able to utilize these carryovers until the related tax return is filed. In accordance with Section 382 of the Internal Revenue Code, the future utilization of the Company’s net operating loss to offset future taxable income may be subject to an annual limitation as a result of ownership changes that may have occurred previously or that could occur in the future. The Company has not yet determined whether such an ownership change has occurred; however, the Company will be completing a Section 382 analysis regarding the limitation of the net operating loss.
Avalanche International, Corp. and Subsidiary
Notes to the Consolidated Financial Statements (Continued)
In assessing the realization of 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 during the periods in which temporary differences representing net future deductible amounts become deductible. Management considers the scheduled reversal of deferred tax assets, projected future taxable income and tax planning strategies in making this assessment. After consideration of all of the information available and due to the substantial doubt related to the Company’s ability to continue as a going concern and utilize its deferred tax assets, the Company recorded a full valuation allowance of the deferred tax asset. For the year ended November 30, 2015, the valuation allowance has increased by $507,306.
The 2012 through 2015 tax years remain open to examination by the Internal Revenue Service. The IRS has the authority to examine such tax year until the applicable statute of limitations expire.
Avalanche International, Corp. and Subsidiary
Notes to the Consolidated Financial Statements (Continued)
The consolidated financial statements for the year ended November 30, 2014 have been restated to expense the previously capitalized licensing fee and to reclassify original issue discount that was initially recorded as a prepaid asset to debt discount.
An analysis of those restated numbers is reflected below.
Consolidated Balance Sheet
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
November 30, 2014
|
|
|
|
As Reported
|
|
|
Adjustment
|
|
|
(As Restated)
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
2,247
|
|
|
$
|
—
|
|
|
$
|
2,247
|
|
Inventory
|
|
|
25,900
|
|
|
|
—
|
|
|
|
25,900
|
|
TOTAL CURRENT ASSETS
|
|
|
28,147
|
|
|
|
—
|
|
|
|
28,147
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other assets
|
|
|
526
|
|
|
|
—
|
|
|
|
526
|
|
Product license
|
|
|
29,250
|
|
|
|
(29,250
|
)
|
|
|
—
|
|
TOTAL ASSETS
|
|
$
|
57,923
|
|
|
$
|
(29,250
|
)
|
|
$
|
28,673
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' DEFICIT
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT LIABILITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable and accrued expenses
|
|
$
|
87,217
|
|
|
$
|
—
|
|
|
$
|
87,217
|
|
Accounts payable, related party
|
|
|
88,572
|
|
|
|
—
|
|
|
|
88,572
|
|
Due to related parties
|
|
|
6,927
|
|
|
|
—
|
|
|
|
6,927
|
|
Convertible notes payable, net of discount of 9,040
|
|
|
54,210
|
|
|
|
—
|
|
|
|
54,210
|
|
Notes payable
|
|
|
18,300
|
|
|
|
—
|
|
|
|
18,300
|
|
TOTAL CURRENT LIABILITIES
|
|
|
255,226
|
|
|
|
—
|
|
|
|
255,226
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES
|
|
|
255,226
|
|
|
|
—
|
|
|
|
255,226
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COMMITMENTS AND CONTINGENCIES
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS' DEFICIT
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock, $0.001 par value: 10,000,000 shares authorized;
|
|
|
|
|
|
|
|
|
|
|
|
|
Class A Preferred Stock, $0.001 par value; 50,000 shares designated,
|
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|
|
|
|
|
|
|
|
|
|
|
14,000 shares issued and outstanding
|
|
|
14
|
|
|
|
—
|
|
|
|
14
|
|
Common stock, $0.001 par value: 75,000,000 shares authorized;
|
|
|
|
|
|
|
|
|
|
|
|
|
5,144,400 shares issued and outstanding
|
|
|
5,144
|
|
|
|
—
|
|
|
|
5,144
|
|
Additional paid-in capital
|
|
|
203,445
|
|
|
|
—
|
|
|
|
203,445
|
|
Accumulated deficit
|
|
|
(405,906
|
)
|
|
|
(29,250
|
)
|
|
|
(435,156
|
)
|
TOTAL STOCKHOLDERS' DEFICIT
|
|
|
(197,303
|
)
|
|
|
(29,250
|
)
|
|
|
(226,553
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT
|
|
$
|
57,923
|
|
|
$
|
(29,250
|
)
|
|
$
|
28,673
|
|
Avalanche International, Corp. and Subsidiary
Notes to the Consolidated Financial Statements (Continued)
Consolidated Statements of Operations
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|
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|
|
|
|
|
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|
|
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|
|
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|
|
|
For the Year Ended November 30, 2014
|
|
|
|
As Reported
|
|
|
Adjustment
|
|
|
(As Restated)
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
46,131
|
|
|
$
|
—
|
|
|
$
|
46,131
|
|
Cost of revenue
|
|
|
45,146
|
|
|
|
—
|
|
|
|
45,146
|
|
Gross profit
|
|
|
985
|
|
|
|
—
|
|
|
|
985
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
Advertising and marketing
|
|
|
137,473
|
|
|
|
—
|
|
|
|
137,473
|
|
Salary expense
|
|
|
50,200
|
|
|
|
—
|
|
|
|
50,200
|
|
Professional fees
|
|
|
42,954
|
|
|
|
—
|
|
|
|
42,954
|
|
General and administrative
|
|
|
134,252
|
|
|
|
29,250
|
|
|
|
163,502
|
|
Total operating expenses
|
|
|
364,879
|
|
|
|
29,250
|
|
|
|
394,129
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from operations
|
|
|
(363,894
|
)
|
|
|
(29,250
|
)
|
|
|
(393,144
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
(985
|
)
|
|
|
—
|
|
|
|
(985
|
)
|
Total other expenses
|
|
|
(985
|
)
|
|
|
—
|
|
|
|
(985
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before income taxes
|
|
|
(364,879
|
)
|
|
|
(29,250
|
)
|
|
|
(394,129
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(364,879
|
)
|
|
$
|
(29,250
|
)
|
|
$
|
(394,129
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted net loss per common share
|
|
$
|
(0.07
|
)
|
|
$
|
(0.01
|
)
|
|
$
|
(0.08
|
)
|
In accordance with FASB ASC 855-10, the Company has analyzed its operations subsequent to November 30, 2015 through April 28, 2017 and has
determined that it does not have any material subsequent events to disclose in these financial statements except for the following.
Notes Payable
On December 2, 2015, the Company entered into a Promissory Note (the
“Note”
) with a third party. Under the Note, the Company borrowed the sum of $125,000. The Note featured an original issue discount of $25,000, resulting in net funding to the Company of $100,000. The Note is due in sixty (60) days and does not bear interest. As additional consideration to the investor, the Company agreed to issue
a warrant to purchase up to 100,000 shares of the Company’s common stock at a price of $0.01 per share, exercisable for a period of one year
.
Convertible Notes Payable
On December 7, 2015,
the Company entered into convertible promissory notes with various entities in which it received aggregate proceeds of $11,000. As consideration for these loans, the Company issued promissory notes in the aggregate principal amount of $11,000. The convertible promissory notes accrue interest at 10% per annum and are due in three years.
Amendments
In January 2016, the Company entered into Amendments to its promissory notes with Adar Bays, Union Capital, LG Capital, and Typenex (the “Amendments”). In general, each of the Amendments stipulates that the lender will, for a period of ninety (90) days, convert no more than ten percent (10%) of the principal amount due under their notes in any thirty (30) day period. In addition, the specific Amendments also provide as follows:
Avalanche International, Corp. and Subsidiary
Notes to the Consolidated Financial Statements (Continued)
|
·
|
The Adar Bays and Union Capital Amendments each provide that the conversion discount shall be increased by 5%, such that these notes are convertible at 55%, rather than 60%, of market price as defined in the notes. Further, the pricing period, or “look-back” for determining the conversion price has been extended from 20 days to 25 days, and the pre-payment penalty has been increased to 150%.
|
|
·
|
The LG Capital Amendment also calls for additional consideration to LG Capital in the form of warrants to purchase 75,000 shares of our common stock at a price of $0.30 per share, exercisable for 3 years. Also, we will be permitted to re-pay the LG Capital note with the applicable penalty set forth in the note for a pre-payment made between 91 and 180 days after issue.
|
|
·
|
The Typenex Amendment also allows pre-payment in accord with the terms for such pre-payment as set forth in the note, and contains certain affirmations and representations and warranties regarding our liability under the Typenex note and other matters. The Typenex Amendment was also conditional upon our filing our quarterly report for the period ended August 31, 2015 by January 27, 2016.
|
On or around April 19, 2016, the Company received from counsel for Typenex, a written demand to accelerate and demand payment of the entire outstanding balance of the Convertible Note entered into between the Company and Typenex on May 29, 2015 (the
“Typenex Note”
). On June 7, 2016, Typenex filed suit in the State of Utah, the Third Judicial District Court, County of Salt Lake, for repayment of all principal, default effects, late fee and accrued interest. According to the complaint, Typenex asserted an aggregate amount due, as of June 6, 2016, of $149,054. On April 4, 2017, the Company and Typenex agreed to settle the lawsuit for payment of $90,000 provided such payment is received by Typenex no later than May 1, 2017.
Between April 2016 and August 2016, the Company entered into a convertible promissory note with JLA Realty (the
“JLA Note”
). Under the terms of the JLA Note, the Company borrowed the sum of $325,600. The Note featured an original issue discount of $29,600, resulting in net funding to the Company of $296,000. The JLA Note is due in three years and accrues interest at 12% per annum.
The JLA Note is convertible into 2,170,667 shares of the Company’s common stock.
Between October 2016 and February 2017, the Company entered into three convertible promissory notes with Digital Power Corporation (NYSE: DPW) (the
“DPW Notes”
). Under the terms of the DPW Notes, the Company borrowed the sum of $1,500,000. The DPW Notes featured an original issue discount of $75,000, resulting in net funding to the Company of $1,500,000. The DPW Notes are due in two years and accrue interest at 12% per annum. Subject to adjustment as provided for by the DPW Notes,
the
DPW
Note, inclusive of the original issue discount, is convertible into 2,113,086 shares of the Company’s common stock
. Between March 2017 and April 2017, the Company received $400,871 in loans from DPW in excess of the three convertible promissory notes.
Common Stock
On December 10, 2015, the Company entered into a Subscription Agreement with a third party, whereby it sold 25,000 shares of its common stock at a price of $0.20 per share for total cash proceeds of $5,000
.
On January 26, 2016, the Company granted 50,000 shares of common stock to a third party for consulting services. The shares were valued at $20,000, the fair value of the shares
was determined based on the closing price of the Company’s common stock
on the issuance date, and is being recognized over the term of the consulting agreement.
On January 26, 2016, the Company issued 297,619 shares of common stock to Typenex Co-Investment, LLC in conversion of $12,500 of accrued interest.
On January 28, 2016, the Company issued 100,000 shares of common stock to Black Mountain Equities, Inc. in conversion of $12,830 of principal and accrued interest.
On January 29, 2016, the Company issued 60,000 shares of common stock to JMJ Investments, Inc in conversion of $3,024 of accrued interest.
On October 27, 2016, the Company authorized the issuance of 250,000 shares of common stock as payment for services to an officer. The company issued the shares on February 28, 2017. The shares were valued at $40,000, $0.16 per share, based on the closing price of the Company’s common stock on the date of grant.
Preferred Stock
On March 6, 2017, the Company withdrew its former Class A Convertible Preferred Stock (the “
Previous Class
”), all shares of which were converted into shares of Common Stock as of September 21, 2015. The certificate of designations of the Previous Class was originally filed with the Secretary of State of the State of Nevada on July 31, 2014.
Avalanche International, Corp. and Subsidiary
Notes to the Consolidated Financial Statements (Continued)
On March 7, 2017, the Company filed a new Certificate of Designations, Preferences, Rights and Limitations of Class A Convertible Preferred Stock (the “
Class A Certificate of Designations
”) with the Secretary of State of the State of Nevada, setting forth the terms of the Class A Shares.
The Class A Shares each carry a stated value of $20.00. The Class A Shares shall vote together with the shares of Common Stock as a single class and, regardless of the number of Class A Shares outstanding, provided that at least 25,000 of such Class A Shares are outstanding, shall represent eighty percent (80%) of all votes entitled to be voted at any annual or special meeting of shareholders of the Company or action by written consent of shareholders, including any shares of preferred stock other than the Class A Shares that are voted with the Common Stock. Each outstanding Class A Share shall represent its proportionate share of the 80% which is allocated to the outstanding Class A Shares. The Class A Shares are convertible at the Holder’s option into shares of Common Stock of the Company at a conversion price derived by dividing the stated value of each Class A Share by $0.50 per share, subject to customary adjustment, which conversion may occur at any time at the option of the Holder.
On March 7, 2017, the Company entered into an agreement (the “
Exchange Agreement
”) with Philou pursuant to which it agreed to issue to Philou 50,000 shares of its newly created Class A Convertible Preferred Stock (the “
Class A Shares
”) in exchange for the surrender by Philou of 2,000,000 shares of its Common Stock.
On March 7, 2017, the Company filed the Certificate of Designations, Preferences, Rights and Limitations of Class B Convertible Preferred Stock (the “
Class B Certificate of Designations
”) with the Secretary of State of the State of Nevada, setting forth the terms of its Class B Convertible Preferred Stock (the “Class B Shares”).
The Company designated 100,000 shares of its preferred stock, par value $0.001 per share, as Class B Shares. The Class B Shares will have a priority over all of the shares of Common Stock on liquidation or sale of the Company, at the rate of $50.00 per Class B Share, or a liquidation preference of $5,000,000 (the “
Class B Stated Value
”) as to all Class B Shares. The Class B Shares will pay an annual dividend (at the option of the Company, either in cash or in additional shares of Common Stock), in an amount that shall be the greater of (i) an annual rate of 5% per annum, or (ii) 5% of MTIX’s net income as determined in accordance with United States Generally Accepted Accounting Principles for the fiscal year then ended. The Class B Shares will vote with the Common Stock on all matters as to which shareholders of the Company are entitled to vote, on an “as converted” basis, as though all outstanding Class B Shares had been converted into Common Stock immediately prior to the taking of the record date for all shareholders entitled to vote at any regular or special meeting of the Company’s shareholders. Commencing two (2) years after the Closing Date, the Class B Shares shall be convertible into shares of Common Stock by dividing the Class B Stated Value by the Conversion Price applicable to the Notes. The Class B Shares shall contain the respective rights, privileges and designations as are set forth in the Certificate of Designations, Preferences, Rights and Limitations of Class B Convertible Preferred Stock.
Management Services Agreement
On May, 1, 2016, the Company entered into
management services agreement (the
“MSA”
) with Alzamend Neuro, Inc. (
“Alzamend”
), a related party. Alzamend, which was formed on February 26, 2016 under the laws of the State of Delaware, was formed to acquire and commercialize patented intellectual property and know how to prevent, treat and cure the crippling and deadly disease, Alzheimer’s. Avalanche provides management, consulting and financial services to Alzamend. Such services include advice and assistance concerning any and all aspects of operations, planning and financing of Alzamend and conducting relations with accountants, attorney, financial advisors and other professionals. The term of the MSA, as amended, is for the period May 1, 2016 to December 31, 2017 and may be extended by written agreement. Avalanche receives $40,000 per month for its services.
MTIX, Ltd.
On October 26, 2016, the Company made an initial payment of $50,000 towards the purchase of MTIX Ltd., an advanced materials and processing technology company located in Huddersfield, West Yorkshire, UK (
“MTIX”
). MTIX has developed a novel cost effective and environmentally friendly material synthesis technology for textile applications. The parties to the transaction are currently completing their due diligence procedures and, assuming that no issues arise during the due diligence process, upon completion will finalize the terms of the purchase and prepare definitive agreements.
Avalanche International, Corp. and Subsidiary
Notes to the Consolidated Financial Statements (Continued)
On March 3, 2017, the Company entered into a Share Exchange Agreement (the
“Exchange Agreement
”) with MTIX and the three (3) current shareholders of MTIX (individually, a
“Seller”
and collectively, the
“Sellers”
). Upon the terms and subject to the conditions set forth in the Exchange Agreement, the Company will acquire MTIX from the Sellers through the transfer of all issued and outstanding ordinary shares of MTIX (the
“MTIX Shares”
) by the Sellers to the Company in exchange (the
“Exchange”
) for the issuance by the Company of: (a) 7% secured convertible promissory notes (individually, a
“Note”
and collectively, the
“Notes”
) in the aggregate principal face amount of $9,500,000 to the Sellers in pro rata amounts commensurate with their current respective ownership percentages of MTIX’s ordinary shares, (b) (i) $500,000 in cash, $50,000 of which has already been paid, and (ii) 100,000 shares of the Company’s newly designated shares of Class B Convertible Preferred Stock (the
“Class B Shares”
) to the principal shareholder of MTIX (the
“Majority Shareholder”
).
Consummation of the Exchange (the
“Closing”
) is subject to a number of closing conditions, including, among other things: (i) absence of litigation that seeks to prohibit the Exchange and certain other matters; (ii) the accuracy of the representations and warranties, subject to customary materiality qualifiers; (iii) the performance by the parties of certain covenants and agreements in all material respects, and (iv) the absence of a Material Adverse Effect (as defined in the Exchange Agreement). The Exchange Agreement does not contain a financing condition.
At the Closing the Company shall deliver to the Majority Shareholder and the two Sellers other than Majority Shareholder (the
“Minority Shareholders”
) three Notes, which Notes shall be in the principal face amount of $6,166,666 with respect to the Majority Shareholder and in the principal face amount of $1,666,667 with respect to each of the Minority Shareholders. Other than the principal amount under the foregoing Notes, the Notes shall be in all respects identical to the Note.
The Notes
The Notes bear interest at 7% per annum with interest payable (i) in cash upon maturity or in connection with any voluntary or mandatory conversion or, (ii) at the option of the Seller, in arrears
on the first day of each calendar quarter after the date of issuance (the
“Closing Date”
) by issuing and delivering that number of shares of Common Stock determined by dividing the interest accrued for such quarter by the average price per share for the ten (10) trading days immediately preceding the determination date as reported by Bloomberg, L.P.
Commencing two (2) years from the Closing Date, the Company may prepay any portion of the principal amount of the Notes without the prior written consent of the holders, provided, however, that the Company shall provide the Sellers with 90 days’ notice of such prepayment, and any prepayment must be undertaken on a pro rata basis for all Notes then outstanding. The holders of Notes shall have the right to convert any or all of the amount to be redeemed into common stock prior to prepayment.
Each Note ranks pari passu in right of payment with all other Notes now or hereafter issued in accordance with the Exchange Agreement and matures on the five-year anniversary of the issuance date thereof. Subject to certain limitations, the Notes are convertible at any time at the option of the holder into shares of the Company’s common stock at a conversion price equal to either (i) if the aggregate market capital of the Company on the date of conversion (the
“Market Cap”
) is $35,000,000 or less, at a 25% discount to the Market Price, or (ii) if the Market Cap is greater than $35,000,000, at a 25% discount to the Market Price, provided that such discount shall be increased by dividing it by the quotient that shall be obtained by dividing $35,0000,000 by the Market Cap at the time of conversion, provided, however, any increase in the discount to the Market Price shall not result in a discount that is greater than a 75% discount (the
“Conversion Price”
). Notwithstanding the foregoing, in no event shall the Conversion Price be less than $0.35. In addition, the Company may force the conversion of the Notes at any time commencing two (2) years from the Closing Date, provided certain conditions are met.
Avalanche International, Corp. and Subsidiary
Notes to the Consolidated Financial Statements (Continued)
Certificate of Designations of Class B Convertible Preferred Stock
Upon Closing, the Company will issue the 100,000 Class B Shares to the Majority Shareholder. The Class B Shares will have a priority over all of the shares of Common Stock on liquidation or sale of the Company, at the rate of $50.00 per Class B Share, or a liquidation preference of $5,000,000 (the “
Class B Stated Value
”) as to all Class B Shares. The Class B Shares will pay an annual dividend (at the option of the Company, either in cash or in additional shares of Common Stock), in an amount that shall be the greater of (i) an annual rate of 5% per annum, or (ii) 5% of MTIX’s net income as determined in accordance with United States Generally Accepted Accounting Principles for the fiscal year then ended. The Class B Shares will vote with the Common Stock on all matters as to which shareholders of the Company are entitled to vote, on an “as converted” basis, as though all outstanding Class B Shares had been converted into Common Stock immediately prior to the taking of the record date for all shareholders entitled to vote at any regular or special meeting of the Company’s shareholders. Commencing two (2) years after the Closing Date, the Class B Shares shall be convertible into shares of Common Stock by dividing the Class B Stated Value by the Conversion Price applicable to the Notes.
Security Agreement
The Notes will be secured, pursuant to a Security Agreement, by a lien on certain of the Company’s assets, including but not limited to the intellectual property of MTIX. Upon the occurrence of an event of default under the Notes, a majority in interest of the Notes may require the Company to repay all of its Notes in cash, at a price equal to 100% of the principal, accrued and unpaid interest and any amounts, costs and liquidated damages, as applicable.
Registration Rights Agreement
In connection with the Exchange, the Company and the Sellers will enter into a Registration Rights Agreement under which the Company shall be required to file a registration statement with the Commission covering the resale of the shares of the Common Stock issuable pursuant to conversion of: (i) the Notes
eighteen (18) months from the Closing Date, and (ii) the Class B Shares twenty-four (24) months from the Closing Date. In addition, the Company use its best efforts to have the registration statement declared effective as soon as practicable, but in no event later than 90 days after the filing date if the registration statement is not subject to a full review by the Commission, or 120 days after filing if the registration statement is subject to a full review by the Commission. The Company will be subject to certain monetary penalties, as set forth in the Registration Rights Agreement, if the registration statement is not filed, does not become effective on a timely basis, or does not remain available for the resale (subject to certain allowable grace periods) of the Registrable Securities, as such term is defined in the Registration Rights Agreement.
Stock Incentive Plan
On October 27, 2016, subject to stockholder approval, the Company’s Board of Directors approved the Company’s 2016 Stock Incentive Plan (the
“Plan”
), which provides for the issuance of a maximum of three million (3,000,000) shares of the Company’s common stock to be offered to the Company’s directors, officers, employees, and consultants. Options granted under the Plan have an exercise price equal to or greater than the fair market value of the underlying common stock at the date of grant and become exercisable based on a vesting schedule determined at the date of grant. The options expire between 5 and 10 years from the date of grant. Restricted stock awards granted under the Plan are subject to a vesting period determined at the date of grant.
Restaurant Capital Group
On April 13, 2016, through our wholly-owned subsidiary, Restaurant Capital Group, LLC (“
RCG
”) we entered into an agreement to finance a new restaurant owned by Philo Group, LLC (“
Philo
”). The restaurant is named Giulia, and features Italian fusion cuisine and two stylish full service bars with an intimate lounge atmosphere. Giulia, which opened in March 2017, is located near the Financial District, LA Live, and the Staples Center in downtown Los Angeles.
Between April 2016 and April 2017, the Company provided $931,000 in financing to Philo under the terms of a Senior Secured Property Note dated April 4, 2016, as amended (the
“Philo Note”
). The Philo Note bears interest at a rate of sixteen percent (16%) per year, requires monthly interest payments, and was due within six (6) months from the date of issue. Due to delays in the opening of Giulia, the Philo Note has not yet been repaid. The Philo Note features an original issue discount of $285,000 and allows for legal fees up to $20,000. The Philo Note is personally guaranteed by the principal of Philo, and secured by all assets of Philo. In addition, the principal of Philo has agreed to further secure the loan by pledging several pieces of real property located in California.
Avalanche International, Corp. and Subsidiary
Notes to the Consolidated Financial Statements (Continued)
We partially funded the Philo Note from our loans dated April 13, 2016 and September 15, 2016, with JLA Realty Associates, LLC and its principals (
“JLA”
), in the form of Senior Secured Property Notes in the amount of $330,000 and $150,000, respectively, (the
“JLA Notes”
) issued to JLA by RCG. The initial JLA Note featured terms mirroring those of the Philo Note, including 16% annual interest, a due date six months from issue, and required monthly interest payments. As of the date of this report, the Company has only repaid $100,000 of the JLA Notes and is currently in default. The JLA notes are secured by all of the assets of RCG and, in addition, is personally guaranteed by our Chairman, Milton C. Ault III. Mr. Ault serves as the Manager of RCG.
In addition to the financing from JLA discussed above, RCG has received financing from MCKEA Holdings, LLC under a Promissory Note dated March 4, 2016 (the
“MCKEA Note”
). The MCKEA Note has a face amount of $100,000 and bears interest a rate of fifteen percent (15%) per year. All principal and interest accrued under the MCKEA Note was due on or before August 4, 2016. The MCKEA Note features and original issue discount of 10% of the total cash advanced to RCG. Between March 2016 and December 2016, $58,350 has been advanced to RCG, inclusive of $5,305 of original issue discount, under the MCKEA Note, of which $42,125 has been repaid.
Item 9.
|
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
.
|
On June 16, 2015, Harris & Gillespie CPA’S, PLLC
(“
Harris & Gillespie
”)
was deregistered per PCAOB Release No. 105-2015-011. As a result of the transaction, on June 16, 2015, the Former Accountant effectively resigned as the Company’s independent registered public accounting firm and the Company engaged Michael Gillespie & Associates, PLLC
(“
Gillespie & Associates
”)
as the Company’s independent registered public accounting firm. The engagement of the New Accountant was approved by the Company’s Board of Directors.
Effective October 8, 2015, the Company dismissed its former independent registered public accounting firm, Gillespie & Associates. The decision to dismiss Gillespie & Associates was approved by the Company’s Board of Directors (the
“Board”
) on October 8, 2015.
In connection with the audits of the fiscal years ended November 30, 2014 and 2013 and through October 8, 2015, there were (i) no disagreements with Gillespie & Associates on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreements if not resolved to the satisfaction of Gillespie & Associates would have caused them to make reference to the subject matter of the disagreement(s) in connection with their report; (2) no “reportable events” as such term is defined in Item 304(a)(1)(v) of Regulation S-K.
Gillespie & Associates’ report on the financial statements of the Company for the years ended November 30, 2014 and 2013 did not contain an adverse opinion or a disclaimer of opinion, nor was it qualified or modified as to uncertainty, audit scope, or accounting principles. However, both reports included an explanatory paragraph in which Gillespie & Associates stated there is substantial doubt about the Company’s ability to continue as a going concern due to the Company’s financial condition as of November 30, 2014 and November 30, 2013.
On October 8, 2015, 2015, the Company engaged Marcum LLP (“
Marcum
”) as the Company’s independent registered public accounting firm effective immediately. The engagement was approved by the Board on October 8, 2015. Prior to October 8, 2015, neither the Company nor anyone acting on its behalf consulted with Marcum regarding (1) the application of accounting principles to a specified transaction, either completed or proposed, (2) the type of audit opinion that might be rendered on the Company’s financial statements, (3) written or oral advice provided that would be an important factor considered by the Company in reaching a decision as to an accounting, auditing or financial reporting issue, or (4) any matter that was the subject of a disagreement between the Company and its predecessor auditor as described in Item 304(a)(1)(iv) or a reportable event as described in Item 304(a)(1)(v) of Regulation S-K.
Item 9A.
|
Controls and Procedures.
|
We carried out an evaluation required by Rule 13a-15 of the Exchange Act under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of Avalanche International, Corp.’s “disclosure controls and procedures” and “internal control over financial reporting” as of the end of the period covered by this Annual Report.
The evaluation of the Company’s disclosure controls and procedures and internal control over financial reporting included a review of our objectives and processes, implementation by us and the effect on the information generated for use in this Annual Report. In the course of this evaluation and in accordance with Section 302 of the Sarbanes Oxley Act of 2002, we sought to identify material weaknesses in our controls, to determine whether we had identified any acts of fraud involving personnel who have a significant role in our internal control over financial reporting that would have a material effect on our consolidated financial statements, and to confirm that any necessary corrective action, including process improvements, were being undertaken. Our evaluation of our disclosure controls and procedures is done quarterly and management reports the effectiveness of our controls and procedures in our periodic reports filed with the Securities and Exchange Commission. Our internal control over financial reporting is also evaluated on an ongoing basis by individuals in our organization. The overall goals of these evaluation activities are to monitor our disclosure controls and procedures and internal control over financial reporting and to make modifications as necessary. We periodically evaluate our processes and procedures and make improvements as required.
Because of inherent limitations, disclosure controls and procedures and internal control over financial reporting may not prevent or detect misstatements. In addition, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate. Management applies its judgment in assessing the benefits of controls relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the company have been detected. The design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote.
Evaluation of Disclosure Controls and Procedures
As of the end of the period covered by this report, we conducted an evaluation, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) of the Exchange Act). Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were ineffective as of November 30, 2015.
Management’s Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f) and Rule 15d-15(f). Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that (a) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (b) provide reasonable assurance that transactions are recorded as necessary to permit the 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 our management and directors; and (c) 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.
Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control—Integrated Framework 2013 issued by the Committee of Sponsoring Organizations of the Treadway Commission (
“COSO”
). Based on that evaluation, our management concluded that there were material weaknesses in our internal control over financial reporting as of November 30, 2015. The material weaknesses identified during management's assessment were (i) a lack of sufficient internal accounting resources to provide reasonable assurance that our financial statements and notes thereto, are
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 chief financial officer, as appropriate, to allow timely decisions regarding required disclosure
and (ii) a lack of segregation of duties to ensure adequate review of financial statement preparation. In light of these material weaknesses, management has concluded that, as of November 30, 2015, we did not maintain effective internal control over financial reporting. As defined by Regulation S-X 1-02(a)(4), a material weakness is a deficiency or a combination of deficiencies, such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis. In order to ensure the effectiveness of our disclosure controls in the future we are considering adding financial staff resources, either as an employee or a consultant, to our accounting and finance department.
Changes in Internal Controls over Financial Reporting
During the most recent fiscal quarter 2015 (the fourth fiscal quarter of 2015) there were no significant changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.
Significant changes were and are being implemented and tested during the latter half of fiscal 2016 through the date of this report to remediate our material weaknesses in internal control over financial reporting. Management believes that such measures we have implemented to remediate the material weaknesses in internal control over financial reporting have had a favorable impact on our internal control over financial reporting. Changes in our internal control over financial reporting through the date of this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting are described below.
Remediation Process for November 30, 2015 Material Weaknesses:
Management, in coordination with the input, oversight and support of our Board of Directors, has identified the measures below to strengthen our control environment and internal control over financial reporting.
We hired a new Chief Financial Officer in June 2016, who performs the following:
|
·
|
assists with documentation and implementation of policies and procedures and monitoring of controls,
|
|
·
|
prepares budgets, financial statements and journal entries,
|
|
·
|
reviews account reconciliations and journal entries.
|
While these remedial actions were implemented in fiscal year 2016, some may not be in place for a sufficient period of time to help us certify that material weaknesses have been fully remediated as of the end of fiscal year 2016. If the remedial measures described above are insufficient to address any of the identified material weaknesses or are not implemented effectively, or additional deficiencies arise in the future, material misstatements in our interim or annual financial statements may occur in the future and we may continue to be delinquent in our filings. We are currently working to improve and simplify our internal processes and implement enhanced controls, as discussed above, to address the material weaknesses in our internal control over financial reporting and to remedy the ineffectiveness of our disclosure controls and procedures. Any unremediated material weaknesses could have the effects described in “Item 1A. Risk Factors – In preparing our consolidated financial statements, our management determined that our disclosure controls and procedures were ineffective as of November 30, 2015 which could result in material misstatements in our financial statements” Part I of this Form 10-K.
Item 9B.
|
Other Information
|
None.
PART III
Item 10.
|
Directors, Executive Officers and Corporate Governance.
|
Directors and Executive Officers
The following table sets forth information regarding our current directors and officers as of April 27, 2017.
|
|
|
Served as a
|
|
|
Position and Offices
|
Director and
|
Name
|
Age
|
Held with the Company
|
Officer Since
|
Milton C. Ault III
|
46
|
Chairman of the Board and Director
|
2014
|
Philip E. Mansour
|
48
|
President and Chief Executive Officer and Director
|
2014
|
William B. Horne
|
48
|
Chief Financial Officer and Director
|
2016
|
Directors serve until the next annual meeting and until their successors are elected and qualified. Officers are appointed to serve for one year until the meeting of the Board following the annual meeting of shareholders and until their successors have been elected and qualified.
Milton C. Ault, III
Mr. Ault is a seasoned business professional and entrepreneur that has spent more than twenty-seven years identifying value in various financial markets including equities, fixed income, commodities, and real estate. Mr. Ault has served as our Chairman since September 2014. Since February, 2016, Mr. Ault has served as the Chairman of the Board of Alzamend Neuro, Inc. Since January, 2011 Mr. Ault has been the Vice President of Business Development for MCKEA Holdings, LLC, a private hedge fund. Through this position Mr. Ault has consulted for a few publicly traded and privately-held companies, providing each of them the benefit of his diversified experience, that range from development stage to seasoned businesses. He was the President, Chief Executive Officer, Director and Chairman of the Board of Zealous, Inc. from August 2007 until June 4, 2010 and again from February 2011 through May 1, 2011. Mr. Ault was a registered representative at Strome Securities, LP, from July 1998 until December 2005, where he was involved in portfolio management and worked on several activism campaigns including Taco Cabana, Jack In The Box (formerly Foodmaker), and 21st Century Holdings Co. Mr. Ault was elected to the board of directors of Patient Safety Technologies, Inc. (OTCBB:PSTX, OTCQB:PSTX) (“PST”) in July 2004, and became its Chairman and Chief Executive Officer in October 2004 serving until January 2006, and again from July 2006 to January 2007. Stryker Corporation (NYSE:SYK) acquired PST at the beginning of 2014 in a deal valued at approximately one hundred twenty million dollars ($120,000,000). PST’s wholly-owned operating subsidiary, SurgiCount Medical, Inc., is the company that developed the Safety-Sponge® System; a bar coding technology for inventory control that aims to detect and prevent the incidence of foreign objects left in the body after surgery.
Philip E. Mansour
Mr. Mansour has served as
our President, Secretary, Treasurer, Chief Executive Officer, and Director
since May 2014. Since February, 2016, Mr. Mansour has served as the President, Chief Executive Officer and Director of Alzamend Neuro, Inc. Since October 2008, Mr. Mansour has been the full-time principal of PMC Solutions, LLC, specializing in consulting to companies on issues of operational management, strategic planning, marketing business development and disruptive technology. Additionally, Mr. Mansour has provided executive coaching services. Mr. Mansour clients during this period and corresponding roles include: Chief Operational Officer with the RXtra Solutions organization. The organization was a privately owned set of health care development companies which had footprints in the compounding pharmacy, diagnostics, medical equipment, chemical distribution and wellness provider spaces. Vice President, corporate development for Conceivex, Inc. a private company focused on At Home Infertility treatment. His prior experience includes leading the research and development for some prominent educational technology companies for more than 2 decades and leading multi-million-dollar government grants with leading universities. His entrepreneurial and significant corporate experience is expected to benefit the Company, including, but not limited to, through establishing its infrastructure and guiding its progression through its projected growth.
William B. Horne
Mr. Horne has served as our Chief Financial Officer and Director (OTC: AVLP) since June 2016. Since February, 2016, Mr. Horne has served as the Chief Financial Officer and Director of Alzamend Neuro, Inc. Mr. Horne has also served as the Chief Financial Officer of Targeted Medical Pharma, Inc. (OTC: TRGM) since August 2013. Mr. Horne previously held the position of Chief Financial Officer in various companies in the healthcare and high-tech field, including OptimisCorp, from January 2008 to May 2013, a privately held, diversified healthcare technology company located in Los Angeles, California. Mr. Horne served as the Chief Financial Officer of Patient Safety Technologies, Inc. (OTCQB: PSTX), a medical device company located in Irvine, California, from June 2005 to October 2008 and as the interim Chief Executive Officer from January 2007 to April 2008. In his dual role at Patient Safety Technologies, Mr. Horne was directly responsible for structuring the divestiture of non-core assets, capital financings and debt restructuring. Mr. Horne held the position of Managing Member & Chief Financial Officer of Alaska Wireless Communications, LLC, a privately held, advanced cellular communications company, from its inception in May 2002 until November 2007. Mr. Horne was responsible for negotiating the sale of Alaska Wireless to General Communication Inc. (NASDAQ: GNCMA). From November 1996 to December 2001, Mr. Horne held the position of Chief Financial Officer of The Phoenix Partners, a venture capital limited partnership located in Seattle, Washington. Mr. Horne has also held supervisory positions at Price Waterhouse, LLP and has a Bachelor of Arts Magna Cum Laude in Accounting from Seattle University.
Corporate Governance
The Board oversees our business and considers the risks associated with our business strategy and decisions. The Board currently implements its risk oversight function as a whole. Each of the Board committees, when established, will also provide risk oversight in respect of its areas of concentration and reports material risks to the board for further consideration.
Term of Office
Directors serve until the next annual meeting and until their successors are elected and qualified
or until removed from office in accordance with our bylaws
. Officers are appointed to serve for one year until the meeting of the Board following the annual meeting of shareholders and until their successors have been elected and qualified.
Committees of the Board
Until further determination by the board, the full board of directors will undertake the duties of the Audit Committee, Compensation Committee, and Nominating Committee.
Audit Committee
We do not have a separately designated standing audit committee. The entire Board of Directors performs the functions of an audit committee, but no written charter governs the actions of the Board when performing the functions of what would generally be performed by an audit committee. The Board approves the selection of our independent accountants and meets and interacts with the independent accountants to discuss issues related to financial reporting. In addition, the Board reviews the scope and results of the audit with the independent accountants, reviews with management and the independent accountants our annual operating results, considers the adequacy of our internal accounting procedures and considers other auditing and accounting matters including fees to be paid to the independent auditor and the performance of the independent auditor. Our Board of Directors, which performs the functions of an audit committee,
has determined that Mr. Horne is an “audit committee financial expert” as defined in Item 407(d)(5)(ii) of Regulation S-K and the Nasdaq Capital Market listing standards
.
Nomination Committee
Our Board of Directors does not maintain a nominating committee. As a result, no written charter governs the director nomination process. Our size and the size of our Board, at this time, do not require a separate nominating committee.
When evaluating director nominees, our directors consider the following factors:
|
·
|
The appropriate size of our Board of Directors;
|
|
·
|
Our needs with respect to the particular talents and experience of our directors;
|
|
·
|
The knowledge, skills and experience of nominees, including experience in finance, administration or public service, in light of prevailing business conditions and the knowledge, skills and experience already possessed by other members of the Board;
|
|
·
|
Experience in political affairs;
|
|
·
|
Experience with accounting rules and practices; and
|
|
·
|
The desire to balance the benefit of continuity with the periodic injection of the fresh perspective provided by new Board members.
|
Our goal is to assemble a Board that brings together a variety of perspectives and skills derived from high quality business and professional experience. In doing so, the Board will also consider candidates with appropriate non-business backgrounds.
Other than the foregoing, there are no stated minimum criteria for director nominees, although the Board may also consider such other factors as it may deem are in our best interests as well as our stockholders. In addition, the Board identifies nominees by first evaluating the current members of the Board willing to continue in service. Current members of the Board with skills and experience that are relevant to our business and who are willing to continue in service are considered for re-nomination. If any member of the Board does not wish to continue in service or if the Board decides not to re-nominate a member for re-election, the Board then identifies the desired skills and experience of a new nominee in light of the criteria above. Current members of the Board are polled for suggestions as to individuals meeting the criteria described above. The Board may also engage in research to identify qualified individuals. To date, we have not engaged third parties to identify or evaluate or assist in identifying potential nominees, although we reserve the right in the future to retain a third-party search firm, if necessary. The Board does not typically consider shareholder nominees because it believes that its current nomination process is sufficient to identify directors who serve our best interests.
Director Independence
We use the definition of “independence” of The NASDAQ Stock Market to make this determination. NASDAQ Listing Rule 5605(a)(2) provides that an “independent director” is a person other than an officer or employee of the company or any other individual having a relationship which, in the opinion of the Company’s Board, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. The NASDAQ listing rules provide that a director cannot be considered independent if:
|
·
|
the director is, or at any time during the past three years was, an employee of the company;
|
|
·
|
the director or a family member of the director accepted any compensation from the company in excess of $120,000 during any period of 12 consecutive months within the three years preceding the independence determination (subject to certain exemptions, including, among other things, compensation for board or board committee service);
|
|
·
|
the director or a family member of the director is a partner in, controlling shareholder of, or an executive officer of an entity to which the company made, or from which the company received, payments in the current or any of the past three fiscal years that exceed 5% of the recipient’s consolidated gross revenue for that year or $200,000, whichever is greater (subject to certain exemptions);
|
|
·
|
the director or a family member of the director is employed as an executive officer of an entity where, at any time during the past three years, any of the executive officers of the company served on the compensation committee of such other entity; or
|
|
·
|
the director or a family member of the director is a current partner of the company’s outside auditor, or at any time during the past three years was a partner or employee of the company’s outside auditor, and who worked on the company’s audit.
|
Under such definitions, we have no independent directors. However, our Common Stock is not currently quoted or listed on any national exchange or interdealer quotation system with a requirement that a majority of our Board be independent and, therefore, the Company is not subject to any director independence requirements.
Family Relationships
There are no family relationships among any of our officers or directors.
Involvement in Certain Legal Proceedings
Except as set forth below, to the best of our knowledge, during the past ten years, none of the following occurred with respect to a present or former director, executive officer, or employee:
|
·
|
been convicted in a criminal proceeding or been subject to a pending criminal proceeding (excluding traffic violations and other minor offenses);
|
|
·
|
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), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member.
|
|
1.
|
Mr. Ault held series 7, 24, and 63 licenses and managed four domestic hedge funds and one bond fund from 1998 through 2008. On April 26, 2012, as a result from an investigation by FINRA involving activities during 2008, Mr. Ault agreed to a settlement with FINRA in which he did not admit to any liability or violation of any laws or regulatory rules and that included restitution and a suspension from association with a FINRA member firm for a period of 2 years. As part of that settlement, Mr. Ault agreed that before he would reapply for association with FINRA, if at all, he would make restitution to certain investors. Mr. Ault was able to speak with and pay restitution to one of the investors, but no others. As a result, Mr. Ault is neither eligible, nor does he intend, to apply for association with FINRA.
|
|
2.
|
Mr. Ault was CEO, President and Chairman of Zealous Holdings, Inc. that filed for bankruptcy protection under Chapter 11 of Title 11 of the United States Code (the “Bankruptcy Code”) on February 20, 2009, in the U.S. Bankruptcy Court, Central District of California. This Chapter 11 filing was subsequently converted to a Chapter 7 filing by order of the Bankruptcy Court. Zealous Holdings, Inc. was not an entity that was entitled to a discharge under the bankruptcy code. As such Zealous Holdings, Inc. did not receive a discharge. Ultimately, Zealous Holdings, Inc. ceased doing business and was permanently closed.
|
|
3.
|
Mr. Ault filed for bankruptcy protection under Chapter 11 of Title 11 of the United States Code (the “Bankruptcy Code”) on December 8, 2009, in the U.S. Bankruptcy Court, Central District of California. This Chapter 13 filing was subsequently converted to a Chapter 7 filing by order of the Bankruptcy Court and months later, the petition being withdrawn and dismissed without prejudice.
|
Code of Ethics and Code of Conduct for Executive Officers and Directors
We currently have not adopted a Code of Ethics and a Code of Conduct for Executive Officers and Directors.
Our Board plans to adopt a written code of business ethics and conduct that applies to our directors, officers and employees, including our principal executive officer, principal financial officer and principal accounting officer, or persons performing similar functions. We will post on our website a current copy of these codes and all disclosures that are required by law in regard to any amendments to, or waivers from, any provision of the code.
Item 11.
|
Executive Compensation.
|
The following table sets forth compensation paid by us for the years indicated to the individuals who served as our President and Chief Executive Officer, Chief Financial Officer and Former Officer during the year ended November 30, 2015. These individuals are referred to as our "Named Executive Officers."
SUMMARY COMPENSATION TABLE
|
|
Name and principal position
|
Year
|
Salary ($)
|
Bonus ($)
|
Stock
Awards ($)
|
Option
Awards ($)
|
All Other
Compensation ($)
|
Total ($)
|
|
|
Philip E. Mansour
|
2015
|
141,059
|
0
|
0
|
0
|
0
|
141,059
|
|
|
|
|
|
|
|
|
|
|
President, Chief Executive Officer
(1)
|
2014
|
34,102
|
0
|
0
|
0
|
0
|
34,102
|
|
Rachel Boulds
|
2015
|
35,140
|
0
|
0
|
0
|
0
|
35,140
|
|
|
|
|
|
|
|
|
|
|
Chief Financial Officer
(2)
|
2014
|
11,550
|
0
|
0
|
0
|
0
|
11,550
|
|
John Pulos
|
2015
|
0
|
0
|
0
|
0
|
0
|
0
|
|
|
|
|
|
|
|
|
|
|
Former Officer
(3)
|
2014
|
0
|
0
|
0
|
0
|
0
|
0
|
|
|
(1)
|
On May 15, 2014, Mr. Mansour became our
President, Chief Executive Officer, Secretary, Treasurer and Director
.
|
|
(2)
|
On June 6, 2014, Ms. Boulds became our Chief Financial Officer. Ms. Boulds resigned on June 25, 2016.
|
|
(3)
|
On May 15, 2014, in conjunctions with an Agreement of Conveyance, Transfer and Assignment of Assets and Assumption of Obligations entered into on May 14, 2014, Mr.
Pulos resigned as our former sole officer and director
. Mr.
Pulos
did not receive a salary during the years ended November 30, 2015 and 2014.
|
Agreements with Company Insiders
Currently, our executive officers receive cash compensation as set forth in the Summary Compensation Table. We presently do not have employment or compensation agreements with any of our named executive officers and have not established any overall system of executive compensation or any fixed policies regarding compensation of executive officers.
Outstanding Equity Awards for Named Executive Officers
The following table provides information regarding outstanding equity awards held by our Named Executive Officers as of November 30, 2015. Market value for stock options is calculated by taking the difference between the closing price of Avalanche International common stock on November 30, 2015 and the option exercise price, and multiplying it by the number of outstanding stock options.
OUTSTANDING EQUITY AWARDS AT NOVEMBER 30, 2015
|
|
OPTION AWARDS
|
|
Name
|
Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable
|
Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable
|
Equity Incentive
Plan Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options (#)
|
Option
Exercise
Price ($)
|
Option
Expiration
Date
|
Market
Value of
Unexercised
Options ($)
|
|
|
Philip E. Mansour
|
—
|
—
|
—
|
—
|
—
|
—
|
|
Rachel Boulds
|
—
|
—
|
—
|
—
|
—
|
—
|
|
Director Compensation
Our Board of Directors has determined not to pay any cash fees to our executive directors, nor will we pay their expenses for attending board meetings. We do not currently provide any set compensation to our non-executive directors for their service as directors. In fiscal year 2015 Milton C. Ault III earned a fee of $20,000 for his services as a non-executive director. Ms. Maines and Mr. Smith resigned as directors on June 25, 2016 and were not compensated in fiscal year 2015 for their services as non-executive directors.
|
|
Fees earned or
|
|
Stock
|
|
Option
|
|
All other
|
|
|
|
Name
|
|
paid in cash ($)
|
|
awards ($)
|
|
awards ($)
|
|
compensation ($)
|
|
Total ($)
|
|
Milton C. Ault III
|
|
|
|
20,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
20,000
|
|
Jeanette Maines
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Joshua Smith
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Outstanding Equity Awards for Directors
OUTSTANDING EQUITY AWARDS AT NOVEMBER 30, 2015
|
|
OPTION AWARDS
|
|
Name
|
Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable
|
Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable
|
Equity Incentive
Plan Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options (#)
|
Option
Exercise
Price ($)
|
Option
Expiration
Date
|
Market
Value of
Unexercised
Options ($)
|
|
|
Milton C. Ault III
|
—
|
—
|
—
|
—
|
—
|
—
|
|
Item 12.
|
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
.
|
Beneficial Ownership of Certain Beneficial Owners.
The following table sets forth certain information regarding beneficial ownership of our common stock as of April 27, 2017 (1) by each person who is known by us to own beneficially more than 5% of our outstanding common stock, (2) by each of our directors, (3) by each Named Executive Officer identified above in the "Summary Compensation Table," and (4) by all of our executive officers and directors as a group.
Beneficial ownership has been determined in accordance with SEC rules, which generally attribute beneficial ownership of securities to each person who possesses, either solely or shared with others, the power to vote or dispose of those securities.
SEC rules also treat as beneficially owned all shares that a person would receive upon exercise or conversion of stock options, warrants or other securities or rights held by that person that are immediately exercisable or convertible, or exercisable or convertible within 60 days of the determination date, which in our case is April 27, 2017. Such shares are deemed to be outstanding for the purpose of computing the number of shares beneficially owned and the percentage ownership of the person holding such options, warrants securities or other rights, but these shares are not treated as outstanding for the purpose of computing the percentage ownership of any other person. On April 27, 2017, there were 5,092,254 shares of our common stock issued and outstanding and 50,000 shares of class A preferred stock issued and outstanding.
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Beneficial Ownership
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Number of Shares
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Subject to Options
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Number of
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and Warrants
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shares of
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Exercisable as of
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Common Stock
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April 27, 2017
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Beneficially
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or which become
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Owned as of
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Percent
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Exercisable within
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April 27, 2017
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of Class
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60 Days of this Date
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Directors and Officers:
(1)
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Philip E. Mansour
(2)
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1,250,000
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20.5%
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1,000,000
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Milton C. Ault, III
(2)
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1,000,000
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16.4%
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1,000,000
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William B. Horne
(2)
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1,000,000
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16.4%
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1,000,000
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All directors and named executive officers as a
group (3 persons)
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3,250,000
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40.2%
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3,000,000
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Greater than 5% Beneficial Owners:
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Philou Ventures, LLC
(3)
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7,214,000
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59.7%
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7,000,000
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(1)
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Unless otherwise indicated, the business address of each of the individuals is c/o Avalanche International, Corp., 5940 S. Rainbow Blvd., Las Vegas, NV 89118.
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(2)
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Consists of options to purchase 1,000,000 shares of common stock.
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(3)
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Consists of 50,000 shares of Class A preferred stock and warrants to purchase 5,000,000 shares of common stock.
The Class A Shares represent eighty percent (80%) of all votes entitled to be voted at any annual or special meeting of shareholders of the Company or action by written consent of shareholders. Kristine L. Ault is the Managing Member of Philou Ventures, LLC and, in that capacity, has the authority to direct voting and investment decisions with regard to stock. MCKEA Holdings, LLC is the majority member of Philou Ventures, LLC. The control person and Managing Member of MCKEA Holdings, LLC is Mrs. Ault, the wife of Mr. Ault.
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Other than the shareholders listed above, we know of no other person who is the beneficial owner of more than five percent (5%) of our common stock.
Securities Authorized for Issuance under Equity Compensation Plans
On October 27, 2016, subject to stockholder approval, the Company’s Board of Directors approved the Company’s 2016 Stock Incentive Plan (the
“Plan”
), which provides for the issuance of a maximum of three million (3,000,000) shares of the Company’s common stock to be offered to the Company’s directors, officers, employees, and consultants. Options granted under the Plan have an exercise price equal to or greater than the fair market value of the underlying common stock at the date of grant and become exercisable based on a vesting schedule determined at the date of grant. The options expire between 5 and 10 years from the date of grant. Restricted stock awards granted under the Plan are subject to a vesting period determined at the date of grant.
Item 13.
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Certain Relationships and Related Transactions, and Director Independence.
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Certain Relationships and Related Transactions
Given our small size and limited financial resources, we have not adopted formal policies and procedures for the review, approval or ratification of transactions, such as those described above, with our executive officer(s), Director(s) and significant stockholders. We intend to establish formal policies and procedures in the future, once we have sufficient resources and have appointed additional Directors, so that such transactions will be subject to the review, approval or ratification of our Board of Directors, or an appropriate committee thereof. On a moving forward basis, our Directors will continue to approve any related party transaction.
Except as set forth below, none of our directors or executive officers, nor any proposed nominee for election as a director, nor any person who beneficially owns, directly or indirectly, shares carrying more than 5% of the voting rights attached to all of our outstanding shares, nor any members of the immediate family (including spouse, parents, children, siblings, and in-laws) of any of the foregoing persons has any material interest, direct or indirect, in any transaction since our incorporation or in any presently proposed transaction which, in either case, has or will materially affect us:
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1.
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As of November 30, 2015, the Company owed its CEO $27,834 for accrued compensation and expense reimbursement. The amount due is non-interest bearing, due upon demand and unsecured.
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2.
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As of November 30, 2015, the Company owed its Chairman of the Board of Directors $22,171 for accrued director fees and expense reimbursement. The amount due is non-interest bearing, due upon demand and unsecured.
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3.
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One of our major customers, Vape Nation, is 50% owned by MCKEA Holdings, LLC. MCKEA Holdings, LLC is the majority member of Philou Ventures, LLC, which is our controlling shareholder. To date, we have sold approximately $61,086 in products to Vape Nation, of which $34,086 was sold during the year ended November 30, 2015.
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4.
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Cross Click Media, Inc. performed sales, marketing, and advertising services for our initial product launch. During the years ended November 30, 2015 and 2014, we have paid approximately $114,000 and $154,000, respectively, for these services. MCKEA Holdings, LLC is the controlling shareholder of Cross Click Media, Inc. MCKEA Holdings, LLC is also the majority member of Philou Ventures, LLC, which is our controlling shareholder.
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Director Independence
None of our directors meets the definition of “independent.” We use the definition of “independence” of The NASDAQ Stock Market to make this determination.
Item 14.
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Principal Accounting Fees and Services.
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Fees Paid to Independent Registered Public Accountants for 2015
(1)
and 2014
(2)
The following table sets forth fees billed to us by our independent registered public accounting firms during the fiscal years ended November 30, 2015 and November 30, 2014 for: (i) services rendered for the audit of our annual financial statements and the review of our quarterly financial statements; (ii) services by our independent registered public accounting firms that are reasonably related to the performance of the audit or review of our financial statements and that are not reported as Audit Fees; (iii) services rendered in connection with tax compliance, tax advice and tax planning; and (iv) all other fees for services rendered.
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November 30, 2015
(1)
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November 30, 2014
(2)
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Audit Services
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$
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36,925
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$
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8,500
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Audit Related Services
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$
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—
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$
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—
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Tax Services
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$
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—
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$
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—
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All Other Services
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$
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—
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$
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—
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Total
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$
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36,925
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$
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8,500
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(1)
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Information regarding the fees billed to the Company for the year ended November 30, 2015 is related to services provided by
Harris & Gillespie CPA’S, PLLC
(
“Harris & Gillespie”
)
, Michael Gillespie & Associates, PLLC
(
“Gillespie & Associates”
) and
Marcum LLP (
“Marcum”
). The amounts attributable to
Harris & Gillespie
, Gillespie and Associates and Marcum for Audit Services during 2015 were $25,125, $5,000 and $6,800, respectively.
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(2)
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Information regarding the fees billed to the Company for the year ended November 30, 2014 is related to services provided by
Harris & Gillespie
.
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Audit Services.
This category includes fees billed for professional services rendered for the audit of our annual financial statements, review of financial statements included in our Form 10-Q quarterly reports, and services that are typically provided by the independent registered public accounting firms in connection with statutory and regulatory filings or engagements for those fiscal years.
Audit-Related Services.
This category includes fees billed for assurance and related services that are reasonably related to the performance of the audit or review of our financial statements, and are not included in the fees reported in the table above under “Audit Services.” These services include attest services that are not required by statute or regulation and consultations concerning financial accounting and reporting standards.
Tax Services.
This category includes tax services provided with respect to tax consulting, tax compliance, and tax audit assistance.
All Other Services.
This category consists of services that are not included in the category descriptions defined above under “Audit Services,” “Audit-Related Services,” or “Tax Services.”
Policies and Procedures Relating to Approval of Services by our Independent Registered Public Accountants
The board of directors are solely responsible for the approval in advance of all audit and permitted non-audit services to be provided by our independent registered public accounting firms (including the fees and other terms thereof), subject to the de minimis exceptions for non-audit services provided by Section 10A(i)(1)(B) of the Exchange Act, which services are subsequently approved by the board of directors prior to the completion of the audit. None of the fees listed above are for services rendered pursuant to such de minimis exceptions.
PART IV.
Exhibit
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Number
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Description
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2.1
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Share Exchange Agreement by and among Avalanche International Corp., MTIX, Ltd and the Sellers signatories thereto dated as of March 3, 2017
(Incorporated by reference to Exhibit 2.1 of the Company’s quarterly report on Form 8-K filed with the Securities and Exchange Commission on March 9, 2017)
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2.2
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Exchange Agreement by and among Avalanche International Corp. and Philou Ventures, LLC dated as of March 7, 2017
(Incorporated by reference to Exhibit 2.2 of the Company’s quarterly report on Form 8-K filed with the Securities and Exchange Commission on March 9, 2017)
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3.1
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Articles of Incorporation of Avalanche International, Corp. (Incorporated by reference to Exhibit 3.1 of the Company’s registration statement on Form S-1 filed with the Securities and Exchange Commission on January 17, 2012)
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3.2
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Bylaws of Avalanche International, Corp. (Incorporated by reference to Exhibit 3.2 of the Company’s registration statement on Form S-1 filed with the Securities and Exchange Commission on January 17, 2012)
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3.3
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Certification of Designation of Class A Convertible Preferred Stock of Avalanche International, Corp. (Incorporated by reference to Exhibit 3.2 of the Company’s quarterly report on Form 8-K filed with the Securities and Exchange Commission on March 9, 2017)
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3.4
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Certification of Designation of Class B Convertible Preferred Stock of Avalanche International, Corp. (Incorporated by reference to Exhibit 3.3 of the Company’s quarterly report on Form 8-K filed with the Securities and Exchange Commission on March 9, 2017)
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10.1*
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Avalanche International, Corp. 2016 Stock Incentive Plan
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10.2*
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Form of Convertible Redeemable Note, dated November 3, 2014, by and between Avalanche International, Corp. and LG Capital Funding, LLC
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10.3
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Form of Convertible Promissory Note, dated March 7, 2015, by and between Avalanche International, Corp. and Dr. Gary Gelbfish (Incorporated by reference to Exhibit 10.2 of the Company’s quarterly report on Form 10-Q filed with the Securities and Exchange Commission on April 20, 2015)
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10.4
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Form of Convertible Note, dated April 29, 2015, by and between Avalanche International, Corp. and JMJ Financial (Incorporated by reference to Exhibit 10.1 of the Company’s quarterly report on Form 10-Q filed with the Securities and Exchange Commission on July 16, 2015)
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10.5
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Form of Convertible Redeemable Note, dated May 11, 2015, by and between Avalanche International, Corp. and Union Capital, LLC (Incorporated by reference to Exhibit 10.6 of the Company’s current report on Form 8-K filed with the Securities and Exchange Commission on May 15, 2015)
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10.6
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Form of Convertible Redeemable Note, dated May 11, 2015, by and between Avalanche International, Corp. and Adar Bays, LLC (Incorporated by reference to Exhibit 10.2 of the Company’s current report on Form 8-K filed with the Securities and Exchange Commission on May 15, 2015)
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Exhibit
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Number
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Description
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10.7
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Form of Secured Convertible Promissory Note, dated May 29, 2015, by and between Avalanche International, Corp. and Typenex Co-Investment, LLC (Incorporated by reference to Exhibit 10.2 of the Company’s quarterly report on Form 10-Q filed with the Securities and Exchange Commission on July 16, 2015)
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10.8
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Form of Securities Purchase Agreement, dated May 29, 2015, by and between Avalanche International, Corp. and Typenex Co-Investment, LLC (Incorporated by reference to Exhibit 10.3 of the Company’s quarterly report on Form 10-Q filed with the Securities and Exchange Commission on July 16, 2015)
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10.9
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Form of Security Agreement, dated May 29, 2015, by and between Avalanche International, Corp. and Typenex Co-Investment, LLC (Incorporated by reference to Exhibit 10.4 of the Company’s quarterly report on Form 10-Q filed with the Securities and Exchange Commission on July 16, 2015)
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10.10
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Form of Convertible Note, dated June 4, 2015, by and between Avalanche International, Corp. and Black Mountain Equities, Inc. (Incorporated by reference to Exhibit 10.8 of the Company’s quarterly report on Form 10-Q filed with the Securities and Exchange Commission on July 16, 2015)
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10.11
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Form of Convertible Promissory Note, dated June 30, 2015, by and between Avalanche International, Corp. and GCEF Opportunity Fund, LLC (Incorporated by reference to Exhibit 10.9 of the Company’s quarterly report on Form 10-Q filed with the Securities and Exchange Commission on July 16, 2015)
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10.12
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Form of Promissory Note, dated October 8, 2015, by and between Avalanche International, Corp. and Studio Capital, LLC (Incorporated by reference to Exhibit 10.1 of the Company’s current report on Form 8-K filed with the Securities and Exchange Commission on October 13, 2015)
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10.13
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Form of Secured Promissory Note, dated December 2, 2015, by and between Avalanche International, Corp. and Lori Livingston (Incorporated by reference to Exhibit 10.1 of the Company’s quarterly report on Form 10-Q filed with the Securities and Exchange Commission on January 25, 2016)
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10.14
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Form of Amendment to Secured Convertible Promissory Note, dated January 22, 2016, by and between Avalanche International, Corp. and Typenex Co-Investment, LLC (Incorporated by reference to Exhibit 10.2 of the Company’s quarterly report on Form 10-Q filed with the Securities and Exchange Commission on January 25, 2016)
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10.15
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Form of Amendment to Convertible Redeemable Note, dated January 20, 2016, by and between Avalanche International, Corp. and LG Capital Funding, LLC (Incorporated by reference to Exhibit 10.3 of the Company’s quarterly report on Form 10-Q filed with the Securities and Exchange Commission on January 25, 2016)
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10.16
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Form of Amendment to Convertible Redeemable Note, dated January 22, 2016, by and between Avalanche International, Corp. and Union Capital, LLC (Incorporated by reference to Exhibit 10.4 of the Company’s quarterly report on Form 10-Q filed with the Securities and Exchange Commission on January 25, 2016)
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10.17
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Form of Amendment to Convertible Redeemable Note, dated January 25, 2016, by and between Avalanche International, Corp. and Adar Bays, LLC (Incorporated by reference to Exhibit 10.5 of the Company’s quarterly report on Form 10-Q filed with the Securities and Exchange Commission on January 25, 2016)
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Exhibit
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Number
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Description
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10.18
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Form of Senior Secured Property Note, dated April 13, 2016, by and between Restaurant Capital Group, LLC and Philo Group, LLC (Incorporated by reference to Exhibit 10.1 of the Company’s current report on Form 8-K filed with the Securities and Exchange Commission on April 20, 2016)
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10.19
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Form of Senior Secured Property Note, dated April 13, 2016, by and between Restaurant Capital Group, LLC and JLA Realty Associates, LLC (Incorporated by reference to Exhibit 10.2 of the Company’s current report on Form 8-K filed with the Securities and Exchange Commission on April 20, 2016)
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10.20
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Form of Promissory Note, dated March 4, 2016, by and between Restaurant Capital Group, LLC and MCKEA Holdings, LLC (Incorporated by reference to Exhibit 10.3 of the Company’s current report on Form 8-K filed with the Securities and Exchange Commission on April 20, 2016)
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21*
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List of Subsidiaries
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31.1*
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Certification of Chief Executive Officer required by Rule 13a-14(a) or Rule 15d-14(a)
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31.2*
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Certification of Chief Financial Officer required by Rule 13a-14(a) or Rule 15d-14(a)
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32.1**
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Certification of Chief Executive Officer and Chief Financial Officer required by Rule 13a-14(b) or Rule 15d-14(b) and Section 1350 of Chapter 63 of Title 18 of the United States Code
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101.INS*
|
XBRL Instance Document
|
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101.SCH*
|
XBRL Taxonomy Extension Schema Document
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101.CAL*
|
XBRL Taxonomy Extension Calculation Linkbase Document
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101.DEF*
|
XBRL Taxonomy Extension Definition Linkbase Document
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101.LAB*
|
XBRL Taxonomy Extension Label Linkbase Document
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101.PRE*
|
XBRL Taxonomy Extension Presentation Linkbase Document
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* Filed herewith.
** Furnished herewith
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.
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AVALANCHE INTERNATIONAL, CORP.
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Date: April 28, 2017
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By:
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/s/ Phillip Mansour
|
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Philip Mansour
|
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Chief Executive Officer,
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Principal Executive Officer and Director
|
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Date: April 28, 2017
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By:
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/s/ William B. Horne
|
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William B. Horne
|
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Chief Financial Officer and
|
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Principal Accounting Officer
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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.
/s/ Milton C. Ault III
|
|
/s/ Philip E. Mansour
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Milton C. Ault III
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Philip E. Mansour
|
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Chairman of the Board and Director
|
|
Chief Executive Officer and Director
|
|
April 28, 2017
|
|
April 28, 2017
|
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/s/ William B. Horne
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William B. Horne
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Chief Financial Officer and Director
|
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April 28, 2017
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