The accompanying notes are an integral part of the condensed consolidated unaudited
financial statements
The accompanying notes are an integral part of the condensed consolidated unaudited
financial statements
The accompanying notes are an integral
part of the condensed consolidated unaudited financial statements
Notes to Condensed Consolidated Financial
Statements
March 31, 2016 and March 31, 2015
(Unaudited)
NOTE 1 – ORGANIZATION AND
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Company was incorporated in Florida
on July 31, 2001. In September 21, 2001 the Company was acquired by PlaNet.Com, Inc., a Nevada public, non-reporting corporation.
Pla.Net.Com, Inc. was considered a shell at the time of acquisition. The acquisition was treated as a reverse acquisition (the
acquired company is treated as the acquiring company for accounting purposes). Pla.Net.Com, Inc. changed its name to Inpatient
Clinical Solutions, Inc. immediately after the merger.
In February 2012 the Company changed
its name from Inpatient Clinical Solutions, Inc. to Integrated Inpatient Solutions, Inc.
In August 26, 2014, the Company entered
into a Share Exchange Agreement pursuant to which the Company agreed to acquire all of the outstanding capital stock of Integrated
Timeshare Solutions, Inc., a Nevada corporation (“
ITS
”) in exchange for newly issued shares of the Company’s
common stock (the “
Common Stock
”). As a result of the exchange, ITS became a wholly owned subsidiary of the
Company. ITS was established on July 2, 2014 as a real estate consulting firm specializing in timeshare liquidation and mortgage
relief. The Company has discontinued operations of this subsidiary.
Through January 2016, the Company provided interior design services
targeting budget-minded individuals. The business operated under the trade name Integrated Interior Design. The Company earned
revenues from providing decorator services which were billed at hourly and per diem rates. The interior design business operated
in South Florida. The business provided interior design, interior staging, accompanied shopping, paint color selection, architectural
drawing and other design services.
In December 31, 2015, the Company entered
into an Asset Purchase Agreement pursuant to which the Company agreed to acquire all of the assets and liabilities of Boston Carriers
LTD, a corporation organized under the laws of the Republic of the Marshall Islands (“
Boston Carriers
”) in
exchange for newly issued shares of the Company’s Series B Preferred Shares, $0.0001 par value per share, which were issued
to the former sole shareholder of Boston Carriers. Included in the assets acquired was all outstanding stock in Poseidon Navigation
Corp. a corporation organized under the laws of the Republic of the Marshall Islands (“
Poseidon
”). Accordingly,
as a result of the Exchange, Poseidon is now a wholly owned subsidiary of the Company.
In January 2016, management decided
to
exit the
interior design business. Accordingly, the Company's current strategy is focused
on its maritime transportation business. Accordingly, the financial statements have been presented in accordance with ASC 205-20,
Discontinued Operations
. See also Note 5 below.
On February 29, 2016, Integrated Inpatient Solutions, Inc.
agreed to file Articles of Conversion with the Nevada Secretary of State and Articles of Domestications with the Registrar of
the Republic of the Marshall Islands effective March 21, 2016. Additionally, Integrated Inpatient Solutions, Inc. agreed to
adopt a Plan of Conversion, whereby Integrated Inpatient Solutions, Inc. would become a Marshall Islands company effective
March 2016. Concurrent with the Plan of Conversion, Integrated Inpatient Solutions, Inc. agreed to change its name to Boston
Carriers, Inc. The Company was renamed from Integrated Interior Design to Boston Carriers, Inc., on March 21, 2016, and at
the same time it redomiciled to Marshall Islands.
On February 13, 2016, Poseidon
took delivery of the M/V Nikiforos, 1996 built Handymax vessel (45,693 dwt). The Company acquired this vessel pursuant to a Bareboat
Charter Party contract with Nikiforos Shipping SA. See also Note 3 below. The Company’s vessel is primarily available for
charter on a spot voyage. Under a spot voyage charter, which generally lasts from several days to several months, the owner of
a vessel agrees to provide the vessel for the transport of specific goods between specific ports in return for the payment of
an agreed-upon freight per ton of cargo or, alternatively, for a specified total amount. All operating and specified voyage costs
are paid by the owner of the vessel.
Basis of Presentation
In the opinion of management, the accompanying
unaudited condensed consolidated financial statements of the Company and its subsidiaries reflect all adjustments, including normal
recurring accruals, necessary for a fair presentation. All significant intercompany balances and transactions have been eliminated
in consolidation. Certain information and footnote disclosure normally included in annual financial statements prepared in accordance
GAAP have been condensed or omitted pursuant to instructions, rules and regulations prescribed by the SEC. The Company believes
that the disclosures provided herein are adequate to make the information presented not misleading when these unaudited condensed
consolidated financial statements are read in conjunction with the audited consolidated financial statements contained in the
Company’s Annual Report on Form 10-K for the year ended December 31, 2015. The results of operations for the period ended
March 31, 2016 are not necessarily indicative of the results to be expected for the full year. The consolidated condensed financial
statements of December 31, 2015 are derived from audited financial statements included in the Company’s Annual Report on
Form 10-K for the year ended December 31, 2015.
Revenue and expense recognition
Revenue and expense recognition policies for spot
market voyage charters is as follows:
Spot market voyage revenues
are recognized on a pro rata basis based on the relative transit time in each period. The period over which voyage revenues are
recognized commences at the time the vessel departs from its last discharge port and ends at the time the discharge of cargo at
the next discharge port is completed. The Company does not begin recognizing revenue until a charter has been agreed to by the
customer and the Company, even if the vessel has discharged its cargo and is sailing to the anticipated load port on its next
voyage. The Company does not recognize revenue when a vessel is off hire. Estimated losses on voyages are provided for in full
at the time such losses become evident. Voyage expenses primarily include only those specific costs which are borne by the Company
in connection with voyage charters. These expenses principally consist of fuel, canal and port charges which are generally recognized
as incurred. Demurrage income represents payments by the charterer to the vessel owner when loading and discharging time exceed
the stipulated time in the spot market voyage charter. Demurrage income is measured in accordance with the provisions of the respective
charter agreements and the circumstances under which demurrage claims arise and is recognized on a pro rata basis over the length
of the voyage to which it pertains. Direct vessel operating expenses are recognized when incurred.
Vessel, net
Vessel, net is stated at cost,
which was adjusted to fair value, less accumulated depreciation. Vessel is depreciated on a straight-line basis over their estimated
useful lives, determined to be 25 years from date of initial delivery from the shipyard. The vessel is depreciated at the
lesser of the asset economic life or the term of the lease. Our leased vessel is depreciated over 5 years, which is its remaining
useful life at the date of acquisition. If regulations place limitations over the ability of a vessel to trade on a worldwide
basis, its remaining useful life would be adjusted, if necessary, at the date such regulations are adopted. Depreciation is based
on cost, which was adjusted to fair value, less the estimated residual scrap value. Depreciation expense of vessel assets for
the three months ended March 31, 2016 and 2015 totaled $18,235 and $0 respectively. Table below includes the Cost of the vessel
acquired in February 2016 (see Note 3 below).
|
|
March 31, 2016
|
|
Estimated useful life
|
Leased Vessel
|
|
$
|
2,212,000
|
|
|
25 years
|
Accumulated Depreciation
|
|
|
(18,235
|
)
|
|
|
Total Leased Vessel, net of accumulated depreciation
|
|
$
|
2,193,765
|
|
|
|
Use of Estimates
The preparation of financial statements
in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. The areas involving the most significant use of estimates include legal contingencies, deferred
tax benefits, refundable income taxes, estimated realizable value of accounts receivable. These estimates are based on knowledge
of current events and anticipated future events. The Company adjusts these estimates each period as more current information becomes
available. The impact of any changes in estimates is included in the determination of earnings in the period in which the estimate
is adjusted. Actual results may ultimately differ materially from those estimates.
Cash
The Company considers cash in banks
and other highly liquid investments with insignificant interest rate risk and maturities of three months or less at the time of
acquisition to be cash and cash equivalents. At March 31, 2016 and December 31, 2015, the Company had no cash equivalents. The
Company maintains cash accounts in financial institutions that are guaranteed by the Federal Deposit Insurance Corporation (“FDIC”),
as well as in financial institutions that are not guaranteed by FDIC. Deposits not covered by FDIC insurance totaled $166,141
at March 31, 2016 and $385,628 at December 31, 2015, and are kept in banks operating in the Eurozone, where the respective framework
for the recovery of failing credit institutions applies, including these preventive and early intervention actions, when a financial
institution is in distress. Taking this into consideration, management of the Company, considers the probability of incurring
a loss deriving from the valuation of cash accounts in financial institutions that are not covered by FDIC, as remote.
Trade Receivables
The determination of bad debt allowances
constitutes a significant estimate. Trade receivables represent amounts due from charterers of the vessel that the Company owns.
Trade receivables are recorded and stated at the amount expected to be collected and have been adjusted to reflect the differences
between charges and the estimated reimbursable amounts. As of March 31 2016, and December 31 2015, no allowance for bad debts
was recognized.
Principles of Consolidation
The accompanying consolidated financial
statements include the accounts of Boston Carriers, Inc. and its wholly owned subsidiaries; Integrated Timeshare Solutions, Inc.
and Poseidon Navigation Corp. All significant intercompany transactions and balances have been eliminated in consolidation.
Fair Value of Financial Instruments
U.S. GAAP for fair value measurements
establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three
levels. The fair value hierarchy gives the highest priority to quoted market prices (unadjusted) in active markets for identical
assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). Level 2 inputs are inputs, other
than quoted prices included within Level 1, which are observable for the asset or liability, either directly or indirectly. The
fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities
and the lowest priority to unobservable inputs.
The carrying amounts of the Company’s
financial assets and liabilities, such as cash, trade receivables, deposits, accounts payable and accrued liabilities, approximate
their fair values because of the short maturity of these instruments.
Income Taxes
The Company follows Section 740-10-30 of the FASB Accounting Standards Codification, 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 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 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 operations in the period that includes the enactment date.
The Company adopted section 740-10-25
of the FASB Accounting Standards Codification (“Section 740-10-25”). Section 740-10-25 addresses the determination
of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under
Section 740-10-25, 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
Company had no material adjustments to its liabilities for unrecognized income tax benefits according to the provisions of Section
740-10-25.
The Company’s tax returns for
the years ended 2012, 2013, 2014 and 2015 remain open for audit by the Internal Revenue Service.
On March 21, 2016, the Company redomiciled
to the Marshall Islands. Pursuant to various treaties and the United States Internal Revenue Code, the Company believes that substantially
all its operations will be exempt from income taxes in the Marshall Islands and the United States of America effective as of March
21, 2016.
Marshall Islands and Liberia do not
impose a tax on international shipping income. Under the laws of Marshall Islands and Liberia, the countries of incorporation
of the Company and its subsidiary and the vessel’s registration, the companies are subject to registration and tonnage taxes
which will be included in direct vessel expenses in the accompanying consolidated statements of operations.
Leases
Leases are classified as capital leases
whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases
are classified as operating leases. The Company records vessel under capital leases as fixed assets at the lower of the present
value of the minimum lease payments at inception of the lease or the fair value of the vessel. Vessel under capital leases is
amortized over the estimated remaining useful life of the vessel for capital leases which provide a bargain purchase option.
Payments made for operating leases
are expensed on a straight-line basis over the term of the lease. Office rental expense is recorded in “General and administrative
expenses” in the condensed consolidated statements of operations.
Loss Per Share
The Company computes loss per share
in accordance with the provisions of FASB ASC Topic 260, “Earnings Per Share,” which specifies the computation, presentation
and disclosure requirements for loss per share for entities with publicly held Common Shares. Basic loss per share are computed
by dividing net loss available to common shareholders by the weighted average number of common shares outstanding during the period.
Diluted loss per share are computed assuming the exercise of dilutive Shares options under the treasury Shares method and the
related income tax effects.
As of March 31, 2016 and December 31,
2015, the Company had 1,850,000 shares of Series A Preferred Stock issued and outstanding, which are convertible into 1,850,000,000
shares of Common Stock. As of March 31, 2016 and December 31, 2015, the Company had 250,000 shares of Series B Preferred Stock
issued and outstanding convertible into 2,500,000 shares of Common Stock.
Reclassification
Certain reclassifications, including
discontinued operations, have been made to the prior year’s data to conform to current year presentation. These reclassifications
had no effect on net income (loss).
Recent Accounting Pronouncements
In July 2015, FASB issued Accounting
Standards Update (“ASU”) No. 2015-11, “
Inventory (Topic 330): Simplifying the Measurement of Inventory”
to more closely align the measurement of inventory in GAAP with the measurement of inventory in International Financial Reporting
Standards (“
IFRS
”). The amendments in this ASU do not apply to inventory that is measured using last-in, first-out
(“
LIFO
”) or the retail inventory method. The amendments apply to all other inventory, which includes inventory
that is measured using first-in, first-out (“
FIFO
”) or average cost. An entity should measure inventory within
the scope of this Update at the lower of cost and 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. Subsequent measurement
is unchanged for inventory measured using LIFO or the retail inventory method. For public business entities, this ASU is effective
for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. For all other entities,
this ASU is effective for fiscal years beginning after December 15, 2016, and interim periods within fiscal years beginning after
December 15, 2017. The amendments in this ASU should be applied prospectively with earlier application permitted as of the beginning
of an interim or annual reporting period. We are currently reviewing the provisions of this ASU to determine if there will be
any impact on our results of operations, cash flows or financial condition.
In August 2015, FASB issued Accounting
Standards Update (“ASU”) No. 2015-14, “
Revenue from Contracts with Customers (Topic 606): Deferral of the
Effective Date”
which defers the effective date ASU No. 2014-09 for all entities by one year. Public business entities,
certain not-for-profit entities, and certain employee benefit plans should apply the guidance in Update 2014-09 to annual reporting
periods beginning after December 15, 2017, including interim reporting periods within that reporting period. Earlier application
is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within
that reporting period. All other entities should apply the guidance in Update 2014-09 to annual reporting periods beginning after
December 15, 2018, and interim reporting periods within annual reporting periods beginning after December 15, 2019. All other
entities may apply the guidance in ASU No. 2014-09 earlier as of an annual reporting period beginning after December 15, 2016,
including interim reporting periods within that reporting period. All other entities also may apply the guidance in Update 2014-09
earlier as of an annual reporting period beginning after December 15, 2016, and interim reporting periods within annual reporting
periods beginning one year after the annual reporting period in which the entity first applies the guidance in ASU No. 2014-09.
All other newly issued accounting pronouncements but not yet effective have been deemed either immaterial or not applicable. We
are currently reviewing the provisions of this ASU to determine if there will be any impact on our results of operations, cash
flows or financial condition.
In January 2016, FASB issued Accounting Standards Update (“ASU”)
No.2016-01, “
Financial Instruments - Overall (Subtopic 825-10),
”
in order to address certain aspects
of recognition, measurement, presentation, and disclosure of financial instruments. The amendments in this Update make targeted
improvements to GAAP as follows:
1.
Require equity investments (except those accounted for under the equity method of accounting
or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net
income. However, an entity may choose to measure equity investments that do not have readily determinable fair values at cost
minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical
or a similar investment of the same issuer.
2.
Simplify the impairment assessment of equity investments without readily
determinable fair values by requiring a qualitative assessment to identify impairment. When a qualitative assessment indicates
that impairment exists, an entity is required to measure the investment at fair value.
3
. Eliminate the requirement to
disclose the fair value of financial instruments measured at amortized cost for entities that are not public business entities.
4.
Eliminate the requirement for public business entities to disclose the method(s) and significant assumptions used to
estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet.
5.
Require public business entities to use the exit price notion when measuring the fair value of financial instruments
for disclosure purposes.
6.
Require an entity to present separately in other comprehensive income the portion of the total
change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected
to measure the liability at fair value in accordance with the fair value option for financial instruments.
7.
Require separate
presentation of financial assets and financial liabilities by measurement category and form of financial asset (that is, securities
or loans and receivables) on the balance sheet or the accompanying notes to the financial statements.
8.
Clarify that an
entity should evaluate the need for a valuation allowance on a deferred tax asset related to available-for-sale securities in
combination with the entity’s other deferred tax assets. We are currently reviewing the provisions of this ASU to determine
if there will be any impact on our results of operations, cash flows or financial condition.
In February 2016, FASB issued Accounting Standards Update
(“ASU”) No.2016-02, “
Leases (Topic 842)”
in order to increase transparency and comparability
among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information
about leasing arrangements. To meet that objective, the FASB is amending the FASB Accounting Standards Codification® and
creating Topic 842, Leases. This Update, along with IFRS 16, Leases, is the result of the FASB’s and the International
Accounting Standards Board’s (IASB’s) efforts to meet that objective and improve financial reporting. Leasing is
utilized by many entities. It is a means of gaining access to assets, of obtaining financing, and/or of reducing an
entity’s exposure to the full risks of asset ownership. The prevalence of leasing, therefore, means that it is
important that users of financial statements have a complete and understandable picture of an entity’s leasing
activities. Previous leases accounting was criticized for failing to meet the needs of users of financial statements because
it did not always provide a faithful representation of leasing transactions. In particular, it did not require lessees to
recognize assets and liabilities arising from operating leases on the balance sheet. As a result, there had been
long-standing requests from many users of financial statements and others to change the accounting requirements so
that lessees would be required to recognize the rights and obligations resulting from leases as assets and liabilities. We
are currently reviewing the provisions of this ASU to determine if there will be any impact on our results of operations,
cash flows or financial condition.
NOTE 2 – SHAREHOLDERS' EQUITY
Common Shares
On January 1, 2016, the Company issued
26,274,987 shares of Common Shares to a consultant for consulting services with a fair value of $44,667.
On January 7, 2016, the Company issued
10,000,000 shares of Common Shares to a law firm for legal services with a fair value of $17,000.
Preferred Shares
On November 24, 2015 (the “
Effective
Date
”), prior to the Asset Purchase Agreement with Boston Carriers, LTD (“
Boston Carriers, LTD
”),
Boston Carriers, LTD sold preferred shares raising net proceeds of $1,000,000. Pursuant to the terms of the Subscription Agreement,
YP Holdings, LLC (“
YP
”) invested $1,000,000 to acquire 100 Boston Carriers’ preferred shares (the “
BC
Preferred Shares
”) with a face value of $10,000, each of which is convertible into shares of Boston Carriers’
LTD Common Shares (the “
BC Common Shares
”) as described in the Certificate of Designations with respect to
the BC Preferred Shares (the “
Certificate of Designations
”). Pursuant to the Subscription Agreement, YP will
be issued an equal number of shares of BC Preferred Shares as a commitment fee. Pursuant to the Certificate of Designations, the
BC Preferred Shares will accrue cumulative dividends at a rate equal to 10.75% per annum, subject to adjustment as provided in
the Certificate of Designations. The dividends are payable in cash or BC Common Shares at the option of Boston Carriers LTD and
upon conversion of the BC Preferred Shares; such dividends have a guaranteed payable amount. The Certificate of Designations also
provides that, immediately upon the Effective Date, YP has the right to convert the BC Preferred Shares into BC Common Shares
at a conversion price of $1.00 per BC Common Shares, subject to adjustment as set forth in the Certificate of Designations. On
or after ten years from the Effective Date, Boston Carriers LTD has the right to redeem the BC Preferred Shares at the liquidation
value of $10,000 per share (the “
Liquidation Value
”), plus accrued and unpaid dividends thereon. Prior to such
time, Boston Carriers LTD may redeem the BC Preferred Shares at the Liquidation Value plus the Embedded Dividend Liability (as
defined in the Certificate of Designations), less any dividends paid (the “
Early Redemption Price
”). Upon certain
liquidation events occurring prior to the ten-year anniversary of the Effective Date, Boston Carriers LTD will redeem the BC Preferred
Shares at the Early Redemption Price. On December 31, 2015, the Company assumed the stock subscription liability of $1,000,000,
and the amount remains outstanding as of March 31, 2016. The Company has not authorized or designated any Preferred shares with
these rights and preferences. Due to that, the shares have not been issued to the subscriber.
Pursuant to the Asset Purchase Agreement,
Integrated Inpatient Solutions, Inc. agreed to acquire all of the assets and liabilities of Boston Carriers LTD in exchange for
newly issued shares of the Company’s Series B Preferred Shares, $0.0001 par value per share (the “
Series B Preferred
Shares
”), which were issued to the former sole Shareholder of Boston Carriers LTD (the “
Exchange
”).
Included in the assets acquired was all outstanding Shares in Poseidon Navigation Corp. a corporation organized under the laws
of the Republic of the Marshall Islands (“
Poseidon
”). Accordingly, as a result of the Exchange, Poseidon became
a wholly owned subsidiary of the Company.
In connection with the execution of
the Purchase Agreement, Integrated Inpatient Solutions filed a Certificate of Designations with the Secretary of State of the
State of Nevada regarding the creation of the Series B Preferred Shares and an aggregate of 1,850,000 shares of Series B Preferred
Shares were issued to the former Boston Carriers’ LTD shareholder.
The Series B Preferred Shares will
automatically convert, with no action by the holders thereof, into shares of Common Stock (at times referred to herein as the
“
Common Shares
”) at a rate of 1,000 Common Shares for each Series B Preferred share, on the date that is five
(5) business days following the distribution by the Company of a cash dividend to the shareholders of its Common Shares of all
amounts received by the Company as a refund to the Company from the United States Internal Revenue Service in connection with
the Company's 2014 federal tax return less a maximum of $20,000 which would be used solely to pay the Company’s obligation
under a settlement agreement relating to the Strong v. Strong lawsuit (the “
Dividend
”). The Series B Preferred
Shares are not participating shares and prior to conversion the holders thereof shall not receive any dividend or other distribution
from the Company and no portion of the Dividend will be distributed for the benefit of the holders of Series B Preferred Shares.
Prior to conversion, however, the holders of Series B Preferred Shares shall be entitled to vote on all matters on which holders
of Common Shares are entitled to vote and shall vote as if such Series B Preferred Shares had converted, provided however, that
the holders of Series B Preferred Shares shall not be entitled to vote on any matter which would amend the terms of and restrictions
on the Series B Preferred Shares.
Further, as per the Articles of Incorporation
filed with the Registrar of the Republic of Marshall Islands and effective March 21 2016, the aggregate number of shares of shares
of capital stock that the Company is authorized to issue is two billion and ten million (2,010,000,000) shares, of which:
(i)
|
|
two billion (2,000,000,000) shares shall be registered Common Shares, each with a
par value of US$0.0001 per share (the “
Common Shares
”);
|
(ii)
|
|
one million eight hundred and fifty thousand (1,850,000) shares shall be registered
preferred shares, each with a par value of US$0.0001 per share (the “
Series A Preferred Shares
”). This Series
A Preferred Shares will automatically convert, with no action by the holders thereof, into Common Shares at a rate of 1,000 Common
Shares for each Series A Preferred Share, on the date that is five (5) business days following the distribution by the Company
of a cash dividend to the common shareholders of all amounts received by the Company as a refund from the United States Internal
Revenue Service in connection with Company’s 2014 federal tax return less a maximum of $20,000 which would solely be used
to pay the Company’s obligation under a settlement agreement relating to the Strong v. Strong lawsuit (the “
Dividend
”).
The Series A Preferred Shares are not participating shares and prior to conversion the holders thereof shall not receive any dividend
or other distribution from the Company and no portion of the Dividend will be distributed for the benefit of the holders of Series
A Preferred Shares. Prior to conversion, however, the holders of Series A Preferred Shares shall be entitled to vote on all matters
on which holders of Common Shares are entitled to vote and shall vote as if such Series A Preferred Shares had converted, provided,
however, that the holders of Series A Preferred Shares shall not be entitled to vote on any matter which would amend the terms
of and restrictions on the Series A Preferred Shares;
|
(iii)
|
|
two hundred and fifty thousand (250,000) shares shall be registered preferred shares,
each with a par value of US$0.0001 (the “
Series B
Preferred Shares
”) with the holder of these Series
B Preferred Shares having the right to convert the such shares into Common Shares at a ratio of ten Common Shares for each Series
B Preferred Share held and having no other right;
|
(iv)
|
|
seven million nine hundred thousand (7,900,000) shares shall be registered preferred
shares, each with a par value of US$0.0001 (the “
Series C Preferred Shares
”).
|
Upon filing of the Articles of Conversion,
the Company switched the names of its Series B Preferred Shares to Series A Preferred Shares to more accurately describe the related
rights and preferences. The Series B Preferred Shares, totaling 1,850,000 shares, were subsequently renamed Series A Preferred
Shares. The non-redeemable, convertible preferred shares totaling 250,000 shares, which are issued and are outstanding as of March
31, 2016 and December 31 2015, respectively, were subsequently renamed Series B Preferred Shares.
Effective April 1, 2016, following
receipt of approval by the Company’s Board of Directors and by the holder of approximately 92.5% of the Company’s
voting power, the Company amended and restated its Articles of Incorporation in their entirety. According to the Amended and Restated
Articles of Incorporation, the authorized shares of the Company’s capital stock increased to fifty billion, two million
and one hundred thousand (50,002,100,000) shares of which:
(i)
|
|
forty billion (40,000,000,000) shares shall be registered Common Shares, par value
of US$0.0001, per share;
|
(ii)
|
|
five billion (5,000,000,000) shares shall be registered Class B Common Shares, par
value US$0.0001 per share (the “
Class B Shares
”);
|
(iii)
|
|
one million eight hundred and fifty thousand (1,850,000) shares shall be registered
preferred shares, each with a par value of US$0.0001 (the “
Series A Preferred Shares
”), these Series A
Preferred Shares will automatically convert, with no action by the holders thereof, into Common Shares at a rate of 1,000 Common
Shares for each Series A Preferred Share, on the date that is five (5) business days following the distribution by the Company
of a cash dividend to the shareholders of its Common Shares of all amounts received by the Company as a refund from the United
States Internal Revenue Service in connection with the Company's 2014 federal tax return less a maximum of $20,000 which would
solely be used to pay the Company’s obligation under a settlement agreement relating to the Strong v. Strong lawsuit (the
“
Dividend
”). The Series A Preferred Shares are not participating shares and prior to conversion the holders
thereof shall not receive any dividend or other distribution from the Company and no portion of the Dividend will be distributed
for the benefit of the holders of Series A Preferred Shares. Prior to conversion, however, the holders of Series A Preferred shares
shall be entitled to vote on all matters on which holders of Common Shares are entitled to vote and shall vote as if such Series
A Preferred Shares had been converted, provided however, that the holders of Series A Preferred shares shall not be entitled to
vote on any matter which would amend the terms of and restrictions on the Series A Preferred shares;
|
(iv)
|
|
two hundred and fifty thousand (250,000) shares shall be registered preferred shares,
each with a par value of US$0.0001 (the “
Series B Preferred Shares
”) with the holder of these
Series B Preferred Shares having the right to convert such shares into Common Shares at a ratio of ten shares of Common Shares
for each Series B Preferred Share held and having no other right;
|
(v)
|
|
five billion (5,000,000,000) shares shall be registered preferred shares, each with
a par value of US$0.0001 (the “
Series C Preferred Shares
”). The number of authorized Common Shares, Class
B Common Shares, Series A Preferred Shares, Series B Preferred Shares and Series C Preferred Shares may be increased or decreased
(but not below the number of shares thereof then outstanding) by resolution of the Board of Directors or the affirmative vote
of the holders of a majority of the voting power of all of the then outstanding shares of capital stock of the Company entitled
to vote generally in the election of directors, voting together as a single class, without a separate vote of the holders of the
Preferred Shares, or any series thereof, unless a vote of any such holders is required pursuant to any Preferred Shares Designation.
|
All the authorized shares have been
retroactively adjusted and reflected in the financial statements.
NOTE 3 - COMMITMENTS AND CONTINGENCIES
Commitments
In April 2013, the Company entered
into a one-year office lease agreement at $450 per month. The lease expired in May 2014. The office space was being occupied on
a month to month basis until the lease agreement was amended. In August 2014, the Company entered into an amended lease agreement.
The lease term is one year commencing on June 1, 2014 and expired on May 31, 2015. The office space is currently being occupied
on a month to month basis and the Company has no plans on relocating. The monthly rent is $477 per month. Total rent expense for
the three months ended March 31, 2016 and March 31, 2015 was $1,431.
On August 26, 2014, the Company entered
into an employment agreement with its Chief Executive Officer (the “
CEO
”). The agreement was for a period of
two years unless renewed or extended by both parties. The agreement provided for an annual base salary of $80,000. The CEO was
also eligible for a bonus payment based on the gross revenue achieved by the Company at the end of each twelve-month period following
commencement of this agreement. The bonuses ranged from $40,000 to $100,000 for gross revenues ranging from $3,750,000 to $7,500,000
and over $7,500,000. As of December 31, 2015 and December 31, 2014, the Company did not reach the targeted gross revenues. Therefore,
the CEO did not receive any bonuses in 2015 and 2014. This employment agreement was subsequently terminated and replaced by a
consulting agreement effective January 1, 2016, which was voluntarily terminated on April 30 2016. The monthly consulting fee
was $6,250. On January 1, 2016, and as part of this consulting agreement, the Company issued 26,274,987 shares of Common Shares
to the former CEO with a fair value of $44,667.
On February 13, 2016,
Poseidon took delivery of the M/V Nikiforos, 1996 built Handymax vessel (45,693 dwt). The Company acquired this vessel pursuant
to a Bareboat Charter Party contract with Nikiforos Shipping SA. Poseidon paid $500,000 at November 24, 2015 as a deposit and
will pay $1,315 per day, payable in advance every 30 days, or 60 days in arrears for five years commencing on the date of delivery
of the vessel. At the conclusion of the five years, Poseidon will have the right to purchase the vessel for $500,010. The Company
has recognized this transaction as a capital lease. Please see Note 6 below.
Contingencies
While providing healthcare services
in the then ordinary course of its business, the Company became involved in lawsuits and legal proceedings involving claims of
medical malpractice related to medical services provided by its affiliated physicians. The Company is currently involved in the
settlement stages of one such matter. The accompanying financial statements include an accrual of approximately $94,000 for this
matter under the caption liabilities from discontinued operations. This accrual represents the Company’s anticipated deductible
on the settlement. The details of this settlement are described more fully below.
In September 2013, the Company became
involved in a legal settlement relating to a malpractice claim. As a result of the settlement agreement, the Company agreed to
pay a total amount of $500,000, which will be covered by the tail malpractice insurance. The Company has accrued $50,000 for the
deductible on the tail malpractice insurance as of March 31, 2016 and December 31, 2015.
Edra Schwartz as the Personal Representative
of the Estate of Robert A. Schwartz, Deceased, v. Jason Strong, M.D., Aretha Nelson, M.D. and Inpatient Clinical Solutions, Inc.
This matter involves a 66 years old white male who developed a MRSA (methicillin-resistant staphylococcus aureus) infection following
a craniotomy to remove a suspected meningioma. The matter alleges (1) failure to properly interpret the brain MRIs preoperatively
(this is directed at the radiologist preoperatively), and (2) failure to diagnose a MRSA infection and brain abscess following
the craniotomy on May 6, 2009. The patient died on September 24, 2009. The suit commenced October 18, 2011 and the case is pending
in the circuit court of the 17 Judicial Circuit in and for Broward County, FL, Case # 11-10485. The claim is for unspecified monetary
damages. The Company is defending this case vigorously and, while the claims for damages have not been quantified, the Company
does not believe that a negative decision would have a material impact on the Company.
In November 2011, the Company became
involved in a legal settlement relating to a malpractice claim for $100,000. As a result of the settlement agreement, the Company
agreed to pay a total amount of $100,000. As of March 31, 2016 and December 31, 2015, the remaining balances were approximately
$20,000, which are due on November 1, 2016.
In October 2015, the Company became
involved in a potential legal settlement relating to a malpractice claim. The Company and the other parties have not entered into
a settlement agreement. However, the Company anticipates that the amount will be covered by the tail malpractice insurance. The
Company has accrued $25,000 for the deductible on the tail malpractice insurance as of March 31, 2016 and December 31 2015.
The Company is currently not aware of any other such legal proceedings
or claims that they believe will have, individually or in the aggregate, a material adverse effect on its business, financial
condition or operating results except for the items described above. Litigation is subject to inherent uncertainties, and an adverse
result in these or other matters may arise from time to time that may harm its business.
The accrued legal settlements are presented as liabilities
from discontinued operation in the accompanying balance sheets (see also Note 5 below).
NOTE 4
– CONCENTRATIONS
Geographic and Employment
The Company operates in the business
of maritime transportation and discontinued its interior decorating services. The maritime transportation business is based in
Athens, Greece and the Company expects to own, operate and manage a fleet of dry bulk vessels that transport iron ore, coal, grain,
steel products, cement, alumina and other dry bulk cargoes internationally.
Revenue and Trade Receivables
During the three months ended March
31, 2016, 100% of revenues from the maritime transportation business were derived from one customer.
At March 31, 2016, 100% of trade receivables
were derived from one customer from the maritime transportation business.
NOTE 5 - DISCONTINUED OPERATIONS
In November 2014 management decided
to exit the timeshare business, and in January 2016, management decided to
exit the
interior
design business. Accordingly, the Company's current strategy is focused on its maritime transportation business. Accordingly,
the financial statements have been presented in accordance with ASC 205-20,
Discontinued Operations
.
The following table illustrates the
reporting of the discontinued operations included in the Statements of Operations for the three months ended March 31, 2016 and
March 31, 2015.
|
|
March 31, 2016
|
|
March 31, 2015
|
Interior design and Timeshare revenue:
|
|
$
|
—
|
|
|
$
|
81,225
|
|
Service cost
|
|
|
—
|
|
|
|
79,491
|
|
Gross Profit
|
|
|
—
|
|
|
|
1,734
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
General and administrative
|
|
|
38,041
|
|
|
|
44,434
|
|
Total operating expenses
|
|
|
38,041
|
|
|
|
44,434
|
|
|
|
|
|
|
|
|
|
|
Loss from discontinued operations
|
|
$
|
(38,041
|
)
|
|
$
|
(42,700
|
)
|
As of March 31, 2016 and December 31, 2015, assets and liabilities
from discontinued operations are listed below:
|
|
March 31, 2016
|
|
December 31, 2015
|
Current Assets
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
212,075
|
|
|
$
|
21,239
|
|
Trade Receivables, net
|
|
|
—
|
|
|
|
5,393
|
|
Refundable income taxes
|
|
|
—
|
|
|
|
237,077
|
|
Inventories
|
|
|
—
|
|
|
|
1,816
|
|
Total Current Assets from discontinued operations
|
|
$
|
212,075
|
|
|
$
|
265,525
|
|
|
|
|
|
|
|
|
|
|
Non-Current Assets
|
|
|
|
|
|
|
|
|
Escrow funds
|
|
$
|
126,573
|
|
|
$
|
174,965
|
|
Other Assets
|
|
|
954
|
|
|
|
954
|
|
Total Non-Current Assets from discontinued operations
|
|
$
|
127,527
|
|
|
$
|
175,919
|
|
Current Liabilities
|
|
|
|
|
|
|
|
|
Accounts payable and accrued expenses
|
|
$
|
—
|
|
|
$
|
5,904
|
|
Deferred revenue
|
|
|
5,623
|
|
|
|
5,623
|
|
Accrued legal settlements
|
|
|
94,294
|
|
|
|
94,294
|
|
Total Liabilities from discontinued operations
|
|
$
|
99,917
|
|
|
$
|
105,821
|
|
NOTE 6 – CAPITAL LEASES
On February 13, 2016, the Company entered
into one bareboat charter agreement for the vessel Nikiforos with Nikiforos Shipping SA. The Company has a purchase option to
buy the vessel at specific times during the charter. The bareboat charter agreement terminates on February 13, 2021. The Company
concluded that it has retained substantially all of the benefits and risks associated with such vessel and has treated the transaction
as financing, and classified it as a capital lease in the financial statements.
As of March 31, 2016, the amount of
the long term and short term obligations in relation to capital leases is $1,418,834 and $297,993, respectively. See also Note
3 above.
Annual Future Minimum Lease Payments
The annual future minimum lease payments under the capital lease
agreement for the vessel described above, assuming that the clauses of the respective lease agreements will be met, are as follows:
Description
|
|
|
Amount
|
|
March 31, 2017
|
|
$
|
299,995
|
|
March 31, 2018
|
|
|
497,580
|
|
March 31, 2019
|
|
|
497,580
|
|
March 31, 2020
|
|
|
496,791
|
|
March 31, 2021
|
|
|
515,195
|
|
Total minimum lease payments
|
|
|
2,307,141
|
|
Less: Imputed interest
|
|
|
(590,314
|
)
|
Present value of minimum lease payments
|
|
|
1,716,827
|
|
Less Current portion of capitalized lease obligations
|
|
|
(297,993
|
)
|
Long term capitalized lease obligations
|
|
$
|
1,418,834
|
|
NOTE 7 – NOTE PAYABLE TO VENDOR
On February 12 2016, the Company issued
an unsecured promissory note, amounting to $355,880, for consulting services rendered during the three months ended March 31 2016.
This Note, bears an interest rate of 8% per annum and matures on May 30 2016. As services rendered were directly related to the
acquisition of the Company’s vessel on February 2016, the Company has capitalized the accrued interest expense for the three
months ended March 31 2016, equal to $3,875, and the amount is included under the caption “Leased vessel, net of accumulated
depreciation”.
NOTE 8 – TRANSACTIONS WITH
NON-RELATED PARTY
Our former CEO, Mrs. Ozzie Bloom was
considered a related party to the Company, until the Assets Purchase Agreement with BOSTON CARRIERS LTD became effective on December
31 2015. As of January 1, 2016, former CEO is no longer a related party to the Company, as she holds less than 10% of the issued
shares as of May 16 2016, and she is no longer a director of the Company. During the three months ended March 31, 2016, the following
transactions took place with former CEO:
i)
|
|
In January 1, 2016, the Company issued 26,274,987 shares of Common Shares to former
CEO Mrs. Osnah Bloom for consulting services with a fair value of $44,667,
|
ii)
|
|
Amount due to non-related party as of period end, equal to $11,977, mainly refers
to $6,000 brought forward, and consultancy fee for the month of March 2016.
|
NOTE 9 – GOING CONCERN
As reflected in the accompanying
consolidated financial statements, the Company had recurring losses from operations, and has an accumulated deficit of
$1,218,935 as of March 31, 2016. This raised substantial doubt about its ability to continue as a going concern. The ability
of the Company to continue as a going concern is dependent on the Company’s ability to raise additional capital and
implement its new business plan. The consolidated financial statements do not include any adjustments that might be necessary
if the Company is unable to continue as a going concern.
Management believes that actions presently
being taken to obtain additional funding and implement its strategic plans, including the acquisition of the 1996 built Handymax
Vessel (See Note 3 above) provide the opportunity for the Company to continue as a going concern.
NOTE 10 – SUBSEQUENT EVENTS
As described in Note 3 above, effective
April 1, 2016, following receipt of approval by the Company’s Board of Directors and by the holder of approximately 92.5%
of the Company’s voting power, the Company amended and restated its articles of Incorporation in their entirety. According
to the Amended and Restated Articles of Incorporation, the authorized shares of the Company’s Stock, increased to fifty
billion two million and one hundred thousand (50,002,100,000). Details on the classes of authorized shares of capital stock are
provided in Note 2 above.
Effective April 15, 2016, the Company entered into a Share Subscription
Agreement with YP Holdings, LLC, under which the latter subscribed for $50,000 in convertible, redeemable Preferred Shares. The
amount of $50,000 has been received in April 2016. As of May 17 2016, the Company has not yet authorized or designated any Preferred
shares with the rights and preferences as noted above and the shares have not been issued.
On March 18 2016, Poseidon Navigation
Corp., the Company’s wholly-owned subsidiary, issued a Promissory Note to Ray Capital Inc., in the amount $250,000. The
note is bearing an interest of 8% per annum and is due on June 30, 2016. The Company has recorded a debt issuance cost of $ 50,000
for the original issue discount at inception date.