PART II AND III 2 partiiandiii.htm

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

OFFERING CIRCULAR

 

DOYEN ELEMENTS, INC.

 

20511 Abbey Drive

Frankfort, Illinois 60423

(800) 511-5925

www.doyenelements.com

 

MAXIMUM OF 7,000,000 SHARES OF COMMON STOCK

OFFERING PRICE: $7 PER SHARE.

SEE “ DESCRIPTION OF SECURITIES ” AT PAGE 39

 

SECURITIES OFFERED

 

 

Price Per Share to
Public

  Total Number of
Shares Being
Offered
 

Proceeds to
issuer Before
Expenses,
Discounts and
Commissions*

Common Stock  $7.00    7,000,000   $49,000,000 

 

An Issuer may raise an aggregate of up to $50 million in a 12-month period pursuant to Tier II of Regulation A of the Securities Act.

 

*    See “Plan of Distribution” for details regarding the compensation payable to placement agents in connection with this offering.

 

The Company expects that the amount of expenses of the offering that it will pay will be approximately 10% of the gross proceeds of securities sold, not including state filing fees. The offering will terminate at the earlier of: (1) the date at which the maximum offering amount has been sold, (2) twelve months from the date this Offering Statement is qualified by the Commission, or (3) the date at which the offering is earlier terminated by the Company in its sole discretion, which may occur at any time. The offering is being conducted on a best efforts basis without any minimum target.

 

 

 

 
  

 

THE DATE OF THIS OFFERING CIRCULAR IS August 1, 2017

 

THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION DOES NOT PASS UPON THE MERITS OR GIVE ITS APPROVAL OF ANY SECURITIES OFFERED OR THE TERMS OF THE OFFERING, NOR DOES IT PASS UPON THE ACCURACY OR COMPLETENESS OF ANY OFFERING CIRCULAR OR OTHER SOLICITATION MATERIALS. THESE SECURITIES ARE OFFERED PURSUANT TO AN EXEMPTION FROM REGISTRATION WITH THE COMMISSION; HOWEVER, THE COMMISSION HAS NOT MADE AN INDEPENDENT DETERMINATION THAT THE SECURITIES OFFERED ARE EXEMPT FROM REGISTRATION.

 

GENERALLY, NO SALE MAY BE MADE TO YOU IN THIS OFFERING IF THE AGGREGATE PURCHASE PRICE YOU PAY IS MORE THAN 10% OF THE GREATER OF YOUR ANNUAL INCOME OR NET WORTH. DIFFERENT RULES APPLY TO ACCREDITED INVESTORS AND NON-NATURAL PERSONS. BEFORE MAKING ANY REPRESENTATION THAT YOUR INVESTMENT DOES NOT EXCEED APPLICABLE THRESHOLDS, WE ENCOURAGE YOU TO REVIEW RULE 251(d)(2)(i)(C) OF REGULATION A. FOR GENERAL INFORMATION ON INVESTING, WE ENCOURAGE YOU TO REFER TO www.investor.gov.

 

This offering is inherently risky. See “Risk Factors” on page 5.

 

THIS OFFERING CIRCULAR FOLLOWS THE S-1 DISCLOSURE FORMAT.

 

Approximate date of commencement of proposed sale to the public:

The Offering will commence within two calendar days after the Qualification Date of the Offering Circular in accordance with Rule 251(d)(3)

 

AN OFFERING STATEMENT PURSUANT TO REGULATION A RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. INFORMATION CONTAINED IN THIS PRELIMINARY OFFERING CIRCULAR IS SUBJECT TO COMPLETION OR AMENDMENT. THESE SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED BEFORE THE OFFERING STATEMENT FILED WITH THE COMMISSION IS QUALIFIED. THIS PRELIMINARY OFFERING CIRCULAR SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR MAY THERE BE ANY SALES OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL BEFORE REGISTRATION OR QUALIFICATION UNDER THE LAWS OF SUCH STATE. THE COMPANY MAY ELECT TO SATISFY ITS OBLIGATION TO DELIVER A FINAL OFFERING CIRCULAR BY SENDING YOU A NOTICE WITHIN TWO BUSINESS DAYS AFTER THE COMPLETION OF THE COMPANY’S SALE TO YOU THAT CONTAINS THE URL WHERE THE FINAL OFFERING CIRCULAR OR THE OFFERING STATEMENT IN WHICH SUCH FINAL OFFERING CIRCULAR WAS FILED MAY BE OBTAINED.

 

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TABLE OF CONTENTS

 

  Page No
   
Summary of Offering Circular 4
Risk Factors 6
Use of Proceeds 15
Determination of Offering Price 16
Dilution of the Price You Pay for Your Shares 16
Plan of Distribution 18
Management’s Discussion and Analysis of Financial Condition and Plan of Operations 19
Business 21
Management 32
Executive Compensation 34
Principal Shareholders 35
Description of Securities 36
Related Party Transactions 41
Experts 41
Legal Proceedings 41
Interests of Named Experts and Counsel 41
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 41
Available Information 42
Financial Statements 42

 

DISCLOSURE REGARDING THE USE OF “FORWARD-LOOKING STATEMENTS

 

In this Offering Circular, the term “Doyen”, “we”, “us”, “our”, or “the Company” refers to Doyen Elements, Inc.

 

THIS OFFERING CIRCULAR MAY CONTAIN FORWARD-LOOKING STATEMENTS AND INFORMATION RELATING TO, AMONG OTHER THINGS, THE COMPANY, ITS BUSINESS PLAN AND STRATEGY, AND ITS INDUSTRY. THESE FORWARD-LOOKING STATEMENTS ARE BASED ON THE BELIEFS OF, ASSUMPTIONS MADE BY, AND INFORMATION CURRENTLY AVAILABLE TO THE COMPANY’S MANAGEMENT. WHEN USED IN THE OFFERING MATERIALS, THE WORDS “ESTIMATE,” “PROJECT,” “BELIEVE,” “ANTICIPATE,” “INTEND,” “EXPECT” AND SIMILAR EXPRESSIONS ARE INTENDED TO IDENTIFY FORWARD-LOOKING STATEMENTS, WHICH CONSTITUTE FORWARD LOOKING STATEMENTS. THESE STATEMENTS REFLECT MANAGEMENT’S CURRENT VIEWS WITH RESPECT TO FUTURE EVENTS AND ARE SUBJECT TO RISKS AND UNCERTAINTIES THAT COULD CAUSE THE COMPANY’S ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE CONTAINED IN THE FORWARD-LOOKING STATEMENTS. INVESTORS ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE ON THESE FORWARD-LOOKING STATEMENTS, WHICH SPEAK ONLY AS OF THE DATE ON WHICH THEY ARE MADE. THE COMPANY DOES NOT UNDERTAKE ANY OBLIGATION TO REVISE OR UPDATE THESE FORWARD-LOOKING STATEMENTS TO REFLECT EVENTS OR CIRCUMSTANCES AFTER SUCH DATE OR TO REFLECT THE OCCURRENCE OF UNANTICIPATED EVENTS.

 

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SUMMARY

 

Our Company

 

Doyen Elements, Inc., formerly AdvantaMeds Solutions USA Fund I, Inc. (the “Company”) is a corporation, organized on October 21, 2015 under the laws of the State of Nevada. We have conducted limited business operations since our inception, and have had no revenues to date. Upon the completion of this Offering, we intend to focus our business operations on providing a wide range of ancillary services to the legal medical-use legal cannabis industry, including property leasing and management, equipment leasing, management consulting, incubator services, technology solutions, and logistical support functions, both in the United States and internationally.

 

Our Planned Acquisitions

 

In April 2017, we entered into an "Equity Purchase Agreement" with several non-affiliated parties to acquire controlling interests (51% to 100%) of sixteen operating companies currently engaged in providing a wide variety of services to the legal medical-use and adult-use legal cannabis industry. The Equity Purchase Agreement was amended on July 25, 2017 to reflect the fact that up to 100% of all of these entities may be acquired. These acquisitions are scheduled to be completed on or before February 1, 2018, utilizing a substantial portion of the proceeds of this Offering. The total purchase of the sixteen entities will be approximately $16 million in cash and 9,000,000 shares of Common Stock of the Company. In the event that less than 50% of the maximum proceeds are received from this Offering, a fewer number of entities may be acquired and/or a percentage of less than 100% but at least 51% of these entities will be acquired. (See: “Use of Proceeds”, p. 18).

 

The Company plans, upon the completion of the pending acquisitions, to employ several executives of the acquired companies to certain executive positions with our Company. However, at the present time, the Company has entered into no formal agreement and has no obligation to do so.

 

THE OFFERING

 

Securities Offered   A maximum of 7 million shares of Common Stock at a price of $7.00 per share.
     
Total Offering:   The Company will receive a maximum of $49,000,000 in gross proceeds upon sale of the maximum number of shares of Common Stock offered.
     
Common Stock Outstanding:  

As of June 30, 2017, the Company had 100,000,000 shares of Common Stock authorized and 29,000,000 issued and outstanding.

     
Preferred Stock Outstanding:  

As of June 30, 2017, the Company had 638 shares of Preferred Stock, designated as "6% Convertible Preferred Stock" issued and outstanding.

     
Use of Proceeds:   The net proceeds of this Offering, which are expected to be approximately $45,000,000 after commissions and expenses, will be utilized for the pending acquisitions, marketing, and general working capital purposes. The details of our plans are set forth in “Use of Proceeds” on page 17 of this Offering Circular.

 

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Selected Risks Associated With Our Business

 

Our business is subject to a number of risks and uncertainties, including those highlighted in the section titled "Risk Factors" immediately following this summary. These risks include, but are not limited to, the following:

 

  We are an early-stage company with limited business operations, and have not yet generated any revenues or profits.
     
  Our planned business operations will be concentrated in the state-legal medical-use cannabis industry, which may in the future be subjected to increased federal law enforcement activities which would severely and negatively impact our business plan and operations.
     
 

If we do not complete the sale of at least 50% of the securities which we are offering herein, we will most likely not have sufficient capital resources to complete the pending acquisition of 100% of all of the sixteen operating business which will form the basis of our business operations. In that event, a fewer number of entities and/or a percentage of less than 100%, but at least 51% of particular entities, may be acquired. (See Use of Proceeds)

     
  We are just developing our marketing plan, and there can be no assurance as to how quickly, or if, we can obtain a sufficient number of clients and customers to achieve profitability.
     
  As our business operations expand, our costs may grow more rapidly than our revenues, thereby harming our business and our profitability.
     
  Our company is controlled by its Officers, Directors, and current shareholders.
     
  There is currently no public market for any of the Company’s shares of stock.

 

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RISK FACTORS

 

Investing in the Company’s Securities is very risky. You should be able to bear a complete loss of your investment. In addition to the other information in this Offering Circular, the following Risk Factors should be considered carefully in evaluating the Company and its business before investing in the Shares offered hereby.

 

RISK FACTORS RELATED TO OUR COMPANY

 

Emerging Growth Company Status

 

The Company is an “emerging growth company” as defined in the Jumpstart Our Business Startups Act (“ JOBS ACT”). For as long as the Company is an emerging growth company, the Company may take advantage of specified exemptions from reporting and other regulatory requirements that are otherwise applicable generally to other public companies. These exemptions include:

 

  An exemption from providing an auditor’s attestation report on management’s assessment of the effectiveness of the Company’s systems of internal control over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act of 2002;
     
  An exemption from compliance with any new requirements adopted by the Public Accounting Oversight Board (“PCAOB”), requiring mandatory audit firm rotation or a supplement to the auditor’s report in which the auditor would be required to prove additional information about the audit and the financial statements of the issuer;
     
  An exemption from compliance with any other new auditing standards adopted by the PCAOB after April 5th, 2012, unless the United States Securities and Exchange Commission (“SEC”) determines otherwise; and
     
  Reduced disclosure of executive compensation.

 

In addition, Section 107 of the JOBS Act provides that an emerging growth company can use the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. This permits an emerging growth company to delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. However, the Company has chosen to “opt out” of such extended transition period and, as a result, the Company will comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-emerging growth companies. The Company’s decision to opt out of the extended transition period for complying with new or revised accounting standards is irrevocable.

 

The Company will cease to be an “emerging growth company” upon the earliest of (i) when the Company has 1.0 Billion or more in annual revenues, (ii) when the Company has at least 700 Million in market value of the Company’s Common Units held by non-affiliates, (iii) when the Company issues more than 1.0 Billion of non-convertible debt over a three-year period, or (iv) the last day of the fiscal year following the fifth anniversary of the Company’s Initial Public Offering.

 

If our offering is successful, we will be a public company subject to the reporting requirements of the Securities Exchange Act of 1934. It is extremely expensive being a public company. In the event we are unable to pay these costs, then our share prices could be depressed and the market for our common stock could be limited.

 

If our offering is successful, we will be required to comply with the reporting requirements of the Securities Exchange Act of 1934, including the obligation to timely file all Current, Quarterly, and Annual Reports, and to prepare and file quarterly (unaudited) and annual (audited) financial statements. We have engaged our current legal counsel and independent certifying the accountant to continue to provide these legal and audit services to our Company through our fiscal year ending December 31, 2017. The financial burden of being a public company, which will cost us between $75,000 and $125,000 per year in auditing fees and legal fees to comply with our reporting obligations under the Securities Exchange Act of 1934 and compliance with the Sarbanes-Oxley Act of 2002 will strain our finances and stretch our human resources to the extent that we may have to price our products higher than our non-publicly held competitors just to cover the costs of being a public company. Due to our limited funds, we may not be able to pay these costs of being a public company to the extent that we may not be able to file the reports required by the Securities Exchange Act of 1934, which could result in our stock being excluded from trading on the NYSE or Over-The-Counter Markets, and could result in only a limited market for our common stock.

 

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Because our auditors have issued a going concern opinion, there is substantial uncertainty that we will continue operations in which case you could lose your investment.

 

Our auditors have issued a going concern opinion. This means that there is substantial doubt that we can continue as an ongoing business for the next twelve months. The financial statements do not include any adjustments that might result from the uncertainty about our ability to continue in business. As such, we may have to cease operations and you could lose your investment.

 

We have a limited operating history and have losses that we expect to continue into the future. There is no assurance our future operations will result in profitable revenues. If we cannot generate sufficient revenues to operate profitably, we will cease operations and you will lose your investment.

 

We were incorporated on October 21, 2015 and we have had limited business operations to date.

 

We May Not be able to Effectively Manage our Growth, and any failure to do so may have an Adverse Effect on our Business and Operating Results.

 

We have a limited operating history, and we plan to grow our commercial real estate property portfolio and operations rapidly. Our future operating results depend on our ability to effectively manage our rapid growth, which is dependent, in part, upon our ability to:

 

  Stabilize and manage a rapidly increasing number of properties and tenant relationships while maintaining a high level of tenant satisfaction and building and enhancing our brand;
     
  Identify and supervise an increasing number of suitable third parties on which we rely to provide certain services to our properties;
     
  Attract, integrate, and retain new management and operations personnel as our organization grows in size and complexity;
     
  Continue to improve our operational and financial controls and reporting procedures and systems; and
     
  Scale our technology and other infrastructure platforms to adequately service new properties.

 

We cannot assure you that we will be able to achieve these results or that we may otherwise be able to manage our growth effectively. Any failure to do so may have an adverse effect on our business and operating results.

 

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We May Rely on Local, Third-party Providers for Services that May Become Limited or Unavailable and May Harm our Brand, Reputation, and Operation Results

 

We may rely on local, third-party vendors and service providers, including third-party construction professionals, leasing agents, and property management companies in situations when it is cost-effective to do so or our internal staff is unable to perform these functions. We do not have exclusive or long-term contractual relationships with any of these third-party providers, and we can provide no assurance that we will have uninterrupted or unlimited access to their services. Furthermore, selecting, managing, and supervising these third-party providers requires significant management resources and expertise. If we do not select, manage, and supervise appropriate third parties for these services, our brand and reputations and operating results may suffer. Moreover, we may not successfully detect and prevent fraud, incompetence or theft by our third-party providers, which could subject us to material liability or responsibility for damages, fines, and/or penalties associated with such fraud, incompetence, or theft. In addition, any removal or termination of third-party providers would require us to seek new vendors or providers, which would create delays and adversely affect our operations. If we do not select appropriate third-party providers or if the third party providers we do select fail to deliver quality services, our brand, and reputation, operation results, and cash flows from our properties may be adversely affected, including entities in which our affiliates and we have an interest.

 

Our Evaluation of Commercial Real Estate Properties Involves a Number of Assumptions that May Prove Inaccurate, which could Result in us Paying Too Much for Properties we acquire or overvaluing our Properties, Resulting in them Failing to Perform as we Expect

 

In determining whether a particular commercial real estate property meets our acquisition criteria, the Company makes a number of assumptions, including assumptions related to estimated time of possession and any estimated renovation costs and time frames, annual operating costs, market rental rates and potential rent amounts, time from purchase to leasing and tenant default rates. These assumptions may prove inaccurate. As a result, we may pay too much for commercial real estate properties we acquire or overvalue our commercial real estate properties, or our commercial real estate properties may fail to perform as we expect. Adjustments to the assumptions we make in evaluating potential purchases may result in few commercial real estate properties qualifying under our investment criteria, including assumptions related to our ability to lease commercial real estate properties we have purchased. Reductions in the supply of commercial real estate properties that meet our investment criteria may adversely affect our ability to implement our investment strategy and operating results.

 

Furthermore, the commercial real estate properties that we acquire may vary materially in terms of time to possession, renovation, quality and type of construction, location, and hazards. Our success depends on our ability to acquire commercial real estate properties that can be quickly possessed, renovated, repaired, upgraded, and rented with minimal expense and maintained in rentable condition. Our ability to identify and acquire such commercial real estate properties is fundamental to our success. In addition, the recent market and regulatory environments relating to commercial real estate properties have been changing rapidly, making future trends difficult to forecast.

 

Dependence on Management

 

In the early stages of development, the Company’s business will be significantly dependent on the Company’s management team. The Company’s success will be particularly dependent upon the services of: Mr. Geoffrey J. Thompson, the Company’s Chief Executive Officer and Chief Financial Officer; and Ms. Cynthia Boerum, the Company’s Chief Operating Officer.

 

Risks of Borrowing

 

Although the Company does not intend to incur any additional debt other than the investment commitments provided in this offering, should the company secure bank debt in the future, possible risks could arise. If the Company incurs additional indebtedness, a portion of the Company’s cash flow will have to be dedicated to the payment of principal and interest on such new indebtedness. Typical loan agreements also might contain restrictive covenants, which may impair the Company’s operating flexibility. Such loan agreements would also provide for default under certain circumstances, such as failure to meet certain financial covenants. A default under a loan agreement could result in the loan becoming immediately due and payable and, if unpaid, a judgment in favor of such lender which would be senior to the rights of members of the Company. A judgment creditor would have the right to foreclose on any of the Company’s assets resulting in a material adverse effect on the Company’s business, operating results or financial condition.

 

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Unanticipated Obstacles to Execution of the Business Plan

 

The Company’s business plans may change significantly. Many of the Company’s potential business endeavors are capital intensive and may be subject to statutory or regulatory requirements. Management believes that the Company’s chosen activities and strategies are achievable in light of current economic and legal conditions with the skills, background, and knowledge of the Company’s principals and advisors. Management reserves the right to make significant modifications to the Company’s stated strategies depending on future events.

 

Management Discretion as to Use of Proceeds

 

The net proceeds from this Offering will be used for the purposes described under “Use of Proceeds.” The Company reserves the right to use the funds obtained from this Offering for other similar purposes not presently contemplated which it deems to be in the best interests of the Company and its Investors in order to address changed circumstances or opportunities. As a result of the foregoing, the success of the Company will be substantially dependent upon the discretion and judgment of Management with respect to application and allocation of the net proceeds of this Offering. Investors for the Shares of Common Stock offered hereby will be entrusting their funds to the Company’s Management, upon whose judgment and discretion the investors must depend.

 

RISKS RELATED TO OUR INDUSTRY

 

Legal Cannabis Industry Risks

 

Legal cannabis industry investments are subject to varying degrees of risk. The yields available from equity investments in legal cannabis industry companies depends on the amount of income earned and capital appreciation generated by the company as well as the expenses incurred in connection therewith. If any of the Company’s products or assets does not generate income sufficient to meet operation expenses, the Company’s Common Stock value could adversely be affected. Income from, and the value of, the Company’s products and assets may be adversely affected by the general economic climate, the legal cannabis market conditions such as oversupply of related products or a reduction in demand for legal cannabis products in the areas in which the Company’s products and assets are located, competition from other legal cannabis companies, and the Company’s ability to provide adequate legal cannabis products and superior customer service. Revenues from the Company’s legal cannabis products and assets are also affected by such factors such as the costs of product production and the local market conditions.

 

Because legal cannabis industry investments are relatively illiquid, the Company’s ability to vary its asset portfolio promptly in response to economic or other conditions is limited. The relative illiquidity of its holdings could impede the Company’s ability to respond to adverse changes in performance of its products and assets. No assurance can be given that the fair market value of the products produced or assets acquired by, or produced by, the Company will not decrease in the future. Investors have no right to withdrawal their equity commitment or require the Company to repurchase their respective Common Stock interests and transferability of the Shares of Common Stock is limited. Accordingly, investors should be prepared to hold their investment interest until the Company is dissolved and its assets are liquidated.

 

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The Company Faces Extensive Government Regulation

 

The Company plans to lease real estate properties and legal cannabis production equipment, and enter into Joint Ventures with the established license legal cannabis companies. The manufacturing, processing, formulating, packaging, labeling, advertising, and selling of legal cannabis related products are subject to regulation by one or more Federal Agencies, including the United States Food and Drug Administration, the Federal Trade Commission, and the Consumer Product Safety Commission. These joint venture company activities may also be regulated by various State and Local Government Agencies in the States in which these companies intend to sell their legal cannabis products and in which these companies’ products may be produced and / or distributed. Although the Company believes that its lease and joint venture company targets are in compliance with all existing regulations, the joint venture company will be subject to risk that, in one of more of its present joint venture company targets, or a future joint venture company, its products or marketing systems could be found not to be in compliance with applicable laws and regulations.

 

In addition, the Company is unable to predict whether its joint venture companies will be able to comply with any new legislation or regulations, or amendments to legislation and regulations that may be enacted in the future. New laws or regulations could require the reformation of certain products to meet new standards, the recall or discontinuance of certain products not capable of reformulation, additional record keeping, expanded documentation of the properties of certain products, expanded or different labeling, and/or scientific substantiation. Failure by any of the joint venture companies to comply timely with all laws and regulations applicable to its products could have material adverse effect on the joint venture company’s business, operations, and financial condition.

 

Changes In Federal Policy With Regards To State-Legal Medical Cannabis May Have A Negative Impact On Our Business Operations

 

Our business operations, as well as properties that we may acquire, are subject to many federal, state, and local government laws and regulations, including land use, zoning, environmental regulations, operational licenses, and employment regulations. With our emphasis on the legal cannabis industry we, or our clients and customers, will also be subject to significant government regulations concerning the growing, processing, marketing, and dispensing of legal cannabis products.

 

Some of the properties that we plan to acquire will be used primarily for the cultivation and production of medical-use legal cannabis and will be subject to the laws, ordinances and regulations of the federal, state, and local governments involving land use, water rights, treatment methods, environmental disturbance, and eminent domain. In certain jurisdictions, land used for agricultural purposes are also subject to regulations governing the protection of endangered species and the protection of wetlands. Because certain of the properties that we will own will be used for growing legal cannabis, some jurisdictions have additional regulations regarding security and waste materials disposal.

 

At the present time, under federal law legal cannabis is classified by the Controlled Substances Act (CSA) as a Schedule I controlled substance. Even in those jurisdictions in which the growing, dispensing, or sale of legal cannabis products has been legalized at the state and/or local level, the possession, use, transfer, and cultivation of legal cannabis remains a violation of federal law. At present, it is the policy of the federal government, as stated by the prior Obama Administration, that it is not an efficient use of federal resources to direct federal law enforcement to prosecute those lawfully abiding by state laws permitting the use and distribution of medical-use legal cannabis (the so-called “Cole Memo”). However, absent any statutory changes to the CSA, federal law still criminalizes the possession, use, cultivation or transfer of legal cannabis and pre-empts any state laws to the contrary. If federal law enforcement policy with respect to state-legalized legal cannabis should change, although we are not directly involved in the cultivation or dispensing of medical-use legal cannabis, such enforcement would seriously impact the business operations of our clients and customers, and thereby seriously impact our ability to execute our Company’s business plan. Under such circumstances, we would likely suffer significant losses with respect to our investment in medical-use legal cannabis facilities, including possible seizure and forfeiture of such assets.

 

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RISKS RELATED TO THIS OFFERING

 

Purchasers in this offering will experience immediate and substantial dilution in the book value of their investment.

 

The initial public offering price of our common stock is substantially higher than the net tangible book value per share of our outstanding common stock immediately after this offering. Therefore, if you purchase our common stock in this offering, and the maximum of 7 million shares are sold, you will incur immediate dilution of $5.75 in net tangible book value per share from the price you paid. In addition, following this offering, purchasers in this offering will have contributed 99.8% of the total consideration paid by our stockholders to purchase shares of common stock, in exchange for acquiring approximately 19.4% of our total outstanding shares as of June 30 , 2017 after giving effect to the maximum sale of 7,000,000 Shares in this Offering .

 

The Offering will be Conducted on a Best Efforts Basis, there can be No Assurance that the Company can Raise the Capital it Needs

 

The Common Stock shares are being offered by the Company on a “Best Efforts” basis with no minimum and without the benefit of a Placement Agent. The Company can provide no assurance that this Offering will be completely sold out. If less than the maximum proceeds are available, the Company’s business plans and prospects for the current fiscal year could be adversely affected.

 

Given that there is no minimum offering amount, and that the Company needs at least $1,000,000 to continue operations for the next twelve months, investors bear the complete risk of losing their entire investment if the Company is unable to raise enough proceeds from this Offering to continue operations. If the Company is not able to raise a significant portion of $49,000,000 from the Common Stock Offering, the Company may have to limit or eliminate important expenditures, such as the purchase of certain materials and supplies, and the hiring of essential labor, lease space costs, and marking activities, any and all of which may hinder the Company’s ability to generate significant revenues and cause a delay in the implementation of the Company’s business plan. Moreover, the less money that the Company is able to raise through this Offering, the more risk that Investors may lose their entire investment.

 

Return of Profits

 

The Company has never declared or paid any cash dividends on its Common Stock. The Company currently intends to retain future earnings, if any, to finance the expansion of the Company’s operations and holdings . As a result, the Company does not anticipate paying any cash dividends to its Common Stock Holders for the foreseeable future.

 

The Company May Not be Able to Satisfy Listing Requirements of the NYSE-MKT Exchange or the OTCQX Market, or be able to Maintain a Listing of the Company’s Common Stock on the New York Stock Exchange or the OTCQX Market.

 

The Company intends to file an application to have its Common Stock listed for public trading on both the NYSE-MKT Exchange and the OTCQX Over-the-Counter Market. If the Company’s Common Stock is accepted for listing on either or both of the NYSE-MKT Exchange and the OTCQX Market, of which there can be no assurance, the Company will be required to maintain certain financial and liquidity standards to maintain such listing. There can be no assurance that the Company will be able to maintain such listing. A de-listing of the Company’s Common Stock from the NYSE-MKT Exchange or Over-the-Counter Market may materially impair the ability of the Company’s Common Stockholders ability to buy and sell the Company’s Common Stock, and could have an adverse effect on the market price of the Company’s Common Stock as well as impair the Company’s ability to raise additional capital.

 

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If the Company’s Shares of Common Stock Become Subject to the Penny Stock Rules, It Would Become More Difficult to Trade the Company’s Common Stock

 

The United States Securities and Exchange Commission has adopted rules that regulated broker-dealer practices in connection with transactions in penny stocks. Penny stocks are generally equity securities with a price per share of less than $5.00, other than securities registered on certain national securities exchanges or authorized for quotation on certain automated quotation systems, provided that current price and volume information with respect to transactions in such securities is provided by the exchange or system. If the Company does not obtain or retain a listing on the New York Stock Exchange, and if the price of the Company’s Common Stock is less than $5.00 per share, the Company’s Common Stock will be deemed a penny stock. The penny stock rules require a broker-dealer, before effecting a transaction in a penny stock not otherwise exempt from those rules, to deliver a standardized risk disclosure document containing specified information. In addition, the penny stock rules require that, before effecting any such transaction in a penny stock not otherwise exempt from those rules, a broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive (i) the purchaser’s written acknowledgement of the receipt of a risk disclosure statement; (ii) a written agreement to transaction involving penny stocks; and (iii) a signed and dated copy of a written suitability statement. These disclosure requirements may have the effect of reducing the trading activity in the secondary market for the Company’s Common Stock, and therefore stockholders may have difficulty selling their shares.

 

FINRA Sales Practice Requirements May Limit a Stockholder’s Ability to Buy and Sell the Company’s Stock

 

In addition to the “Penny Stock” rules described above, FINRA has adopted rules that require that in recommending an investment to a customer, a broker-dealer must have reasonable ground for believing that the investment is suitable for that customer. Prior to recommending speculative, low-priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer’s financial status, tax status, investment objectives and other information. The FINRA requirements may make it more difficult for broker-dealers to recommend that their customers buy the Common Stock, which may have the effect of reducing the level of trading activity in the Company’s Common Stock. As a result, fewer broker-dealers may be willing to make a market in the Company’s Common Stock, reducing a stockholder’s ability to resell their shares of Common Stock.

 

Raising Additional Capital by Issuing Securities May Cause Dilution to the Company’s Shareholders

 

The Company may need to, or desire to, raise substantial additional capital in the future. The Company’s future capital requirements will depend on many factors, including, among others:

 

  The Company’s degree of success in capturing a larger portion of the Recreational Legal cannabis market;
     
  The costs of establishing or acquiring sales, marketing, and distribution capabilities for the Company’s services;
     
  The extent to which the Company acquires or invests in businesses, products, or technologies, and other strategic relationships; and
     
  The costs of financing unanticipated working capital requirements and responding to competitive pressures.

 

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If the Company raises additional funds by issuing equity or convertible debt securities, the Company will reduce the percentage of ownership of the then-existing shareholders, and the holders of those newly-issued equity or convertible debt securities may have rights, preferences, or privileges senior to those possessed by the Company’s then-existing shareholders. Additionally, future sales of a substantial number of shares of the Company’s Common Stock, or other equity-related securities in the public market could depress the market price of the Company’s Common Stock and impair the Company’s ability to raise capital through the sale of additional equity or equity-linked securities. The Company cannot predict the effect that future sales of the Company’s Common Stock, or other equity-related securities would have on the market price of the Company’s Common Stock.

 

If Equity Research Analysts Do Not Publish Research Reports about the Company, of if the Research Analysts Issue Unfavorable Commentary or Downgrade the Company’s Common Stock Shares, the Price of the Company’s Common Stock Shares Could Decline

 

The trading market for the Company’s Common Stock Shares will rely in part on the research and reports that equity research analysts publish about the Company, and the Company’s business. The Company does not have control over research analysts, and the Company does not have commitments from research analysts to write research reports about the Company. The price of the Company’s Common Stock Shares could decline if one or more equity research analysts downgrades the Company’s Common Stock Shares, issues an unfavorable commentary, or ceases publishing reports about the Company.

 

If the Company is Unable to Implement and Maintain Effective Internal Control Over Financial Reporting in the Future, Investors May Lose Confidence in the Accuracy and Completeness of the Company’s Financial Reports and the Market Price of the Company’s Common Stock May Decline

 

As a public company, the Company will be required to maintain internal control over financial reporting and to report any material weakness in such internal control. Further, the Company will be required to report any changes in internal controls on a quarterly basis. In addition, the Company would be required to furnish a report by management on the effectiveness of internal control over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act. The Company will design, implement, and test the internal control over financial reporting required to comply with these obligations. If the Company identifies material weakness in these internal controls over financial reporting, if the Company is unable to comply with the requirements of Section 404 in a timely manner or assert that the Company’s internal control over financial reporting is effective, or if the Company’s independent registered public accounting firm is unable to express an opinion as to the effectiveness of its internal control over financial reporting when required, investors may lose confidence in the accuracy and completeness of the Company’s financial reports and the market price of the Company’s Common Stock could be negatively affected. The Company also could become subject to investigations by the Stock Exchange on which the securities are listed, the United States Securities and Exchange Commissions, or other regulatory authorities, which could require additional financial management resources.

 

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As an Emerging Growth Company, the Company’s Auditor is Not Required to Attest to the Effectiveness of the Company’s Internal Controls

 

The Company’s Independent Registered Public Accounting Firm is not required to attest to the effectiveness of the Company’s internal control over financial reporting while the Company is an emerging growth company. This means that the effectiveness of the Company’s financial operation may differ from the Company’s “peer companies” in that they may be required to obtain independent registered public accounting firm attestations as to the effectiveness of their internal controls over financial reporting and the Company does not. While the Company’s management will be required to attest to internal control over financial reporting and the Company will be required to detail changes in its controls on a quarterly basis, the Company cannot provide assurance that the Independent Registered Public Accounting Firm’s review process in assessing the effectiveness of the Company’s internal controls over financial reporting, if obtained, would not find one or more material weaknesses or significant deficiencies. Further, once the Company ceases to be an emerging growth company, the Company will be subject to independent registered public accounting firm attestation regarding the effectiveness of the Company’s internal controls over financial reporting. Even if management finds such controls to be effective, the Company’s Independent Registered Public Accounting Firm may decline to attest to the effectiveness of such internal controls and issue a qualified report.

 

Future Sales of the Company’s Shares Could Reduce the Market Price of the Company’s Common Stock Shares

 

The price of the Company’s Common Stock could decline if there are substantial sales of the Company’s Common Stock, particularly by the Company’s Directors or its Executive Officer(s), or when there is a large number of Shares of the Company’s Common Stock available for sale. The perception in the public market that the Company’s Stockholders might sell the Company Shares could also depress the market price of the Company’s Shares. If this occurs, or continues to occur, it could impair the Company’s ability to raise additional capital through the sale of securities should the Company desire to do so

 

No Public Market for Our Shares Presently Exist

 

Prior to this Offering, there has been no public market for our shares of Common Stock or Preferred Stock. Although we intend to apply to list our Common Stock on the NYSE- MKT Exchange as well as the OTCQX Market , we cannot predict that our Common Stock will be accepted for listing on the NYSE-MKT Exchange or any other National Exchange or Alternative Trading System such as OTC Markets. Even if we obtain a listing for our Common Stock, there can be no assurance as to the extent that a public market for our shares will develop or how liquid that market might become. The lack of a public market for our Common Stock, or a lack of liquidity in any public market for our Common Stock, may impair your ability to sell your shares at the time you wish to sell them or at a price that you consider reasonable. The lack of an active public market for our shares may also reduce the market price of your shares. In addition, broad market and industry factors may decrease the market price of our shares, regardless of our Company's actual operating performance. At the present time, the Company does not plan to list our shares of Preferred Stock on any Exchange or Alternative Trading System, and does not anticipate that a public market for trading of these shares will develop.

 

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USE OF PROCEEDS

 

The gross proceeds of a fully subscribed Offering of the maximum number of shares of Common Stock , before total offering expenses and commissions, will be $49,000,000. Assuming the maximum offering is completed, we estimate that the net proceeds would be approximately $ 45,080,000, which would be used approximately as follows:

 

- Acquisition costs of the Acquired Entities  $16,000,000 
- Marketing and Promotion  $720,000 
- Website Development and Information Technology  $50,000 
- General Working Capital **   $28,310,000 

 

** General and Administrative Expenses, which may include compensation to Officers, Directors and principal employees

 

If the gross Offering proceeds were to be $36,750,000, or 75% of the maximum offered, we estimate that the net proceeds would be approximately $33,810,000, which would be used approximately as follows:

 

- Acquisition costs of the Acquired Entities  $16,000,000 
- Marketing and Promotion  $720,000 
- Website Development and Information Technology  $50,000 
- General Working Capital  $17,040,000 

 

If the gross Offering proceeds were to be $ 24,500,000, or 50% of the maximum offered, we estimate that the net proceeds would be approximately $ 22,540,000, which would be utilized approximately as follows:

 

- Acquisition costs of the Acquired Entities  $16,000,000 
- Marketing and Promotion  $720,000 
- Website Development and Information Technology  $50,000 
- General Working Capital  $5,770,000 

 

If the gross Offering proceeds were to be $12,250,000, or 25% of the maximum offered, we estimate that the net proceeds would be approximately $11,287,000 million, which would be utilized approximately as follows:

 

- Acquisition costs of the Acquired Entities  $8,360,000 
- Marketing and Promotion  $720,000 
- Website Development and Information Technology  $50,000 
- General Working Capital  $ 2,140,000  

 

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In the event that less than 50% of the maximum offered is sold, the amount allocated to the “Acquisition of the Acquired Entities” would be reduced, and the percentage interest in those acquisitions may be reduced from 100% to not less than 51%. Currently, our plan of acquisition calls for the entities to be acquired in the following order of priority:

 

    ($ amounts)        
             
Name of Entity   Ownership
100%
    Ownership
51%
 
Consign Meds LLC     10,000       5,100  
D & M Transport LLC     60,309       30,758  
EliCass LLC     187,500       95,625  
The Patch LLC     250,000       127,500  
Syntheto LLC     250,000       127,500  
AzCo North LLC     300,000       153,000  
CoAZ North LLC     400,000       204,000  
CMJD LLC     591,031       301,426  
JonCass LLC     814,326       415,306  
CJMC Colorado 2 LLC     885,000       451,350  
CassJo LLC     950,000       484,500  
NGS Consulting LLC     1,000,000       510,000  
National Development Services LLC     1,140,000       581,400  
Colorado Financial & Development Services LLC     1,150,000       586,500  
Hydroponics Depot LLC     1,500,000       765,000  
AvaCass LLC     6,509,334       3,319,760  

 

Because this Offering is a "best efforts" offering without a minimum amount required to be sold, we may close this Offering without sufficient funds for all of the intended purposes set forth above, or to fully execute our business plan. In such case, the allocation of our remaining proceeds may be further reduced or modified, or the priorities changed.

 

The sequence of acquisitions have been determined on the basis of price, lowest to highest. Despite the expected sequence of acquisitions, if, due to either operational, managerial and/or financial considerations, management determines that it would be in the best interests of the Company to alter the sequence of acquisitions, the Company reserves the right to do so without notice.

 

DETERMINATION OF OFFERING PRICE

 

In determining the initial public offering of the price of our shares, we included several factors including the following:

 

  our start-up status and lack of operating history;
     
  prevailing market conditions, including the history and prospects of the legal cannabis industry;
     
  the future prospects of our Company; and
     
  our capital structure.

 

Therefore, the public offering price of our Common Stock does not necessarily bear any relationship to established valuation criteria and may not be indicative of prices that may prevail at any time or from time to time in the public market for our Common Stock. You cannot be sure that a public market for any of our securities will develop and continue, or that the securities will ever trade at a price equal to or higher than the offering price in this Offering.

 

DILUTION

 

Immediate Dilution

 

If you invest in our Shares, your interest will be diluted to the extent of the Offering Price per share of our Common Stock and the pro-forma net tangible book value of the shares immediately after the completion of the Offering (and after giving effect to the proceeds of the Offering). Dilution means a reduction in the value, control, or earnings of the shares that an investor owns.

 

An early-stage company such as our Company typically sells it shares to its founders and early employees at a very low cash cost, and sometimes in exchange for services or “sweat equity”. When the company seeks investments from outside investors, such as in this Offering, the new investors typically pay a much larger sum for their shares than the founders or early investors, which means that the cash value of the new investors’ stake is diluted.

 

Our pro-forma net tangible book value as of December 31, 2016 was $ (1,421), or approximately $ 0.0001 per share. After giving effect to maximum net proceeds from this Offering of $ 45,080,000 our pro forma net tangible book value at December 31, 2016 would have been $1.12 per share. This represents an immediate increase in the net tangible book value of $1.12 per share and an immediate dilution of $ 5.88 per share for investors purchasing in this Offering.

 

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The following table compares the price that new investors are paying for their shares with the effective cash price paid by existing stockholders, assuming full conversion of preferred stock and full vesting and exercise of outstanding stock options, and based on the assumption that the price per share in this Offering is $7.00. This method gives investors a better picture of what they will pay for their investment compared to the company’s insiders than just including such transactions for the last 12 months, which is what the SEC requires.

 

DILUTION TABLE

 

Potential Gross Issue 7 Million Shares     100 %     75 %     50 %     25 %
Outstanding Preferred - equitv common     9,114       9,114       9,114       9,114  
Outstanding Common     29,000,000       29,000,00       29,000,00       29,000,00  
Newly Sold Common @ $7 per share     7,000,000       5,250,000       3,500,000       1,750,000  
                                 
Warrants per Acquisition Agreements     4,416,666       4,416,666       4,416,666       4,416,666  
Total Gross Revenue from stock sales     49,000,000       36,750,000       24,500,000       12,250,000  
                                 
Total Net Revenue from sales (92%)     45,080,000       33,810,000       22,540,000       11,270,000  
RETAINED EARNINGS AS OF 12/31/16     (1,421 )     (1,421 )     (1,421 )     (1,421 )
                                 
Net Book Value after issuance     45,078,579       33,808,579       22,538,579       11,268,579  
Total # Common shares
including pfd convertible
    40,425,780       38,675,780       36,925,780       35,175,780  
                                 
Net Book Value / share after issuance     1.14       0.90       0.64       0.35  
Share Dilution     5.86       6.10       6.36       6.65  

 

(1)

Assumes conversion of all shares of Preferred Stock into shares of Common Stock at a conversion price of $7.00 per share , and potential exercise of all warrants per acquisition agreements.

 

Potential Future Dilution

 

Investors who purchase Common Stock in this Offering, or who convert the Preferred Stock into shares of Common Stock, may be further diluted in the future due to the Company issuing additional shares. This increase in the future number of shares outstanding could result from factors including a public or private stock offering, venture capital financing, conversion of Preferred Stock, debt, or Warrants into shares of Common Stock. When the number of shares outstanding increases, each existing stockholder will own a smaller, or diluted percentage of the Company, and each share will be worth less. There is no guaranty that dilution of the Common Stock will not occur in the future.

 

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PLAN OF DISTRIBUTION

 

This Offering will commence within two calendar days after the Qualification date of this Offering Circular, and will close (terminate) upon the earlier of (i) the sale of the maximum number of Shares of Common Stock offered herein, (ii) one year from the date of Qualification of this Offering Circular, or (iii) a date prior to one year from the date the Offering commences that is so determined by Company Management (the “Offering Period”).

 

The Shares of Common Stock offered herein (collectively, the “Shares”), are being offered and sold directly by the Company on a “Best Efforts” basis without the benefit of a Placement Agent, and there is no minimum number of Shares required to be sold. The Shares will initially be offered and sold by the Company’s Officers and Directors, who will receive no commissions from the sale of the Shares. Our Officers and Directors will not register as broker-dealers under Section 15 of the Securities Exchange Act of 1934 in connection with the sale of our securities in reliance upon Rule 3a(4)(1) of such Act.

 

The Company can provide no assurance that the maximum number of Shares will be sold. The Company has engaged Prime Trust, LLC as Escrow Agent in connection with this Offering. All subscriptions will be made through the Escrow Agent, and upon acceptance of the subscription by the Company in compliance with applicable Regulation A purchaser requirements and applicable state Blue Sky regulations, the subscription funds will be immediately paid by the Escrow Agent to the Company, and the Company may determine to continue the Offering until the maximum number of Shares have been sold. The Company has the right to terminate this Offering at any time, regardless of the number of Shares which have been sold. If the Offering is terminated, or if any investor's subscription is rejected by the Company, all funds received by such investors will be returned by the Escrow Agent without interest or deduction. The Company reserves the right to reject an investor's subscription in whole or in part for any or no reason.

 

The Company may engage broker-dealers who are members of the Financial Industry Regulatory Authority (FINRA) to act as Placement Agent(s) with respect to some or all of the Shares offered herein, although the Company has not as of the date of this Offering Circular engaged the services of any broker-dealer. The Company will update the Registration Statement of which this Offering Circular is a part in the event that any broker-dealer is engaged to offer any or all of the Shares offered herein.

 

In order to purchase any of the Shares offered herein, a prospective investor must complete, sign, and deliver the executed Subscription Agreement, Subscriber Questionnaire, and IRS Form W-9 (collectively, the “Subscription Package”) to the Escrow Agent, together with funds for the subscription amount in accordance with the instructions contained in the Subscription Package.

 

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In addition to this Offering Circular, subject to limitations imposed by applicable federal and state securities laws and regulations, the Company expects to use additional advertising, sales and other promotional materials in connection with this Offering. These materials may include public advertisements and audio-visual materials, in each case only as authorized by the Company. Although these materials will not contain information in conflict with the information contained in this Offering Circular, and will be prepared with a view to presenting a balanced discussion of the risks and rewards with respect to an investment in the Shares, these materials will not give a complete understanding of this Offering and are not to be considered part of this Offering Circular.

 

THIS OFFERING IS MADE ONLY BY MEANS OF THIS OFFERING CIRCULAR AND PROSPECTIVE INVESTORS MUST READ AND RELY ON THE INFORMATION PROVIDED IN THIS OFFERING CIRCULAR IN CONNECTION WITH THEIR DECISION TO INVEST IN THESE SECURITIES.

 

MANAGEMENT DISCUSSION AND ANALYSIS AND RESULTS OF OPERATIONS

 

The following discussion of our financial condition and results of operations should be read in conjunction with the financial statements and notes thereto of the Company that are included in this Offering Circular. The following discussion contains forward-looking statements. Actual results could differ materially from the results discussed in the forward-look statements. See: “Risk Factors” and “Note Regarding Forward Looking Statements” above.

 

Overview

 

Doyen Elements, Inc., formerly AdvantaMeds Solutions USA Fund I, Inc. (the “Company”) is a corporation organized on October 21, 2015 under the laws of the state of Nevada. We have conducted limited business operations to date, and have had no revenues since our inception. We intend to focus our future business operations on providing a wide range of ancillary services and products to the legal medical-use cannabis industry, including property management and leasing, equipment sales and leasing, management consulting, business incubator services, technology solutions, and logistical support functions, both in the United States and internationally.

 

Recent Developments

 

On April 20, 2017, we entered into an "Equity Purchase Agreement" with several non-affiliated parties for the purpose of acquiring controlling interests (ranging from 51% to 100%) in sixteen entities which are currently engaged in various business activities in the legal medical-use and adult-use cannabis industry. This Agreement was amended on July 25, 2017, to include the possibility of a larger percentage acquisition of these companies. These acquisitions are scheduled to be completed on or before February 1, 2018, and upon acquisition these entities will be operated as subsidiaries of the Company. The aggregate purchase price is approximately $16 million in cash and 9 million shares of Common Stock of the Company. The Company will be dependent upon the successful completion of this Offering in order to complete these planned acquisitions. Accordingly, the Company’s future business operations are subject to significant risks and uncertainties including the failure by the Company to secure sufficient funding to acquire these sixteen entities and to operationalize its planned business operations. In the event that less than 50% of the potential proceeds are received from this offering, a fewer number of entities and/or a percentage of less than 100%, but at least 51%, may be acquired.

 

Revenue

 

The company has had no revenues from operation since its inception through December 31, 2016. We plan to earn revenues through the provision of goods and services to our customers and clients, and through the continuing business operations of the sixteen entities which we plan to acquire as subsidiaries.

 

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Expenses and Net Loss

 

The Company has had a total of $64,589 in expenses since its inception (October 21, 2015) through December 31, 2016. We have had no revenues, with a resulting net loss of ($64,589) for the inception period. The Company’s expenses included start-up and organizational expenses, consulting fees, and professional fees.

 

Liquidity and Capital Resources

 

As of December 31, 2016, the Company’s cash on hand was $301.00. The Company’s operations since its date of inception have been financed by $1,090.00 in loans from an Officer and $63,800.00 from the proceeds of the sale of Preferred Stock.

 

Operating Activities

 

During the year ended December 31, 2016, we used $63,539.00 of cash in operating activities. During the period from our inception through December 31, 2015, we used $1,050.00 in cash for organizational expenses and professional fees.

 

Issuance of Preferred Stock

 

During the year ended December 31, 2016, we sold a total of 638 Shares of Preferred Stock, designated by the Board of Directors as “6% Convertible Preferred Stock” to 14 shareholders at a price of $100.00 per share, for total cash consideration received by the Company of $63,800.00.

 

Investing Activities

 

We have had no investing activities since the date of our inception through December 31, 2016.

 

Financing Activities

 

During the period from our inception through December 31, 2016, we received a total of $1,090 in cash advances from an Officer of the Company.

 

Financial Advisory Agreement

 

On November 17, 2015, the Company entered into an "Advisory Agreement" with Wellington, Shields & Co. LLC, a Member of the NY Stock Exchange and a FINRA-registered broker-dealer. Pursuant to this Agreement, Wellington, Shields was paid a total of $40,000 to provide the Company with financial advisory services. This agreement terminated on May 31, 2017.

 

CrowdfundX Agreement

 

In July of 2017, the Company entered into a “Marketing Agreement” with CrowdfundX; which calls for intermittent payments on a continuous basis, based on selected projects..

 

Cannabrand Agreement

 

Beginning in July, 2017 the Company entered into a branding agreement with Cannibrand, which calls for intermittent payments on a continuous basis, based on time spent.

 

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BUSINESS

 

Doyen Elements, Inc. (the “Company”) was organized pursuant to the laws of the State of Nevada in October, 2015 as AdvantaMeds Solutions USA Fund I, Inc., and in May, 2017 the Company changed its name to Doyen Elements, Inc. The Company was organized for the purposes of providing consulting, incubator services, and accelerator services to companies operating in the legal cannabis business, as well as to acquire existing companies which are currently engaged in providing various ancillary services to this industry. We are a development-stage and emerging-growth Company, and have conducted minimal business operations since our inception.

 

In April, 2017, we entered into an Agreement to acquire controlling interests in sixteen business entities which are presently engaged in providing various ancillary business services to the legal cannabis industry. These acquisitions are scheduled to be made in three stages, with all of the transactions to be completed by February 1, 2018. These acquisitions will be made in substantial part utilizing funds raised by the Company in this Offering. In addition to the assets which are being acquired, and which are more particularly described below, these acquisitions will bring together a leadership team that merges traditional business management with years of practical operational experience in large-scale manufacturing and distribution in the legal cannabis industry.

 

The Company will not be directly engaged in the legal cannabis Business, and will not be licensed to produce or sell legal cannabis by any State, or any other governmental or regulatory body in any State, or in any jurisdiction. The Company will lease its real estate and legal cannabis production to various outside business entities engaged in the cultivation and distribution of legal cannabis. The Company will not grow, cultivate, manufacture, harvest, distribute, or sell legal cannabis or legal cannabis based products. The Company will be an equity stakeholder in each of the licensed entities that leases its real estate and/or legal cannabis production equipment. The Company will not be directly engaged in the legal cannabis industry.

 

Our principal business office is located at 20511 Abbey Drive, Frankfort, IL 60423. Our telephone number is 800-511-5925, and our corporate website is doyenelements.com. The information found on, or through, our website is not incorporated into or form a part of this Offering Circular, or any other document that we file with the U.S. Securities and Exchange Commission (the “SEC”).

 

INDUSTRY OVERVIEW

 

As a result of changing public attitudes, there is increasing legislative action among the various states with regard to regulated medical-use and legalized adult-use (recreational) legal cannabis (legal cannabis business) products. According to ArcView, an industry consultant, nationwide sales of state-legal cannabis has grown to over $5.4 billion as of 2016, of which approximately 92% consisted of medical-use sales. As of May 1, 2017, a total of 29 states plus the District of Columbia had legalized the sale and use of medically-prescribed legal cannabis or legal cannabis-related products.

 

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With larger states such as California, Illinois, Massachusetts, Florida, and New York having legalized medical-use legal cannabis, and with increasing popular sentiment in favor of both medical-use and adult-use legal cannabis throughout the United States, we expect continued growth in our target market of providing ancillary services to the growing number of direct licensees and participants in the legalized legal cannabis industry, which we sometimes refer to throughout this Offering Circular as “canna-business”.

 

According to an industry publication, Business Daily, sales of medical-use legal cannabis reached approximately $4.3 billion in 2016, which represented a 26% increase in sales from 2015. With an increasing number of states legalizing medical-use or adult-use legal cannabis, including many states with large consumer populations, and assuming a continued lack of enforcement of legal cannabis regulations on the federal level, we believe that all industry indicators and economic signs point to significant growth in the foreseeable future.

 

Business operations and opportunities in the legal cannabis industry are not limited to growing, processing, or dispensing legal cannabis products. A large part of the canna-business industry consists of ancillary companies, which provide products, equipment, technology, and services directly to licensed legal cannabis businesses as well as patients/consumers.

 

OUR PRODUCTS AND SERVICES

 

We have organized our Company to provide a wide range of ancillary services to canna-businesses, including real estate services, management consulting, regulatory and compliance services, industrial equipment leasing, and working capital. We intend to be a “one-stop shop” for the legal cannabis industry, and we expect that operators in this industry will be able to simplify their business operations, become more efficient, and maximize their profit potential by using our Company’s variety of ancillary products and services to replace duties that had been performed either in-house or by a multitude of outside contractors. We plan to help our clients not only save money, but also to save time and manpower that could be more efficiently used towards improving their business operations and product offerings and increasing their market share.

 

We believe that providing ancillary products and services to the licensed legal cannabis industry puts us in the best position to tap the national and international market, because we will not be bound by the licensing and regulatory requirements which binds growers and dispensers to a single state or geographic area. Our goal, and our opportunity, is to provide our products and services to clients in every state in which medical-use legal cannabis is legal. In addition, we expect to gradually tap the international market as well, with our initial emphasis a likely expansion of business operations into Canada.

 

These products and services will include:

 

Real Estate Services

 

We intend to acquire real estate and assets facilities which we can develop or retro-fit for lease to licensed legal cannabis growers and dispensers. According to available industry information, there is a significant demand for such facilities which is not currently being met by the commercial real estate industry. In addition, the supply of legal cannabis-friendly facilities and agricultural real estate is rapidly increasing in value in key markets such as California. Through our pending acquisitions, we will be able to enter this market as a developer and lessor, as well as have the capabilities for construction management and facilities management.

 

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Consulting and Management Services

 

Through our pending acquisitions, we will be acquiring the services of 62 individuals, each of whom has between 2 and 9 years of operational experience in the legal cannabis industry. We intend to offer both established industry participants as well as start-up operators a wide variety of management and operational services, including licensing, compliance, growth structure, facility build-out and expansion, security, transportation and logistics, and legal services.

 

The management expertise and industry experience that we will offer to our clients will be especially helpful to start-up businesses in states, which have recently, or are about to, legalize medical-use and/or adult-use legal cannabis products. Starting a dispensary or grow site is typically extremely complex, with varying rules, regulations, and legal risks involved. Because of the experience of our management and employees, we believe that our Company can provide valuable assistance and guidance to entrepreneurs and companies who wish to get involved in this fledgling industry.

 

Technology Solutions

 

The wide range of rules and regulations which govern the legal cannabis industry require operators to utilize the most up-to-date technology solutions and services available. Through our operating subsidiaries, we will offer to our clients:

 

  State requirements such as “seed-to-sale tracking” require grow operators to record and report every step in the production of licensed legal cannabis products, from initial seed and plant identification through harvesting, processing, and sale. We will assist our clients in obtaining and utilizing the best technology available to maintain compliance with all regulatory requirements.
     
  Supply Chain Management is extremely important for all aspects of canna-business, and our clients will require software that is particularly adapted to their regulatory and logistical requirements. We will assist in the development of their IP infrastructure for purchase order management, inventory control, warehouse management, supplier management, and financial forecasting.
     
  “Green Construction” is extremely important in canna-business, and we will utilize our construction expertise to help our clients decrease their operational costs by providing LEED-Certified solutions in the building of grow houses, including the innovative Syntheto Foam System.

 

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Industrial Equipment

 

The Company’s pending acquisition of Hydroponics Depot will provide us with a chain of 9 stores currently in operation which sell and service hydroponic and other industrial equipment needed to operate clean, efficient, and high-quality legal cannabis grow and processing facilities. The products sold include not only the hydroponic grow equipment, but also climate-control systems, advanced lighting technology, plant fertilizer, and operational supplies.

 

Proprietary Products

 

Through our pending acquisition of The Patch I, LLC, we will acquire a national licensing agreement for a patented Medical Legal cannabis Transdermal Patch (U.S. Patent No. pending). We intend to further develop the commercial applications of this technology, which may include granting sub-licenses or manufacturing licenses to business partners who will utilize this product for patients who are suffering from ailments or chronic illnesses who have been prescribed medical legal cannabis and who may benefit from a transdermal patch as a medication delivery system.

 

OUR PROPOSED ACQUISITIONS

 

On April 20, 2017, the Company entered into an “Equity Purchase Agreement” with sixteen separate entities to acquire, in three stages, controlling ownership of these entities. The total aggregate purchase price of these acquisitions if $15,997,500.00 in cash consideration and the issuance of 9,000,000 Shares of Common Stock of the Company to the various sellers. These acquisition transactions are scheduled to be concluded on or before February 1, 2018. [See: “Use of Proceeds”]. The entities proposed to be acquired are:

 

AvaCass, LLC

 

In January 2015, AvaCass North purchased a 104,000 sq. ft. industrial space that once served as a Pepsi Bottling Plant. It is located at 1900 South Freeway Dr. in Pueblo, CO 81004. The plan is to build out this facility to a state of the art 234,000 sq. ft. facility containing a cultivation, testing lab, office and infused products manufacturer to be leased out to a legal cannabis tenant. The build out will also create jobs in the economically depressed city of Pueblo, CO.

 

AzCo North, LLC

 

AzCo purchased this property at 975 W Fillmore in Colorado Springs, CO. 80907 in June 2012 as an old lube stop and was completely remodeled into a 1,600 sq. ft. retail store for the sale of medical marijuana. It is currently being leased by a legal cannabis tenant.

 

Joncass, LLC

 

Joncass purchased this property at 2103 East Platte Ave in Colorado Springs, CO. 80909 in February 2013 as a Mobil Oil Change and was completely remodeled into a 1,700 sq. ft. retail store for the sale of medical marijuana. The property is currently leased by a legal cannabis tenant.

 

National Development Services, LLC

 

National Development Services is located at 3266 Centennial Blvd Colorado Springs, CO 80907. This company manages all of the financial and accounting duties for all 16 companies listed. They have a Management Contract in place with the entities for these duties.

 

Starting a dispensary or grow site is typically very complex, given the varying rules, regulations and many pitfalls involved. Cannabis entrepreneurs are seeking assistance from companies or people who have experience and can provide guidance on how to go about the process, which will open the door for Doyen’s services.

 

Colorado Financial & Development Services, LLC

 

Colorado Financial & Development Services is located at 3266 Centennial Blvd Colorado Springs, CO 80907. This company financed the 1 million dollar build out of the facility owned by Cassjo LLC. There is a Lease in place with Cassjo for the reimbursement of the costs.

 

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CoAz North, LLC

 

CoAz North purchased this property at 1015 Hwy 115 in Penrose, CO. 81240 on April 2013 as two separate properties. The properties purchased had an existing 1,800 sq ft. space on one property and a small Quonset on the other property. The space was remodeled in 2013 and two 5,400 Nexus Greenhouses, for the grow of medical marijuana, were installed on the property with the Quonset. These properties are currently being leased by a legal Cannabis tenant.

 

CMJD, LLC

 

CMJD purchased this property at 286 S. Purcell Blvd in Pueblo West, CO 81007 as an old auto dealership in November 2013. It was fully remodeled in 2013/2014 and is a 2,274 sq. ft. retail store for the sale of medical marijuana. It is currently being leased out to a legal cannabis tenant.

 

EliCass. LLC

 

EliCass purchased a parking lot at 386 Purcell Blvd in Pueblo West, CO. 81007, in 2014 to be used as customer parking for the tenant using the facility owed by CMJD LLC.

 

CassJo, LLC

 

CassJo purchased this property at 6345 E Platte Ave Colorado Springs, CO 80915 in June 2011 In Colorado Springs, CO as a 8900 sq. ft. 4 office industrial building. It was remodeled in 2012/2013 into a two story 17,000 sq. ft. facility with nine separate rooms, for the grow of medical marijuana. It is currently being leased by a legal cannabis tenant.

 

CJMColorado2, LLC

 

CJMColorado2 purchased this property at 318 South 8th St. in Colorado Springs, CO 80906 and was purchased In September 2015 and was used as a law office. It was remodeled in 2015 and is a 2,000 sq. ft. retail store for the sale of medical marijuana. It is currently being leased out to a legal cannabis tenant.

 

D&M Transport, LLC

 

D&M Transport is located at 3266 Centennial Blvd Colorado Springs CO 80907 and was formed in 2009 in the remembrance of the mother of one of the owners of the above companies. It owns a 2016 transport van and provides Free of Charge rides for Cancer and patients with other debilitating diseases that have no family or ability to get to and from appointments.

 

NGS Consulting, LLC (1)

 

NGS Consulting is located at 3266 Centennial Blvd Colorado Springs, CO 80907; and is one of the few consulting companies that provides full spectrum Cannabis Consulting for the legal cannabis Industry. With a proven track record, NGS Consulting has expertise in all aspects of licensing, compliance, cultivation, operations and more, regardless of what state you are located in. Solution Management, Employee Training, Floor Plans and Construction, and Increasing Harvest Yields are just a few of the tailored services that are available to those wishing to operate legally within the Legal cannabis Industry.

 

The Patch I, LLC (2)

 

The Patch I, is located at 3266 Centennial Blvd Colorado Springs CO. 80907. The Patch I, LLC is a research entity for the development of a transdermal patch for which the company has a U.S. Patent for the delivery of CBD and legal cannabis into the body. It will be a research and development license for different forms of pain and seizure relief.

 

The company intends to use this to benefit its business partners, who will need to leverage this patent, when seeking to provide a solution for those suffering from ailments or chronic illnesses who may benefit from the use of transdermal patches. The Company will avidly focus on researching and developing cutting-edge technologies to benefit the Cannabis Industry.

 

Hydroponics Depot, LLC

 

Hydroponics Depot is located at 10225 N Metro Parkway E. Phoenix AZ. 85051 and is the largest hydroponics equipment supplier in the state. It has a store front being leased on a long term basis. It also ships direct from the supplier to customers in several other states like California, Washington, Oregon and Colorado. Through its chain of stores, Hydroponics Depot, the Company intends to sell hydroponic and other equipment needed to operate clean, high quality grow facilities.

 

As a provider of growing equipment and supplies; be it lights and fertilizers or climate control systems and advanced all-encompassing grow rooms.

 

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Syntheto, LLC. (3)

 

Syntheto is located at 3447 E. Angela Dr. Phoenix AZ 85032. Syntheto owns the United States rights to a proprietary patented Styrofoam material used in construction of cultivation facilities that is mold and pest resistant. The R factor is over double of standard building materials as well as being platinum LEED certified to enable each build to receive every tax credit available and local and state government entities.

 

The Company will also provide its clients with innovative green construction solutions that not only help decrease operational costs, but will also provide growing and cultivating ease.

 

Consign Meds, LLC

 

Consign Meds is located at 3266 Centennial Blvd Colorado Springs CO 80907. Consign Meds LLC provides Cannabis businesses (vendors) with the platform to source and finance wholesale transactions while offering extended payment options. Consign Meds is currently inactive and has had no operations since its inception.

 

We have not included financial statements for certain of the proposed acquisitions listed above due to the following considerations:

 

(1) NGS Consulting LLC is a limited liability company whose owner is not the owner of any of the other 15 entities and therefore was not included in either of the two sets of audited financial statements presented. NGS Consulting’s total assets and net loss were 0.4% and 0.1%, respectively, of the combined assets and net losses of the 16 entities. Audited financial statements of NGS Consulting were not provided due to the immaterial amounts involved.

 

(2) The Patch I, LLC is a limited liability company organized on January 27, 2017. Since this entity was not organized until after the date of the audited financial statements (December 31, 2016) it was not included.

 

(3) Syntheto, LLC is a limited liability company organized on July 27, 2017. Since this entity was not organized until after the date of the audited financial statements (December 31, 2016) it was not included. The sellers originally wanted Syntheto, LLC to be a Colorado entity until their attorney advised against, so the limited liability company was organized in Arizona.

 

SALES AND MARKETING

 

Our ultimate goal is to position Doyen Elements as the premier provider of ancillary services to the legal cannabis industry. Management intends to implement an integrated strategy that will utilize a wide range of marketing, promotional, and advertising initiatives to reach our targeted market. We intend to develop and position each of our subsidiary operations to become market-leaders in their respective niches, to cross-sell all of the services that we have to offer to each prospective client or customer, and to fully take advantage of the synergies and economies-of-scale that our business structure has to offer.

 

MARKETING TACTICS

 

We intend to utilize the following marketing channels and tactics to position ourselves appropriately to prospective canna-business clients and customers. We believe that these strategies will ensure that our Company is able to generate a steady stream of new clients that will end up becoming ongoing recurring customers on a long-term basis.

 

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Online Initiatives

 

  The Doyen Elements website, www.doyenelements.com, will be the Company's primary online marketing tool, and will be designed to serve as a powerful sales and promotional channel to reach our targeted canna-businesses. The website will provide potential clients with key information that will enable them to make a positive decision and convert them into clients. The website will include:
     
  An introductory video that grab the attention of prospective clients through explaining Doyen’s service offerings and value proposition.
     
  A modern logo and typeface that makes  the  website  easy--to--read  while  establishing  the Company’s brand identity
     
  An “About Us” section that will provide an overview of the Company’s history, background, and team Live Chat / Contact Form

 

Through these initiatives, Doyen Elements will create a personal and memorable experience for the potential client, increasing the chance of lead conversion and thereby generating potential revenues for the Company.

 

Search Engine Optimization (SEO)

 

The Company will utilize resources towards implementing an aggressive SEO strategy. Doyen will work to optimize the search engine rankings for all of its niche businesses. The Company will also focus on accumulating inbound links, listing on directories, instituting a blog, and establishing a social media presence with the goal of achieving a higher organic Google, Bing, and Yahoo search ranking for terms related to each of its different niche businesses. The organic ranking earned by Doyen’s subsidiary websites will bring authority to the Company as a leading and established cannabis platform and business. The Company will be very strategic in the search engine keywords it optimizes for and will specifically focus on keywords that have low ranking difficulty and have high purchase intent.

 

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Pay-Per-Click Campaign

 

Doyen will pursue a pay--per--click (PPC) advertising campaign in which the Company can pay additional funds for visible ads on search engines like Google and Bing. These campaigns target high search volume terms relevant to the business in order to drive traffic to the website. Doyen must analyze and opt for keywords that are the most cost effective in terms of driving traffic to the website, enhancing the Company’s visibility on the market.

 

In order to do so, Doyen will establish a Google AdWords account in order to create targeted advertisements that will appear on the first page of a Google search. The Company can specifically create ad copy based on its targeted keywords, establish the geographical radius in which the ad will appear, and allocate a certain budget towards that ad. When potential consumers search for a phrase related to cannabis ancillary services, the ad appears near the top of the Google search page. When customers click on the ad, a certain dollar amount will be removed from the Company’s allocated budget; this dollar amount will be higher depending on the popularity of the search term.

 

Behavioral Retargeting

 

In addition to allocating a marketing budget to search and display banner ads, Doyen will also aim to convert prospective clients that have already visited one of its websites. A visit to one of Doyen’s websites typically indicates a specific interest in the Company’s service offerings. The Company will use its re-targeting algorithms to shift this initial interest into multiple up-sells, cross-sells, and conversions.

 

Whereas other sites are constantly marketing to completely new customers, Doyen has already established a profile on the customer from previous visits or visits to their other web properties to target the marketing to them based upon past activity or purchases. The Company’s network of different properties will allow Doyen to generate significantly more revenue from each customer as compared to its competitors.

 

Doyen will also use behavioral retargeting on external websites. Retargeting marks online users who visited any of its subsidiary websites with a pixel, and then serves banner ads on other websites visited by those same users. The cost of behavioral retargeting is typically a fraction of traditional banner advertising. Assuming a conservative $5 CPM, Doyen will show up to 10 impressions per retargeted user, therefore spending $0.05 in the attempt to bring back a user with an existing digital profile back to one of its properties.

 

E-mail Direct Marketing

 

Doyen Elements will hire a third-party company to gather email addresses for canna-businesses across the country. Once it has created a substantial email list, the Company will send email blasts to these prospective clients on a continuous basis to direct them to the company website. Doyen Elements will also install a tracking code on all of its emails, similar to its retargeting strategy, which will automatically drop an anonymous cookie in the visitors' browser and create lists of people who have visited the Doyen Elements website. The Company can then, again, utilize channels such as AdRoll and Bannersnack to identify previous visitors and display retargeting ads on the web. Determine the Market and Content: Emails will include various types of content that will attract and inform old and new clients; emails will be targeted and designed for specific markets. Email topics include:

 

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Informative Emails: These emails will include helpful tips and information. For example, one email  may inform clients what services are offered and, on average, how much it may cost. These emails will spread goodwill to customers and enhance the Company’s brand.

     
 

Value Proposition: These emails will inform clients on what makes Doyen Elements better than other competitors. The Company can highlight its experience, commitment to helping canna-businesses grow their businesses, and overall positive ratings across online databases.

     
  Promotional Material: These emails will include discounts and promotions that can be applied towards the Company’s services.

 

Then, determine Sending Frequency and Goals: After determining the type of content for the market or campaign, the Company will determine the sending frequency and goals of the email campaign. By setting measurable goals such as amount of leads generated, the Company can track the progress and success of the campaign over time.

 

Finally, create Schedule: Doyen Elements will create a schedule for creating and sending out emails. Emails will be sent on a weekly or biweekly basis, according to this schedule. In addition, the Company will increase volume of email blasts depending on seasonality and market conditions.

 

The Company can create email campaigns on platforms such as Mailchimp and Autopilot.

 

    Doyen will establish a multi-faceted referral system to acquire active partners and economic alignment with a variety of referral relationships.
     
  Through banner advertisements on third party websites: Doyen and its subsidiary companies will publish banner advertisements on referrals’ websites that will direct viewers straight to one of the subsidiary companies.
     
  High traffic, high following websites: The Company will utilize high traffic websites that have a strong following to publicize Doyen’s service offerings.
     
  Channel partners: Channel partners can either be specialized or general websites focused on the different sectors of the cannabis market. Doyen will become affiliated with these channel partners, and will offer them a bonus when they recommend or drive a sale to a Doyen subsidiary.

 

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Referral and Advertising Partners

 

We will establish will establish a multi--faceted referral system to acquire active partners and economic alignment with a variety of referral relationships.

 

  Through banner advertisements on third party websites: Doyen and its subsidiary companies will publish banner advertisements on referrals’ websites that will direct viewers straight to one of the subsidiary companies.
     
  High traffic, high following websites: The Company will utilize high traffic websites that have a strong following to publicize Doyen’s service offerings.
     
  Channel partners: Channel partners can either be specialized or general websites focused on the different sectors of the cannabis market. Doyen will become affiliated with these channel partners, and will offer them a bonus when they recommend or drive a sale to a Doyen subsidiary.

 

Offline Initiatives

 

Events and Trade Shows

 

The Company will attend major industry event, expos, and conferences across the United States as it increases market penetration. The attendance of Doyen at well--known events will help to grow the Company brand, develop potential strategic partners with professionals in the industry, and generate additional leads for the business.

 

Examples of Business-to-Business Events:

 

  NCIA (Oakland)
  West Tech Summit (San Francisco)
  Las Vegas Annual Cannabis Conference
  Big Show Industry (LA)
  High Times Business Summit (LA)

 

Print Advertising

 

Print advertising will also be an effective marketing campaign for the Company. This includes new feature, discount and product announcements in local newspapers and publications, which will drive traffic to the Company. Potential publications include Canna Magazine and High Times.

 

Public Relations

 

We will focus on securing editorial coverage with various media outlets targeting the canna-business market. The team will reach out to relevant publication editors, high--traffic websites, and blogs in order to create a “buzz” about Doyen’s ancillary services and overall value.

 

The Company will rely heavily on an innovative public relations strategy, building strong relationships with magazine editors that focus on cannabis operators. The PR firm’s main responsibility consists of ongoing media outreach with top tier media sources in the industry as well as prominent online sites and bloggers. Public Relations efforts will also include quarterly creative programming ideas and pitches that will keep the Company in the media spotlight and provide the media with an ever-changing story angle, increasing the Company’s opportunity for consistent media coverage.

 

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COMPETITION

 

We face significant competition in providing management consulting, business incubation services, and equipment, products, and technology to companies in the legal cannabis industry that we are targeting. Many of these competitors have significant experience in this industry, have been in operation for a greater period, and possess significantly greater resources than our Company. These competitors may prevent us from acquiring desirable properties, or may cause an increase in the price we must pay for legal cannabis-friendly properties. In particular, larger companies may enjoy significant economies of scale and therefore be in a competitive advantage in pricing products and services.

 

Many of our potential competitors are already publicly traded corporations, including companies engaged in real estate acquisition, financial services, agricultural supplies, and legal cannabis growers and marketers. Recent entrants into this industry include larger companies such as The Legal cannabis Business Group, Inc., MJ Holdings, Inc., Advanced Legal cannabis Solutions, Inc., and Innovative Industrial Properties, Inc.

 

We believe that by targeting small and mid-sized producers and start-ups, which can benefit from our hands-on business support systems and our variety of products and services, we have identified an under-served niche in this rapidly expanding industry.

 

GOVERNMENT REGULATION

 

Our business operations, as well as properties that we may acquire, are subject to many federal, state, and local government laws and regulations, including land use, zoning, environmental regulations, operational licenses, and employment regulations. With our emphasis on the legal cannabis industry we, or our clients and customers, will also be subject to significant government regulations concerning the growing, processing, marketing, and dispensing of legal cannabis products.

 

Some of the properties that we plan to acquire will be used primarily for the cultivation and production of medical-use legal cannabis and will be subject to the laws, ordinances and regulations of the federal, state, and local governments involving land use, water rights, treatment methods, environmental disturbance, and eminent domain. In certain jurisdictions, land used for agricultural purposes are also subject to regulations governing the protection of endangered species and the protection of wetlands. Because certain of the properties that we will own will be used for growing legal cannabis, some jurisdictions have additional regulations regarding security and waste materials disposal.

 

At the present time, under federal law legal cannabis is classified by the Controlled Substances Act (CSA) as a Schedule I controlled substance. Even in those jurisdictions in which the growing, dispensing, or sale of legal cannabis products has been legalized at the state and/or local level, the possession, use, transfer, and cultivation of legal cannabis remains a violation of federal law. At present, it is the policy of the federal government, as stated by the prior Obama Administration, that it is not an efficient use of federal resources to direct federal law enforcement to prosecute those lawfully abiding by state laws permitting the use and distribution of medical-use legal cannabis (the so-called "Cole Memo"). However, absent any statutory changes to the CSA, federal law still criminalizes the possession, use, cultivation or transfer of legal cannabis and pre-empts any state laws to the contrary. If federal law enforcement policy with respect to state-legalized legal cannabis should change, although we are not directly involved in the cultivation or dispensing of medical-use legal cannabis, such enforcement would seriously impact the business operations of our clients and customers, and thereby seriously impact our ability to execute our Company's business plan. Under such circumstances, we would likely suffer significant losses with respect to our investment in medical-use legal cannabis facilities, including possible seizure and forfeiture of such assets.

 

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RESEARCH AND DEVELOPMENT

 

We have had no research and development expenses since our inception in October 2015, nor do we intend to utilize a significant amount of the proceeds of this Offering for research and development purposes. However, several of the entities that we plan to acquire have undertaken significant research and development activities in the past several years which our Company, upon the completion of our acquisitions, will benefit from.

 

SEASONALITY

 

We do not believe that seasonal factors will have a significant effect on our business operations.

 

EMPLOYEES

 

We have had no employees since our inception, and all of our business operations have been conducted by our Officers and Directors. Upon the completion of this Offering, we expect to hire 10 full-time and 6 part-time employees as part of our expansion of business operations. In addition, as of May 1, 2017, the entities which we plan to acquire employed approximately 62 persons, and many will continue to be employed by these entities following our planned acquisitions. Neither our Company nor any of our prospective employees are, or are expected to be, subject to a collective bargaining agreement.

 

PROPERTIES

 

At the present time, the Company does not own or lease any real properties or office facilities. Our business operations are conducted in space provided by the President of the Company on a month-to-month basis.

 

EMERGING-GROWTH COMPANY CONSIDERATIONS

 

We qualify as an "emerging-growth company" as defined by the Jumpstart Our Business Startups Act (the "JOBS Act"). As an emerging-growth company, we may take advantage of specified reduced reporting requirements under the Securities Act of 1933, as amended, and be relieved of certain other significant requirements that are otherwise applicable to public companies. [See: Risk Factors: Emerging Growth Company Considerations"].

 

MANAGEMENT

 

Officers and Directors

 

Our directors will serve until their successor is elected and qualified. Our officers are elected by the board of directors to a term of one year and serves until their successor is duly elected and qualified, or until they are removed from office. Our board of directors has no nominating, auditing or compensation committees.

 

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The name and position of our officer and directors are set forth below:

 

Name   Positions
     
Mr. Geoffrey Thompson   Chief Executive Officer, Chief Financial Officer

 

Mr. Thompson holds 17 years of experience in a wide array of endeavors business ownership and management with a focus predominantly in entrepreneurial-based activities involving start-ups and stabilization. He has served as the Chairman and CEO of the Company since its inception in October, 2015.

 

Geoff has been the founder of several “Start-up” companies that include 3 mortgage companies (Consumer Financial Resource Group, Inc., Streamline Mortgage, Inc. a multi-state correspondent Lender and Presidium Mortgage, Inc. specializing in investment properties), a title and escrow company (Streamline Title, Inc.). He also founded Streamline Real Estate Investments, LLC. With his wife Nancy which acquired in access of $10,000,000 of residential and commercial properties. He also co-founded Global Wealth Solutions, Inc. a real estate brokerage company with his wife Nancy all done prior to age 40.

 

After the US market collapse of the real estate markets in 2007 he co-founded with his wife Nancy and two other partners GWS Financial Services and advanced strategy financial services firm specializing in estate planning, premium financed life insurance, corporate SERP (Supplemental Employee Retirement Planning).

 

In 2009, he ventured into the public markets and purchased a SEC compliant “Blank Check” shell company. The company started as a Healthcare Technology company and grew from there into a mergers and acquisitions company focused on acute care, home health and behavioral sciences. Since inception, the company has made several key strategic acquisition while maintaining its status as fully reporting.

 

Geoff worked from 2010 through May 2012 to acquire healthcare technology licenses and rights and the “Form 10” became Accelera Innovations, Inc.

 

In 2013, Geoff repositioned Global Wealth Solutions into Synergistic Group and Synergistic Life Services creating a hybrid life insurance organization that could transition into a life insurance carrier.

 

In December of 2014, Accelera Innovations, Inc. and its leadership team went public and were progressing toward financing from the capital markets with five companies under contract to close. Through a strategic partnership Geoff became a master at understanding the unique financial needs of the cannabis related industry .

 

In 2015 Geoff embarked on his next commercial endeavor, Advantameds Solutions USA Fund I, Inc. a Nevada company being positioned for a public offering to be listed on a national marketplace (NYSE-MKT) or alternative trading system. The premise of the company is to be a leader in the Real Estate and legal cannabis business industry. After the Tier I became qualified Geoff envisioned taking it one step further. The plan was to qualify as a Reg A Tier II and be among the first US companies in the cannabis verticle to be listed and traded on a US Exchange. On September 8, 2016 his Tier II status was granted.

 

Geoff Thompson address is 20511 Abbey Dr, Frankfort, IL 60423

 

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Ms. Cynthia Boerum Chief Operating Officer

 

Ms. Boerum became the Chief Operating Officer of the Company. in September 2016; prior to joining the Company she was the Chief Strategic Officer and President of Accelera Innovations Inc. since April 2012.

 

Ms Boerum was Vice President of Sales and Consultant for Accentia International Outsourcing Company in Hyberdad, India, from 2009 to 2011. The leadership position included overseeing national and international sales teams.

 

Previously, Ms. Boerum held positions of Vice President of Sales for Opus Healthcare in Austin, TX. 2004 to 2007 and positioned the company for acquisition by NextGen. She also held the positions of Enterprise Vice President of National Accounts and Sales Manager for the top 32 health organizations nationally at McKesson from 1989 to 2003. During this time, she received various top performer awards, not only from McKesson, but also the state of Minnesota.

 

Cynthia Boerum address is 17001 Clear Springs Terrace, Minnetonka MN 55345

 

Audit Committee Financial Expert

 

Our Board of Directors currently carries out the functions of the Audit Committee. Our Board of Directors has determined that we do not have an audit committee financial expert on our Board of Directors carrying out the duties of the Audit Committee. The Board of Directors has determined that the cost of hiring a financial expert to act as a director and to be a member of the Audit Committee or otherwise perform Audit Committee functions outweighs the benefits of having a financial expert on the Audit Committee.

 

EXECUTIVE COMPENSATION

 

The following sets forth the compensation paid by us from inception on October 21, 2015 through December 31, 2016 to our two officers and directors. This information includes the dollar value of base salaries, bonus awards and number of stock options granted, and certain other compensation, if any.

 

Summary Compensation Table

 

NAME   Capacities in which
compensation received
  Cash
Compensation
    TOTAL
Compensation
 
Geoff Thompson (1,2)   Chairman, CEO   $ 1.00     $ 1.00  
Cynthia Boerum(1,2)   Chief Operating Officer     none       none  
Patrick Custardo(1)   Officer, Director (retired June 2017)   $ 1.00     $ 1.00  

 

In October of 2015, the Company adopted a compensation program for Company Management pursuant to which our two Officers and Directors, Geoffrey Thompson and Patrick Custardo, were each paid $1.00 in annual compensation.

 

On June 5, 2017 Patrick Custardo resigned as an Officer and Director of the Company. Patrick Custardo address is 9126 Lincoln Ave Brookfield IL 60513.

 

On June 5, 2017, the Company entered into an Employment Agreement with Cynthia Boerum to serve as Chief Operating Officer of the Company indefinitely. Ms. Boerum's compensation is as follows: $250,000 plus all commercially reasonable expenses. Ms. Boerum will also serve as a Director of the Company until the next Annual Meeting of Shareholders of the Company.**

 

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On June 5, 2017, the Company entered into an Employment Agreement with Geoffrey Thompson to serve as Chairman of Board and Chief Executive Officer of the Company indefinitely. Mr. Thompson’s compensation is as follows: $500,000 plus a monthly housing allowance of $15,000 and all commercially reasonable expenses.**

 

**No payments will be paid or begin or accrue under each of the employment agreements until the offering is qualified by the SEC.

 

There are no other stock option plans, retirement, pension, or profit sharing plans for the benefit of our two Officers and Directors other than as described herein.

 

Long-Term Incentive Plan Awards

 

We do not have any long-term incentive plans that provide compensation intended to serve as incentive for performance.

 

Compensation of Directors

 

Our two directors do not receive any compensation for serving as a member of our board of directors.

 

Indemnification of Officers and Directors

 

Nevada General Corporation Law permits a corporation to provide in its certificate of incorporation that a director of the corporation shall not be personally liable to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability for:

 

  any breach of the director’s duty of loyalty to the corporation or  its stockholders;
  acts or omissions not in good faith or which involve intentional  misconduct or a knowing violation of law;
  payments of unlawful dividends or unlawful stock repurchases or redemptions; or
  Any transaction from which the director derived an improper personal benefit.

 

The Company’s Certificate of Incorporation provides that, to the fullest extent permitted by applicable law, none of our directors will be personally liable to us or our stockholders for monetary damages for breach of fiduciary duty as a director. Any repeal or modification of this provision will be prospective only and will not adversely affect any limitation, right or protection of a director of our company existing at the time of such repeal or modification.

 

PRINCIPAL SHAREHOLDERS

 

The following table sets forth, as of the date of this prospectus, the total number of shares owned beneficially by our directors, officers and key employees, individually and as a group, and the present owners of 5% or more of our total outstanding shares. The table also reflects their ownership assuming the sale of all of the shares in this offering. The stockholders listed below have direct ownership of their shares and possesses sole voting and dispositive power with respect to the shares. Also included are the shares held by all executive officers and directors as a group.

 

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Name and Address
Beneficial Owner
  Number of
Shares
Before the
Offering
    % Ownership
Prior to Offering
    Number of Shares and % of
Ownership After the Offering
Assuming all of the Shares are Sold
 
Geoff Thompson, CEO [1,2]     18,000,000       62.06 %     18,000,000       50.00 %
Patrick Custardo [1]     2,000,000       6.89 %     2,000,000       5.55 %
Cynthia Boerum, COO [1,2]     9,000,000       31.03 %     9,000,000       25 %

 

[1] The persons named above may be deemed to be a “parent” and “promoter” of our company, within the meaning of such terms under the Securities Act of 1933, as amended, by virtue of their direct stock holdings.
   
[2] The persons named above are Offices or Directors of our company

 

Future sales by existing stockholders

 

As of June 30, 2017 a total of 29,000,000 (not including factoring for 9114 shares convertible from preferred and 4,416,666 shares of common stock that may be issued pursuant to warrants, were issued to our two officers and directors and former officer, Patrick Custardo, all of which are restricted securities, as defined in Rule 144 of the General Rules, and Regulations promulgated under the Securities Act of 1933. Under Rule 144, all of these shares can be publicly sold, subject to volume restrictions and restrictions on the manner of sale, commencing six months after their acquisition.

 

Shares purchased in this offering, which will be immediately resalable, and sales of all of our other shares after applicable restrictions expire, could have a depressive effect on the market price, if any, of our common stock and the shares we are offering. There is no public trading market for our common stock. There are no outstanding options or warrants to purchase, or securities convertible into, our common stock. There are seven holders of record of our common stock.

 

DESCRIPTION OF SECURITIES

 

Our authorized capital stock consists of 100 million Shares of Common Stock, $. 0.0001 par value, and Shares of Preferred Stock, $. 0.0001 par value. As of June 30, 2017, we have a total of 29,000,000 shares of Common Stock (not taking into account preferred shares convertible to common @ $7.00) and outstanding, and 638 shares of 6% Convertible Preferred Stock issued and outstanding.

 

36 

 

 

COMMON STOCK

 

The Company is authorized by its Certificate of Incorporation to issue an aggregate of 100,000,000 shares of Common stock, $ 0.0001 par value per share (the "Common Stock"). As of June 30, 2017, 29,000,000 shares of Common Stock were issued and outstanding (not taking into account preferred shares convertible to common @ $7). Upon the completion of this Offering, up to 40,425,780 shares of Common Stock will be issued and outstanding (including preferred shares equivalent to 9114  common - conversion at $7, and 4,416,666 shares which would be potentially be converted due to outstanding warrants).

 

All outstanding shares of Common Stock are of the same class and have equal rights and attributes. The holders of Common Stock are entitled to one vote per share on all matters submitted to a vote of stockholders of the Company. All stockholders are entitled to share equally in dividends, if any, as may be declared from time to time by the Board of Directors out of funds legally available. In the event of liquidation, the holders of Common Stock are entitled to share ratably in all assets remaining after payment of all liabilities. The stockholders do not have cumulative or preemptive rights.

 

Dividends

 

The Company has never declared or paid cash dividends on its Shares of Common Stock. The Company currently intends to retain all available funds and future earnings for use in the operation of Company business and does not anticipate paying any cash dividends in the foreseeable future to holders of our Common Stock. Any future determination to declare dividends for the Company’s Shares of Common Stock will be made at the discretion of our board of directors, and will depend on our financial condition, results of operations, capital requirements, general business conditions and other factors that our board of directors may deem relevant.

 

PREFFERED STOCK

 

The Company has 638 Shares of its Preferred Stock issued and outstanding as of June 30, 2017, designated as "6% Convertible Preferred Stock", owned by 12 different shareholders. The rights, privileges, and preferences of this Class of Preferred Stock has been designated as follows:

 

CERTIFICATE OF DESIGNATION

OF CONVERTIBLE PREFERRED STOCK

$0.0001 PAR VALUEPER SHARE

 

Advantameds Solutions USA Fund I, Inc, (now known as Doyen Elements, Inc.) a Company organized and existing under the laws of the State of Nevada (the "Company"), hereby certifies that the following resolution was adopted by the Board of Directors of the Company (the "Board") on December 20, 2016:

 

RESOLVED, that pursuant to the authority granted to and vested in the Board in accordance with the laws of the State of Nevada, and in accordance the provisions of the Articles of Incorporation and the bylaws of the Company, as amended or amended and restated through the date hereof, the Board hereby authorizes a class of the Company's previously authorized preferred stock (the "Preferred Stock"), and hereby states the designation and number of shares, and fixes the relative rights, preferences , privileges , powers and restrictions thereof as follows:

 

I. NAME OF THE COMPANY

 

Doyen Elements, Inc. formerly known as Advantameds Solutions USA Fund I, Inc,

 

37 

 

 

II.PREFERRED SHARES - NUMBER, OFFERING PRICE, AND DIVIDENDS

 

A. Designation. The designation of said series of preferred stock shall be Series A Preferred Stock shares, with par value of $0.0001 per share (the "Preferred Stock").

 

B. Number of Shares. The number of shares of Preferred Stock authorized to be issued is Five Hundred Thousand (500,000) shares.

 

C. Offering Price. The Preferred Stock shall have an offering price of One Hundred Dollars ($100) per share

 

D. Dividends. The holders of then outstanding shares of the Preferred Stock will be entitled to receive,when, as, and if declared by the Board of Directors out of funds of the Company legally available therefore cumulative cash dividends accruing, on a daily basis from the Purchase Date (as hereinafter defined) through and including the date on which such dividends are declared, at the annual rate of Six Percent (6%) per annum simple interest on the offering price of One Hundred Dollars ($100) per share.

 

III.LIQUIDATION AND REDEMPTION RIGHTS

 

Upon the occurrence of a Liquidation Event (as defined below), before any other distribution to holders of the Company, each holder of Preferred Stock is entitled to receive ratably any unpaid dividends declared by the Board, if any, out of funds legally available for the payment of dividends, if any. After the payment of any such unpaid dividends, if such funds are legally available, the holders of Preferred Stock are entitled to receive any remaining net assets on a pro rata basis with all other then outstanding shares. As used herein, “Liquidation Event” means

 

(i) the liquidation, dissolution or winding-up, whether voluntary or involuntary, of the Company,

 

(ii) the purchase or redemption by the Company of shares of any class of stock or the merger or consolidation of the Company with or into any other Company or Companies, unless (a) the holders of the Preferred Stock receive securities of the surviving Company having substantially similar rights as the Preferred Stock and the stockholders of the Company immediately prior to such transaction are holders of at least a majority of the voting securities of the successor Company immediately thereafter (the “Permitted Merger”) , unless the holders of the shares of Preferred Stock elect otherwise or (b) the sale, license or lease of all or substantially all, or any material part of, the Company’s assets, unless the holders of Preferred Stock elect.

 

Terms of Conversion or Repurchase by the Company:

 

  All 6% Convertible Preferred Stock Shares must be Converted to Company Common Stock either in the 2nd, 3rd, 4th or 5th year under the following terms and conditions at the Shareholders’ Option:

 

  YEAR 2: (Shareholder Conversion Option)

 

  At any time during the second year of the investment, the Shareholder may choose on the First Business Day of Each Month to convert each Unit of the Company’s 6% Convertible Preferred Stock for Common Stock of the Company at market price of the Company’s Common Stock at time of conversion / closing. The closing price will be the weighted average price of the Common Stock Closing Price over the previous 60 days. Fractional interests will be paid to the shareholder by the Company in cash.
     
  The Shareholder can sell the 6% Convertible Preferred Stock Shares back to the Company at any time after two years for the full face value of the Shares plus any accrued interest, though the Company has no obligation to purchase the Shares.

 

38 

 

 

  Dividends on this 6% Convertible Preferred Stock will be payable on a cumulative basis, when and if declared by the Board of Directors, or an authorized committee of the Board of Directors, at an annual rate of 6.00% of the stated value of $100.00
     
  Should the Company not be listed on any Regulated Stock Exchange or NYSE Market (“Over-the-Counter inter-dealer quotation system”), the shares shall convert to Common Stock in the Company at the “per share value” of the Company’s Common Stock as determined by an Independent Third Party Valuations Firm that is chosen by the Company’s Board of Directors.

 

  YEAR 3: (Shareholder Conversion Option)

 

  At any time during the third year of the investment, the Shareholder may choose on the First Business Day of Each Month to convert each Unit of the Company’s 6% Convertible Preferred Stock for Common Stock of the Company at market price minus 2.5% of the Company’s Common Stock at time of conversion / closing. The closing price will be the weighted average price of the Common Stock Closing Price over the previous 60 days. Fractional interests will be paid to the shareholder by the Company in cash.
     
  The Shareholder can sell the 6% Convertible Preferred Stock Shares back to the Company at any time after two years for the full face value of the Shares plus any accrued interest, though the Company has no obligation to purchase the Shares.
     
  Dividends on this 6% Convertible Preferred Stock will be payable on a cumulative basis, when and if declared by the Board of Directors, or an authorized committee of the Board of Directors, at an annual rate of 6.00% of the stated value of $100.00
     
  Should the Company not be listed on any Regulated Stock Exchange or NYSE Market (“Over-the-Counter inter-dealer quotation system”), the shares shall convert to Common Stock in the Company at the “per share value” of the Company’s Common Stock as determined by an Independent Third Party Valuations Firm that is chosen by the Company’s Board of Directors.

 

  YEAR 4: (Optional Conversion Option)

 

  At any time during the fourth year of the investment, the Shareholder may choose on the First Business Day of Each Month to convert each unit of the Company’s 6% Convertible Preferred Stock for Common Stock of the Company at market price minus 5.0%  of the Company’s Common Stock at time of conversion / closing. The closing price will be the weighted average price of the Common Stock Closing Price over the previous 60 days. Fractional interests will be paid to the shareholder by the Company in cash.

 

39 

 

 

  The Shareholder can sell the 6% Convertible Preferred Stock Shares back to the Company at any time after two years for the full face value of the Shares plus any accrued interest, though the Company has no obligation to purchase the Shares.
     
  Dividends on this 6% Convertible Preferred Stock will be payable on a cumulative basis, when and if declared by the Board of Directors, or an authorized committee of the Board of Directors, at an annual rate of 6.00% of the stated value of $100.00
     
  Should the Company not be listed on any Regulated Stock Exchange or NYSE Market (“Over-the-Counter inter-dealer quotation system”), the shares shall convert to Common Stock in the Company at the “per share value” (minus any discounts) of the Company’s Common Stock as determined by an Independent Third Party Valuations Firm that is chosen by the Company’s Board of Directors.

 

  YEAR 5: (Optional & Mandatory Conversion Options)

 

  Optional: At any time during the fourth year of the investment, the Shareholder may choose on the First Day of Each Month to convert each unit of the Company’s Convertible 6% Preferred Stock for Common Stock of the Company at market price minus 7.5% of the Company’s Common Stock at time of conversion / closing. The closing price will be the weighted average price of the Common Stock Closing Price over the previous 60 days. Fractional interests will be paid to the shareholder by the Company in cash.
     
  The Shareholder can sell the 6% Convertible Preferred Stock Shares back to the Company at any time after two years for the full face value of the Shares plus any accrued interest, though the Company has no obligation to purchase the Shares.
     
  Dividends on this 6% Convertible Preferred Stock will be payable on a cumulative basis, when and if declared by the Board of Directors, or an authorized committee of the Board of Directors, at an annual rate of 6.00% of the stated value of $100.00
     
  Mandatory: On the last business day of the 5th year of the investment, the Shareholder MUST convert each Unit of the Company’s 6% Convertible Preferred Stock for Common Stock of the Company at market price minus 7.5% of the Company’s Common Stock at time of conversion / closing. The closing price will be the weighted average price of the Common Stock Closing Price over the previous 60 days. Fractional interests will be paid to the shareholder by the Company in cash.
     
  Should the Company not be listed on any Regulated Stock Exchange or NYSE Market (“Over-the-Counter inter-dealer quotation system”), the shares shall convert to Common Stock in the Company at the “per share value” (minus any discounts) of the Company’s Common Stock as determined by an Independent Third Party Valuations Firm that is chosen by the Company’s Board of Directors.

 

40 

 

 

The Company has the Right to convert the 6% Convertible Preferred Stock Shares to Common Shares of the Company should the Company be acquired or merged with another company (where the Company has less than 50% controlling interest). The Company has the Right to “Call In” all 6% Convertible Preferred Stock Shares at the value of the Common Stock Shares, less the appropriate percentage discount in the Year that the acquisition or merger occurs.

 

The Company has not issued any additional Convertible Securities other than those listed and detailed above.

 

RELATED PARTY TRANSACTIONS

 

From the period of our inception through December 31, 2016, our President Mr. Geoffrey Thompson lent the Company a total of $1090.00 which was utilized for working capital purposes. As of December 31, 2016, a total of $1050.00 remained unpaid, and this sum is payable upon demand.

 

EXPERTS

 

Our financial statements for the periods from inception through December 31, 2016, included in this Offering Circular, have been audited by AJ Robbins CPA LLC, as set forth in their Report. Their Report is given upon their authority as experts in accounting and auditing.

 

LEGAL MATTERS

 

We are not a party to any pending or threatened legal proceedings or disputes, and we do not anticipate the institution of any legal proceedings.

 

The Law Offices of Peter Berkman, Esq. PLLC has acted as our legal counsel in providing a legal opinion for this filing.

 

INTERESTS OF NAMED EXPERTS AND COUNSEL

 

No expert or counsel named in this Offering Circular as having prepared or certified any part of this Offering Circular, or having given any opinion with respect to the validity of the securities offered herein or upon other legal matters in connection with this Offering, was employed on a contingency basis or had, or is to receive, in connection with this Offering, a substantial interest, direct or indirect, in the Company, or otherwise is or has been at any time connected to the Company as a promoter, Officer, Director, or employee.

 

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

 

There have been no disagreements regarding accounting and financial disclosure matters with our independent certified public accountants.

 

41 

 

 

DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES ACT LIABILITIES

 

Under our Articles of Incorporation and Bylaws, we may indemnify an officer or director who is made a party to any proceeding, including a lawsuit, because of their position, if they acted in good faith and in a manner they reasonably believed to be in our best interest. We may advance expenses incurred in defending a proceeding. To the extent that the officer or director is successful on the merits in a proceeding as to which they are to be indemnified, we must indemnify them against all expenses incurred, including attorney’s fees. With respect to a derivative action, indemnity may be made only for expenses actually and reasonably incurred in defending the proceeding, and if the officer or director is judged liable, only by a court order. The indemnification is intended to be to the fullest extent permitted by the laws of the State of Nevada.

 

Insofar as indemnification for liabilities arising under the Securities Act may be permitted to our Officers, Directors, and controlling purposes by our Certificate of Incorporation, our By-Laws and the laws of the State of Nevada, we have been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable.

 

AVAILABLE INFORMATION

 

We have filed with the U.S. Securities and Exchange Commission ("SEC") a Tier II Offering Circular pursuant to Regulation "A" promulgated under the Securities Act of 1933, as amended, and concurrently have filed a Registration Statement on Form 8-A pursuant to the Exchange Act of 1934, with respect to the shares to be sold in this Offering. This Offering Circular does not contain all of the information contained in the Form 1-A as some portions have been omitted in accordance with the rules and regulations of the SEC. For further information concerning our Company and our shares of Common Stock in this Offering Circular, reference is made to the Form 1-A and the Exhibits filed therewith.

 

Upon the completion of this Offering, we will be subject to the information and proxy reporting requirements of the Exchange Act, and we will file reports, proxy statements and other information with the SEC pursuant to the Securities Act. The public may read and copy any materials that we file with the SEC at the SEC's Public Reference Room at 100 F Street, N.E., Washington DC 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC also maintains an Internet site that contains reports, proxy and information statements, and other information regarding Issuers that file electronically with the SEC on the EDGAR system. The address of that site is www.sec.gov.

 

FINANCIAL STATEMENTS

 

Our fiscal year end is December 31. We will provide audited financial statements to our stockholders on an annual basis; the statements will be audited by our independent certifying accounting firm, AJ Robbins, CPA. Said firm is certified by the Public Company Accounting Oversight Board (PCAOB).

 

42 

 

 

ADVANTAMEDS SOLUTIONS USA FUND I INC.

Financial Statements

December 31, 2016 and 2015

 

Contents

 

  Page
Financial Statements:  
   
Report of Independent Registered Public Accounting Firm 2
   
Balance Sheets as of December 31, 2016 and 2015 4
   
Statement of Operations for the Year Ended December 31, 2016 and for the Period from October 21, 2015 (inception) to December 31, 2015

5

   
Statement of Stockholders’ Equity for the Year Ended December 31, 2016 and for the Period from October 21, 2015 (inception) to December 31, 2015

6

   
Statement of Cash Flows for the Year Ended December 31, 2016 and for the Period from October 21, 2015 (inception) to December 31, 2015

7

   
Notes to Financial Statements 8

 

  1 
  

 

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

To the Board of Directors and

Stockholders of Doyen Elements, Inc., (formerly AdvantaMeds Solutions USA Fund I, Inc.)

 

I have audited the accompanying balance sheets of Doyen Elements, Inc., (formerly AdvantaMeds Solutions USA Fund I, Inc.). (the Company”) as of December 31, 2015 and 2016, and the related statements of operations, changes in stockholders’ deficit, and cash flows for the period from October 21, 2015 (inception) to December 31, 2015 and for the year ended December 31, 2016. The Company’s management is responsible for these financial statements. My responsibility is to express an opinion on these financial statements based on my audits.

 

I conducted my audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that I plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor was I engaged to perform, an audit of its internal control over financial reporting. My audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control over financial reporting. Accordingly, I 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. I believe that my audits provide a reasonable basis for my opinion.

 

In my opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Doyen Elements, Inc., (formerly AdvantaMeds Solutions USA Fund I, Inc.) as of December 31, 2015 and 2016, and the results of their operations and their cash flows for each of the periods then ended, in conformity with accounting principles generally accepted in the United States of America.

 

aj@ajrobbins.com

3773 Cherry Creek North Drive, Suite 575 East, Denver, Colorado 80209

(B)303-331-6190 (M)720-339-5566 (F)303-845-9078

 

  2 
  

 

 

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As described in Note 4 to the financial statements, the Company is a business that has not yet commenced planned principal operations; plans to incur significant costs in pursuit of planned business operations, has not generated any revenues or profits since inception, and has sustained a net loss of $1,050.00 for the period from October 21, 2015 (inception) to December 31, 2015 and a net loss of $63,539 for the year ended December 31, 2016. These factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 4. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. My opinion is not modified with respect to this matter.

 

/s/ AJ Robbins CPA LLC

Denver, Colorado

 

April 14, 2017

Except for note 9 which is April 28, 2017

 

aj@ajrobbins.com

3773 Cherry Creek North Drive, Suite 575 East, Denver, Colorado 80209

(B)303-331-6190 (M)720-339-5566 (F)303-845-9078

 

  3 
  

 

DOYEN ELEMENTS, INC.

(formerly AdvantaMeds Solutions USA Fund I Inc.)

       
BALANCE SHEETS        
As of December 31, 2016 and 2015        

 

   2016   2015 
ASSETS          
Current Assets:          
Cash  $301   $- 
           
Total current assets   301    - 
           
Deferred offering costs   -    - 
           
TOTAL ASSETS  $301   $- 
           
LIABILITIES AND STOCKHOLDERS’ DEFICIT          
           
Current Liabilities:          
Due to officer  $1,090   $1,050 
Dividends payable   632    - 
           
Total current liabilities   1,722    1,050 
           
Commitments and contingencies (Note 7)   -    - 
           
STOCKHOLDERS’ DEFICIT          
Common stock, par value $0.0001; 100,000,000 shares authorized; 36,000,000 and 0 shares issued and outstanding at December 31, 2016 and 2015   3,600    - 
Preferred stock, $0.0001 par value 50,000,000 shares authorized; 6% convertible preferred stock, 500,000 shares authorized; 638 and 0 shares issued and outstanding at December 31, 2016 and 2015   -    - 
Additional paid in capital   60,200    - 
Accumulated deficit   (65,221)   (1,050)
Total stockholders’ deficit   (1,421)   (1,050)
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT  $301   $- 

 

See Independent Auditor’s Report and accompanying footnotes, which are an integral part of these financial statements

 

  4 
  

 

DOYEN ELEMENTS, INC.

(formerly AdvantaMeds Solutions USA Fund I Inc.)

STATEMENTS OF OPERATIONS
For the Years Ended December 31, 2016 and for the Period from October 21, 2015 (inception) to December 31, 2015

 

   2016   2015 
         
Revenues  $-   $- 
           
Operating expenses:          
Professional fees   698    1,050 
General and administrative expenses   62,841    - 
Total operating expenses   63,539    1,050 
           
Net loss   (63,539)   (1,050)
           
Preferred stock dividend   (632)   - 
           
Net loss attributed to common stockholder  $(64,171)  $(1,050)
           
Weighted average common shares outstanding - basic and diluted   36,000,000    - 
           
Net loss per common share - basic and diluted  $(0.00)  $- 

 

See Independent Auditor’s Report and accompanying footnotes, which are an integral part of these financial statements

 

  5 
  

 

DOYEN ELEMENTS, INC.

(formerly AdvantaMeds Solutions USA Fund I Inc.)

STATEMENT OF STOCKHOLDERS’ DEFICIT
For the Years Ended December 31, 2016 and for the Period from October 21, 2015 (inception) to December 31, 2015

 

   Common Stock   Preferred Stock   Additional
Paid-In
   Accumulated   Total
Stockholde rs’
 
   Shares   Amount   Shares   Amount   Capital   Deficit   Deficit 
                             
Balance, October 21, 2015 (inception)   -   $-    -   $-   $-   $-   $- 
                                    
Net loss   -    -    -    -    -    (1,050)   (1,050)
                                    
Balance, December 31, 2015   -    -    -    -    -    (1,050)   (1,050)
                                    
Common stock issued to founders   36,000,000    3,600    -    -    (3,600)   -    - 
Sale of 6% cumulative preferred stock   -    -    638    -    63,800    -    63,800 
Preferred stock dividend   -    -    -    -    -    (632)   (632)
Net loss   -    -    -    -    -    (63,539)   (63,539)
                                    
Balance, December 31, 2016   36,000,000   $3,600   $638   $-   $62,200   $(65,221)  $(1,421)

 

See Independent Auditor’s Report and accompanying footnotes, which are an integral part of these financial statements

 

  6 
  

.

DOYEN ELEMENTS, INC.

(formerly AdvantaMeds Solutions USA Fund I Inc.)

       
STATEMENTS OF CASH FLOWS        
For the Years Ended December 31, 2016 and for the Period from October 21, 2015 (inception) to December 31, 2015

 

   2016   2015 
CASH FLOWS FROM OPERATING ACTIVITIES:          
Net loss  $(63,539)  $(1,050)
Adjustments to reconcile net loss to net cash used in operating activities:          
Changes in operating assets and liabilities:          
Increase in due to officer   40    1,050 
           
Net cash used in operating activities   (63,499)   - 
           
CASH FLOWS FROM FINANCING ACTIVITIES:          
Proceeds from sale of preferred stock   63,800    - 
Net cash provided by financing activities   63,800    - 
           
NET INCREASE IN CASH   301    - 
           
CASH, BEGINNING OF PERIOD   -    - 
           
CASH, END OF PERIOD  $301   $- 
           
CASH PAID FOR:          
Interest  $-   $- 
Income taxes  $-   $- 

 

See Independent Auditor’s Report and accompanying footnotes, which are an integral part of these financial statements

 

  7 
  

 

DOYEN ELEMENTS, INC.

(formerly AdvantaMeds Solutions USA Fund I Inc.)

NOTES TO FINANCIAL STATEMENTS

For the Year Ended December 31, 2016 and for the Period from October 21, 2015 (inception) to December 31, 2015

 

Note 1 – Organization and Basis of Presentation

 

Organization and Line of Business

 

AdvantaMeds Solutions USA Fund I Inc. (the “Company”) is a corporation organized on October 21, 2015 under the laws of Nevada. The Company plans to lease real estate properties and cannabis production equipment, and enter in joint ventures with established licensed cannabis companies where the Company will be an equity stockholder in each company. The Company has not yet commenced planned principal operations nor generated revenue as of December 31, 2016. The Company is dependent upon additional capital resources for the commencement of its planned principal operations and is subject to significant risks and uncertainties; including failing to secure additional funding to operationalize the Company’s planned operations.

 

Basis of Presentation

 

The accounting and reporting policies of the Company conform to accounting principles generally accepted in the United States of America (GAAP).

 

The Company has elected to adopt early application of Accounting Standards Update (“ASU”) No. 2014-10, Development Stage Entities (Topic 915): Elimination of Certain Financial Reporting Requirements; the Company does not present or disclose inception-to-date information and other remaining disclosure requirements of Topic 915.

 

The Company adopted the calendar year as its basis of reporting.

 

Note 2 – Summary of Significant Accounting Policies

 

Use of Estimates

 

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates.

 

Cash Equivalents

 

For the purpose of the statement of cash flows, cash equivalents include time deposits, certificate of deposits, and all highly liquid debt instruments with original maturities of three months or less.

 

Fair Value of Financial Instruments

 

The Company discloses fair value information about financial instruments based upon certain market assumptions and pertinent information available to management.

 

Revenue and Cost Recognition

 

The Company recognizes revenue in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 605, Revenue Recognition, only when the price is fixed or determinable, persuasive evidence of an arrangement exists, the services have been provided, and collectability is assured. No revenues have been earned or recognized as of December 31, 2016. Expenses are recognized as incurred.

 

  8 
  

 

DOYEN ELEMENTS, INC.

(formerly AdvantaMeds Solutions USA Fund I Inc.)

NOTES TO FINANCIAL STATEMENTS

For the Year Ended December 31, 2016 and for the Period from October 21, 2015 (inception) to December 31, 2015

 

Organizational Costs

 

In accordance with FASB ASC 720, organizational costs, including accounting fees, legal fees, and costs of incorporation, are expensed as incurred.

 

Income Taxes

 

The Company accounts for income taxes in accordance with ASC Topic 740, Income Taxes. ASC 740 requires a company to use the asset and liability method of accounting for income taxes, whereby deferred tax assets are recognized for deductible temporary differences, and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion, or all of, the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.

 

Under ASC 740, a tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded. The Company has no material uncertain tax positions for any of the reporting periods presented.

 

Basic and Diluted Earnings Per Share

 

Earnings per share is calculated in accordance with ASC Topic 260, Earnings Per Share. Basic earnings per share (“EPS”) is based on the weighted average number of common shares outstanding. Diluted EPS is based on the assumption that all dilutive securities are converted. Dilution is computed by applying the treasury stock method. Under this method, options and warrants are assumed to be exercised at the beginning of the period (or at the time of issuance, if later), and as if funds obtained thereby were used to purchase common stock at the average market price during the period. There were no potentially dilutive securities outstanding during the year ended December 31, 2016 and for the period from October 21, 2015 (inception) to December 31, 2015, except for the 638 shares of 6% Convertible Preferred Stock outstanding at December 31, 2016. Due to the net loss incurred during year ended December 31, 2016 and for the period from October 21, 2015 (inception) to December 31, 2015 all instruments convertible into common stock would be anti-dilutive. Accordingly, diluted loss per share is the same as basic loss per share for year ended December 31, 2016 and for the period from October 21, 2015 (inception) to December 31, 2015.

 

Note 3 – Stockholders’ Equity

 

The Company authorized 150,000,000 shares of capital stock with consists of 100,000,000 shares of common stock, $0.0001 par value per share and 50,000,000 shares of preferred stock, $0.0001 par value per share.

 

6% Convertible Preferred Stock

 

The Company has designated 500,000 shares of the preferred stock as 6% Convertible Preferred Stock. Dividends on the 6% Convertible Preferred Stock will be payable on a cumulative basis when, and if declared by the Board of Directors, or an authorized committee of the Board of Directors, at an annual rate of 6.00% on the stated value of $100.00, and a shareholder can sell the shares of 6% Convertible Preferred Stock back to the Company at any time after two (2) years for the full face value of the shares plus any accrued interest, though the Company has no obligation to purchase the shares.

 

  9 
  

 

DOYEN ELEMENTS, INC.

(formerly AdvantaMeds Solutions USA Fund I Inc.)

NOTES TO FINANCIAL STATEMENTS

For the Year Ended December 31, 2016 and for the Period from October 21, 2015 (inception) to December 31, 2015

 

All shares of 6% Convertible Preferred Stock must be converted to shares common stock, either in the second, third, fourth or fifth year under the following terms and conditions at the shareholder’s option:

 

Year 2: (Shareholder Conversion Option)

 

At any time during the second year of the investment, a shareholder may choose on the first business day of each month to convert each share of the 6% Convertible Preferred Stock into common stock at the market price of the common stock at the time of conversion/closing. The closing price will be the weighted average price of the common stock closing price over the previous 60 days. Fractional interests will be paid to the shareholder by the Company in cash.

 

Year 3: (Shareholder Conversion Option)

 

At any time during the third year of the investment, a shareholder may choose on the first business day of each month to convert each share of the 6% Convertible Preferred Stock into common stock at the market price minus 2.5% of the common stock at time of conversion/closing. The closing price will be the weighted average price of the common stock closing price over the previous 60 days. Fractional interests will be paid to the shareholder by the Company in cash.

 

Year 4: (Shareholder Conversion Option)

 

At any time during the fourth year of the investment, a shareholder may choose on the first business day of each month to convert each share of the 6% Convertible Preferred Stock into common stock at the market price minus 5% of the common stock at time of conversion/closing. The closing price will be the weighted average price of the common stock closing price over the previous 60 days. Fractional interests will be paid to the shareholder by the Company in cash.

 

Year 5: (Optional & Mandatory Conversion Option)

 

At any time during the fourth year of the investment, a shareholder may choose on the first business day of each month to convert each share of the 6% Convertible Preferred Stock into common stock at the market price minus 7.5% of the common stock at time of conversion/closing. The closing price will be the weighted average price of the common stock closing price over the previous 60 days. Fractional interests will be paid to the shareholder by the Company in cash.

 

Note 4 – Going Concern

 

The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has not generated any revenues or profits since inception, and has sustained net losses of $63,539 and $1,050 for year ended December 31, 2016 and for the period from October 21, 2015 (inception) to December 31, 2015, respectively. The Company’s ability to continue as a going concern for the next twelve (12) months is dependent upon its ability to generate sufficient cash flows from operations to meet its obligations, which it has not been able to accomplish to date, and its ability to obtain additional capital financing from investors. These factors, among others, raise substantial doubt about the ability of the Company to continue as a going concern for a reasonable period of time. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

 

Management plans to raise additional equity capital to the Company as necessary to fund expenditures until the Company’s planned principal operations can generate sufficient cash flows to sustain operations. No assurance can be made that these efforts will be successful and sustain the Company for a reasonable period of time.

 

Note 5 – Related Party Transactions

 

Certain expenses of the Company for year ended December 31, 2016 and for the period from October 21, 2015 (inception) to December 31, 2015 were advanced by a related party company. As of December 31, 2016 and 2015, the Company owed Geoff Thompson, CEO, $1,090 and $1,050, respectively, for expenses paid on its behalf, which are included in due to officer on the balance sheet.

 

  10 
  

 

DOYEN ELEMENTS, INC.

(formerly AdvantaMeds Solutions USA Fund I Inc.)

NOTES TO FINANCIAL STATEMENTS

For the Year Ended December 31, 2016 and for the Period from October 21, 2015 (inception) to December 31, 2015

 

Note 6 – Income Taxes

 

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. A full valuation allowance is established against all net deferred tax assets as of December 31, 2016 based on estimates of recoverability. While the Company has optimistic plans for its business strategy, it determined that such a valuation allowance was necessary given the current and expected near term losses and the uncertainty with respect to its ability to generate sufficient profits from its business model. Because of the impacts of the valuation allowance, there was no income tax expense or benefit for the year ended December 31, 2016 and for the period from October 21, 2015 (inception) to December 31, 2015.

 

A reconciliation of the differences between the effective and statutory income tax rates for the year ended December 31, 2016 and for the period from October 21, 2015 (inception) to December 31, 2015:

 

   2016   2015 
   Amount   Percent   Amount   Percent 
                 
Federal statutory rates  $(21,960)   34.0%  $(357)   34.0%
State income taxes   (3,230)   5.0%   -    0.0%
Valuation allowance against net deferred tax assets   25,190    -39.0%   357    -34.0%
Effective rate  $-    0.0%  $-    0.0%

 

At December 31, 2016 and 2015, the significant components of the deferred tax assets are summarized below:

 

   2016   2015 
Deferred income tax asset          
Net operation loss carryforwards  $25,547   $357 
Total deferred income tax asset   25,547    357 
Less: valuation allowance   (25,547)   (357)
Total deferred income tax asset  $-   $- 

 

The valuation allowance increased by $25,190 and $357 in 2016 and 2015, respectively, as a result of the Company generating additional net operating losses.

 

The Company has recorded as of December 31, 2016 a valuation allowance of $25,547, as it believes that it is more likely than not that the deferred tax assets will not be realized in future years. Management has based its assessment on the Company’s lack of profitable operating history.

 

The Company conducts an analysis of its tax positions and has concluded that it has no uncertain tax positions as of December 31, 2016 and 2015.

 

The Company has net operating loss carry-forwards of $65,639. Such amounts are subject to IRS code section 382 limitations and expire in 2031. The 2016 and 2015 tax years are still subject to audit.

 

  11 
  

 

DOYEN ELEMENTS, INC.

(formerly AdvantaMeds Solutions USA Fund I Inc.)

NOTES TO FINANCIAL STATEMENTS

For the Year Ended December 31, 2016 and for the Period from October 21, 2015 (inception) to December 31, 2015

 

Note 7 – Commitments and Contingencies

 

Equity Purchase Agreement

 

The Company is currently negotiating an equity purchase agreement with four (4) individuals for the purchase of sixteen (16) limited liability companies incorporated in Colorado and Arizona. The companies provide services, development and equipment for the cannabis industry.

 

Note 8 – Recent Accounting Pronouncements

 

In January 2017, the FASB issued ASU 2017-01, Business Combinations (Topic 805) Clarifying the Definition of a Business. The amendments in this update 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 interim and annual periods beginning after December 15, 2017 and should be applied prospectively on or after the effective date. The Company is in the process of evaluating the impact of this accounting standard update on its financial statements.

 

In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash, which requires restricted cash to be presented with cash and cash equivalents on the statement of cash flows and disclosure of how the statement of cash flows reconciles to the balance sheet if restricted cash is shown separately from cash and cash equivalents on the balance sheet. ASU 2016-18 is effective for interim and annual periods beginning after December 15, 2017, with early adoption permitted. The Company is in the process of evaluating the impact of this accounting standard update on its financial statements.

 

In October 2016, the FASB issued ASU 2016-16, Income Taxes (Topic 740): Intra-Entity Transfer of Assets Other than Inventory, which requires the recognition of the income tax consequences of an intra-entity transfer of an asset, other than inventory, when the transfer occurs. ASU 2016-16 is effective for interim and annual periods beginning after December 15, 2018, with early adoption permitted. The Company is in the process of evaluating the impact of this accounting standard update on its financial statements.

 

In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230), Classification of Certain Cash Receipts and Cash Payments. ASU 2016-15 provides guidance for targeted changes with respect to how cash receipts and cash payments are classified in the statements of cash flows, with the objective of reducing diversity in practice. ASU 2016-15 is effective for interim and annual periods beginning after December 15, 2017, with early adoption permitted. The Company is in the process of evaluating the impact of this accounting standard update on its statements of cash flows.

 

In March 2016, the FASB issued ASU 2016-09, Stock Compensation (Topic 718), Improvements to Employee Share-Based Payment Accounting. ASU 2016-09, which amends several aspects of accounting for employee share-based payment transactions including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, and classification in the statement of cash flows. ASU 2016-09 is effective for fiscal years beginning after December 15, 2016 and interim periods within annual periods beginning after December 15, 2016, with early adoption permitted. The Company is in the process of evaluating the impact of this accounting standard update on its financial statements.

 

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). ASU 2016-02 requires lessees to recognize lease assets and lease liabilities on the balance sheet and requires expanded disclosures about leasing arrangements. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018 and interim periods in fiscal years beginning after December 15, 2018, with early adoption permitted. The Company is in the process of evaluating the impact of this accounting standard update on its financial statements.

 

In August 2014, the FASB issued ASU No. 2014-15, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern, which provides guidance on determining when and how to disclose going-concern uncertainties in the financial statements. ASU 2014-15 requires management to perform interim and annual assessments of an entity’s ability to continue as a going concern within one year of the date the financial statements are issued. An entity must provide certain disclosures if conditions or events raise substantial doubt about the entity’s ability to continue as a going concern. ASU 2014-15 is effective for annual periods ending after December 15, 2016, and interim periods thereafter. Early adoption is permitted. The Company is currently evaluating the impact of the adoption of this accounting standard update on its financial statements and disclosures.

 

  12 
  

 

DOYEN ELEMENTS, INC.

(formerly AdvantaMeds Solutions USA Fund I Inc.)

NOTES TO FINANCIAL STATEMENTS

For the Year Ended December 31, 2016 and for the Period from October 21, 2015 (inception) to December 31, 2015

 

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers. ASU 2014-09 is a comprehensive revenue recognition standard that will supersede nearly all existing revenue recognition guidance under current GAAP and replace it with a principle based approach for determining revenue recognition. ASU 2014-09 will require that companies recognize revenue based on the value of transferred goods or services as they occur in the contract. The ASU also will require additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. ASU 2014-09 is effective for interim and annual periods beginning after December 15, 2017. Early adoption is permitted only in annual reporting periods beginning after December 15, 2016, including interim periods therein. Entities will be able to transition to the standard either retrospectively or as a cumulative-effect adjustment as of the date of adoption. The Company is in the process of evaluating the impact of this accounting standard update on its financial statements and disclosures.

 

Management does not believe that any recently issued, but not yet effective, accounting standards could have a material effect on the accompanying financial statements. As new accounting pronouncements are issued, the Company will adopt those that are applicable under the circumstances.

 

Note 9 – Subsequent Event

 

On April 20, 2017, the Company entered into an equity purchase agreement with five individuals (collectively, the “Sellers”) pursuant to which the Company agreed to purchase the membership interests held by the Sellers in 14 Colorado limited liability companies and two Arizona limited liability companies in consideration for the aggregate purchase of $15,997,500, subject to adjustment. The purchase price is payable as follows:

 

  $150,000 on or before May 5, 2017;
  $150,000 on or before June 30, 2017;
  $8,000,000 on or before September 1, 2017;
  $3,000,000 on or before December 1, 2017; and
  $4,697,500 on or before February 1, 2018.

 

In addition, on April 28, 2017, in connection with the equity purchase agreement mentioned above, the Company issued 4,416,666 warrants to purchase shares of the Company’s common stock. The exercise price is $0.00 per shares and the warrants expire on April 28, 2022. The warrants were issued for consideration and accommodations related to a series of transactions regarding the purchase and lease back of real property.

 

  13 
  

 

AVACASS, LLC AND RELATED ENTITIES

Combined Financial Statements

December 31, 2016 and 2015

 

Contents

 

  Page
Financial Statements:  
   
Independent Auditor’s Report 2
   
Combined Balance Sheets as of December 31, 2016 and 2015 3
   
Combined Statements of Operations for the Years Ended December 31, 2016 and 2015 4
   
Combined Statement of Members’ Interest for the Years Ended December 31, 2016 and 2015 5
   
Combined Statements of Cash Flows for the Years Ended December 31, 2016 and 2015 6
   
Notes to Combined Financial Statements 7

 

 1 
  

 

 

INDEPENDENT AUDITOR’S REPORT

 

To the Board of Directors

AVACASS, LLC AND RELATED ENTITIES.

 

Report on the Financial Statements

 

I have audited the accompanying combined financial statements of AVACASS, LLC AND RELATED ENTITIES, which comprise the combined balance sheets as of December 31, 2015 and 2016, and the related combined statements of operations, statements of, members’ interests and cash flows for the years then ended and the related notes to the financial statements.

 

Management’s Responsibility for the Financial Statements

 

Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

 

Auditor’s Responsibility

 

My responsibility is to express an opinion on these financial statements based on my audit. I conducted my audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that I plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatements.

 

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, I express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my audit opinion.

 

aj@ajrobbins.com

3773 Cherry Creek North Drive, Suite 575 East, Denver, Colorado 80209

(B)303-331-6190 (M)720-339-5566 (F)303-845-9078

 

 2 
 

 

 

In my opinion, the financial statements referred to above present fairly, in all material respects, the financial position of AVACASS, LLC AND RELATED ENTITIES, as of December 31, 2015 and 2016, and the results of its operations and its cash flows for the years then ended, in accordance with accounting principles generally accepted in the United States of America.

 

   
Denver, Colorado  
May 18, 2017  

 

aj@ajrobbins.com

3773 Cherry Creek North Drive, Suite 575 East, Denver, Colorado 80209

(B)303-331-6190 (M)720-339-5566 (F)303-845-9078

 

 3 
 

 

AVACASS, LLC AND RELATED ENTITIES

COMBINED BALANCE SHEETS

As of December 31, 2016 and 2015

 

    2016     2015  
ASSETS                
Current Assets:                
Cash   $ 29,145     $ 32,488  
Accounts receivable, net     399,137       161,162  
Other receivable     -       49,524  
Inventory     302,883       116,634  
Prepaid expenses and other current assets     5,304       11,331  
                 
Total current assets     736,469       371,139  
                 
Property and equipment, net     5,073,104       5,213,710  
                 
TOTAL ASSETS   $ 5,809,573     $ 5,584,849  
                 
LIABILITIES AND MEMBERS’ INTEREST                
                 
Current Liabilities:                
Accounts payable   $ 219,259     $ 271,453  
Accrued expenses     13,883       44,633  
Due to Todays Health Care     573,398       372,262  
Due to related parties     1,278,180       1,002,764  
Notes payable     353,050       45,198  
                 
Total current liabilities     2,437,770       1,736,310  
                 
Notes payable, net of current portion     2,717,398       3,074,721  
                 
TOTAL LIABILITIES     5,155,168       4,811,031  
                 
Commitments and contingencies (Note 7)     -       -  
                 
MEMBERS’ INTEREST                
Members contributions     801,239       800,019  
Accumulated deficit     (146,834 )     (26,201 )
Total members’ interest     654,405       773,818  
TOTAL LIABILITIES AND MEMBERS’ INTEREST   $ 5,809,573     $ 5,584,849  

 

See Independent Auditor’s Report and accompanying footnotes, which are an integral part of these combined financial statements.

 

 4 
 

 

AVACASS, LLC AND RELATED ENTITIES

COMBINED STATEMENTS OF OPERATIONS

For the Years Ended December 31, 2016 and 2015

 

    2016     2015  
Revenues:                
Rental income   $ 914,913     $ 844,295  
Services income     135,358       125,987  
Retail sales     3,781,424       2,717,170  
Total revenues     4,831,695       3,687,452  
                 
Operating expenses:                
Cost of retail sales     2,906,303       2,338,557  
General and administrative expenses     1,026,752       822,856  
Total operating expenses     3,933,055       3,161,413  
                 
Income from operations     898,640       526,039  
                 
Other income (expense):                
Interest expense     (209,913 )     (170,630 )
Other income     19,374       4,860  
Total other income (expense)     (190,539 )     (165,770 )
                 
Net income   $ 708,101     $ 360,269  

 

See Independent Auditor’s Report and accompanying footnotes, which are an integral part of these combined financial statements.

 

 5 
 

 

AVACASS, LLC AND RELATED ENTITIES

COMBINED STATEMENT OF MEMBERS’ INTEREST

For the Years Ended December31, 2016 and 2015

 

          Retained        
          Earnings/     Total  
    Members     (Accumulated     Members’  
    Contributions     Deficit)     Interest  
                   
Balance, January 1, 2015   $ 649,619     $ 536,944     $ 1,186,563  
                         
Members contributions     150,400               150,400  
Distributions             (923,414 )     (923,414 )
Net income             360,269       360,269  
                         
Balance, December 31, 2015     800,019       (26,201 )     773,818  
                         
Members contributions     1,220               1,220  
Distributions             (828,734 )     (828,734 )
Net income             708,101       708,101  
                         
Balance, December 31, 2016   $ 801,239     $ (146,834 )   $ 654,405  

 

See Independent Auditor’s Report and accompanying footnotes, which are an integral part of these combined financial statements.

 

 6 
 

 

AVACASS, LLC AND RELATED ENTITIES

COMBINED STATEMENTS OF CASH FLOWS

For the Years Ended December31, 2016 and 2015

 

    2016     2015  
CASH FLOWS FROM OPERATING ACTIVITIES:                
Net income   $ 708,101     $ 360,269  
Adjustments to reconcile net income to net cash provided by operating activities:                
Depreciation     169,863       140,200  
Loss on disposal of equipment     14,602       -  
Changes in operating assets and liabilities:                
Accounts receivable     (237,975 )     (95,277 )
Inventory     (186,249 )     -  
Prepaid expenses and other current assets     6,027       (545 )
Accounts payable     (52,194 )     237,243  
Accrued expenses     (30,750 )     (21,185 )
                 
Net cash provided by operating activities     391,425       620,705  
                 
CASH FLOWS FROM INVESTING ACTIVITIES:                
Payment on other receivable     49,524       47,310  
Purchase of property and equipment     (43,859 )     (1,103,791 )
Net cash used in investing activities     5,665       (1,056,481 )
                 
CASH FLOWS FROM FINANCING ACTIVITIES:                
Advances from Todays Health Care     201,136       273,517  
Advances from related parties     275,416       991,762  
Members contributions     1,220       150,400  
Distributions     (828,734 )     (923,414 )
Payments on notes payable     (49,471 )     (45,200 )
Net cash provided by (used in) financing activities     (400,433 )     447,065  
                 
NET INCREASE (DECREASE) IN CASH     (3,343 )     11,289  
                 
CASH, BEGINNING OF PERIOD     32,488       21,199  
                 
CASH, END OF PERIOD   $ 29,145     $ 32,488  
                 
CASH PAID FOR:                
Interest   $ 209,913     $ 170,630  
Income taxes   $ -     $ -  
                 
SUPPLEMENTAL NON-CASH INVESTING AND FINANCING ACTIVITIES:                
Issuance of notes payable for property   $ -     $ 2,292,000  

 

See Independent Auditor’s Report and accompanying footnotes, which are an integral part of these combined financial statements.

 

 7 
 

 

AVACASS, LLC AND RELATED ENTITIES

NOTES TO COMBINED FINANCIAL STATEMENTS

For the Years Ended December 31, 2016 and 2015

 

Note 1 - Basis of Presentation, Organization and Lines of Business

 

Basis of Presentation and Organization

 

The accompanying combined financial statements include the accounts of the following entities:

 

    State of    Date of 
Name   Incorporation    Incorporation 
           
AvaCass, LLC   Colorado    February 10, 2014 
AzCo North, LLC   Colorado    March 2, 2012 
Joncass, LLC   Colorado    February 23, 2013 
CoAZ North, LLC   Colorado    February 25, 2013 
CMJD, LLC   Colorado    October 14, 2013 
CassJo, LLC   Colorado    November 7, 2012 
CJMColorado2, LLC   Colorado    July 29, 2014 
EliCass, LLC   Colorado    May 6, 2015 
D&M Transport, LLC   Colorado    March 15, 2012 
Hydroponics Depot, LLC   Arizona    August 6, 2010 

 

The above entities have been combined in this financial statement presentation as the majority owner of each entity is the same individual. The entities are hereafter referred to as the “Company.”

 

The accounting and reporting policies of the Company conform to accounting principles generally accepted in the United States of America (GAAP).

 

Line of Business

 

The Company owns real property that it currently leases to tenants in the cannabis industry, operates a retail recreational and medical cannabis store in Phoenix, Arizona and provides transportation services to its tenants’ customers. All of the Company’s business activities are in the cannabis industry.

 

Note 2 – Summary of Significant Accounting Policies

 

Use of Estimates

 

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions. These estimates and assumptions 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. Actual results could differ from those estimates. It is possible that accounting estimates and assumptions may be material to the Company due to the levels of subjectivity and judgment involved.

 

Cash Equivalents

 

For the purpose of the statement of cash flows, cash equivalents include time deposits, certificate of deposits, and all highly liquid debt instruments with original maturities of three months or less. At December 31, 2016 and 2015, the Company did not have any cash equivalents.

 

Accounts Receivable

 

The Company grants credit to customers under credit terms that it believes are customary in the industry and does not require collateral to support customer receivables. The Company provides an allowance for doubtful collections, which is based upon a review of outstanding receivables, historical collection information, and existing economic conditions. As of December 31, 2016 and 2015, the allowance for doubtful accounts was $0 and $0, respectively.

 

 8 
 

 

AVACASS, LLC AND RELATED ENTITIES

NOTES TO COMBINED FINANCIAL STATEMENTS

For the Years Ended December 31, 2016 and 2015

 

Other receivable

 

In 2014, the Company sold equipment to an unrelated third party. The purchase price is being paid in monthly installments of $4,615. The balance was fully paid in 2016.

 

Inventory

 

Inventory is valued at the lower of the inventory’s cost (first in, first out basis) or the current market price of the inventory. Management compares the cost of inventory with its market value and an allowance is made to write down inventory to market value, if lower. As of December 31, 2016 and 2015, there was an allowance for slow moving or obsolete inventory of $0 and $0, respectively. The Company’s entire inventory at December 31, 2016 and 2015 was finished goods inventory.

 

Concentrations

 

The Company leases real property to Todays Health Care, LLC and Todays Health Care II, LLC (collectively “Todays Health Care”). All of the Company’s rental income and services income for the years ended December 31, 2016 and 2015 are from Todays Health Care. At December 31, 2016 and 2015, 44% and 100% of the Company’s accounts receivable was from Todays Health Care.

 

Property and Equipment, net

Property and equipment are stated at cost. Expenditures for maintenance and repairs are expensed as incurred; additions, renewals and improvements are capitalized. When furniture and equipment are retired or otherwise disposed of, the related cost and accumulated depreciation are removed from the respective accounts, and any gain or loss is included in operations. Depreciation of furniture and equipment is provided using the straight-line method for substantially all assets with estimated lives as follows:

 

Building and Improvements 30 years
Leasehold improvements 7 years
Furniture and fixtures 5 years
Equipment 7 years
Vehicles 5 years

 

Long-Lived Assets

 

The Company applies the provisions of ASC Topic 360, Property, Plant, and Equipment, which addresses financial accounting and reporting for the impairment or disposal of long-lived assets. ASC 360 requires impairment losses to be recorded on long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets’ carrying amounts. In that event, a loss is recognized based on the amount by which the carrying amount exceeds the fair value of the long-lived assets. Loss on long-lived assets to be disposed of is determined in a similar manner, except that fair values are reduced for the cost of disposal. Based on its review as of December 31, 2016 and 2015, the Company believes there was no impairment of its long-lived assets.

 

Fair Value of Financial Instruments

 

For certain of the Company’s financial instruments, including cash, accounts receivable, other receivables, accounts payable, accrued expenses and advances, the carrying amounts approximate their fair values due to their short maturities.

 

FASB ASC Topic 820, Fair Value Measurements and Disclosures, requires disclosure of the fair value of financial instruments held by the Company. FASB ASC Topic 825, Financial Instruments, defines fair value, and establishes a three-level valuation hierarchy for disclosures of fair value measurement that enhances disclosure requirements for fair value measures. The carrying amounts reported in the balance sheets for receivables and current liabilities each qualify as financial instruments and are a reasonable estimate of their fair values because of the short period of time between the origination of such instruments and their expected realization and their current market rate of interest. The three levels of valuation hierarchy are defined as follows:

 

 9 
 

 

AVACASS, LLC AND RELATED ENTITIES

NOTES TO COMBINED FINANCIAL STATEMENTS

For the Years Ended December 31, 2016 and 2015

 

  Level 1 inputs to the valuation methodology are quoted prices for identical assets or liabilities in active markets.
     
  Level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets in inactive markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.
     
  Level 3 inputs to the valuation methodology use one or more unobservable inputs which are significant to the fair value measurement.

 

The Company analyzes all financial instruments with features of both liabilities and equity under FASB ASC Topic 480, Distinguishing Liabilities from Equity, and FASB ASC Topic 815, Derivatives and Hedging.

 

As of December 31, 2016 and 2015, respectively, the Company did not identify any assets or liabilities required to be presented on the balance sheet at fair value.

 

Revenue Recognition

 

The Company recognizes revenue in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 605, Revenue Recognition, only when the price is fixed or determinable, persuasive evidence of an arrangement exists, the services have been provided, and collectability is assured. Rental income is recognized on a monthly basis based on existing lease agreements with customers. Services income is recognized as services are performed to benefit its tenants’ customers. Retail sales are recognized at the point of sale to the customer.

 

Income Taxes

 

The Company is classified as a partnership for federal and state income tax purposes. Therefore, all income is required to be reported on the individual members’ income tax returns. A partnership is not a taxpaying entity for income tax purposes. Accordingly, no income tax expense has been recorded in the combined financial statements.

Under Financial Accounting Standards Board ASC 740 “Income Taxes” (“ASC 740”), an uncertain tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded. Based on management’s analysis, the Company did not record a provision for uncertain tax positions during the years ended December 31, 2016 and 2015. The open tax years are 2014, 2015 and 2016.

 

Recent Accounting Pronouncements

 

In May 2014, the Financial Accounting Standards Board (“FASB”) issued an Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers, which supersedes nearly all existing revenue recognition guidance under U.S. GAAP. The core principle of ASU 2014-09 is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration to which an entity expects to be entitled for those goods or services. ASU 2014-09 defines a five step process to achieve this core principle and, in doing so, more judgment and estimates may be required within the revenue recognition process than are required under existing U.S. GAAP. This pronouncement is effective for annual reporting periods beginning after December 15, 2016, and is to be applied using one of two retrospective application methods, with early application not permitted. The Company is currently evaluating the impact of the pending adoption of ASU 2014-09 on its financial statements.

 

 10 
 

 

AVACASS, LLC AND RELATED ENTITIES

NOTES TO COMBINED FINANCIAL STATEMENTS

For the Years Ended December 31, 2016 and 2015

 

In November 2015, the FASB issued ASU 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 Company does not anticipate the adoption of this ASU will have a significant impact on its financial position, results of operations, or cash flows.

 

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). The guidance in ASU No. 2016-02 supersedes the lease recognition requirements in ASC Topic 840, Leases (FAS 13). ASU 2016-02 requires an entity to recognize assets and liabilities arising from a lease for both financing and operating leases, along with additional qualitative and quantitative disclosures. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, with early adoption permitted. The Company is currently evaluating the effect this standard will have on its financial statements.

 

In March 2016, the FASB issued ASU 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 financial statements.

 

In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230), Classification of Certain Cash Receipts and Cash Payments. ASU 2016-15 provides guidance for targeted changes with respect to how cash receipts and cash payments are classified in the statements of cash flows, with the objective of reducing diversity in practice. ASU 2016-15 is effective for interim and annual periods beginning after December 15, 2017, with early adoption permitted. The Company is currently evaluating the impact of the adoption of this newly issued guidance to its statements of cash flows.

 

In October 2016, the FASB issued ASU 2016-16, Income Taxes (Topic 740): Intra-Entity Transfer of Assets Other than Inventory, which requires the recognition of the income tax consequences of an intra-entity transfer of an asset, other than inventory, when the transfer occurs. ASU 2016-16 is effective for interim and annual periods beginning after December 15, 2018, with early adoption permitted. The Company is currently evaluating the impact of the adoption of this newly issued guidance to its financial statements.

 

In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash, which requires restricted cash to be presented with cash and cash equivalents on the statement of cash flows and disclosure of how the statement of cash flows reconciles to the balance sheet if restricted cash is shown separately from cash and cash equivalents on the balance sheet. ASU 2016-18 is effective for interim and annual periods beginning after December 15, 2017, with early adoption permitted. The Company is currently evaluating the impact of the adoption of this newly issued guidance to its financial statements.

 

In January 2017, the FASB issued ASU 2017-01, Business Combinations (Topic 805) Clarifying the Definition of a Business. The amendments in this update 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 interim and annual periods beginning after December 15, 2017 and should be applied prospectively on or after the effective date. The Company is in the process of evaluating the impact of this accounting standard update.

 

Other recent accounting pronouncements issued by the FASB, including its Emerging Issues Task Force, the American Institute of Certified Public Accountants, and the Securities and Exchange Commission did not or are not believed by management to have a material impact on the Company’s present or future financial statements.

 

 11 
 

 

AVACASS, LLC AND RELATED ENTITIES

NOTES TO COMBINED FINANCIAL STATEMENTS

For the Years Ended December 31, 2016 and 2015

 

Note 4 – Property and Equipment

 

The following are the details of the property and equipment as of December 31, 2016 and 2015:

 

   2016   2015 
         
Land  $1,132,319   $1,132,319 
Building and improvements   4,183,226    4,178,568 
Leasehold improvements   22,733    22,733 
Furniture and fixtures   24,251    24,251 
Equipment   35,470    35,470 
Vehicles   62,229    86,028 
    5,460,228    5,479,369 
Less accumulated depreciation   (387,124)   (265,659)
Property and equipment, net  $5,073,104   $5,213,710 

 

Depreciation expense for the years ended December 31, 2016 and 2015 was $169,863 and $140,200, respectively.

 

Note 5 – Due to Todays Health Care

 

Due to Todays Health Care are advances received to by the Company that are non-interest bearing and payable upon demand.

 

Note 6 – Due to Related Parties

 

Due to related parties are advances received to by the Company that are non-interest bearing and payable upon demand. The majority of the amount due to related parties is due to the Company’s majority owner.

 

Note 7 – Notes Payable

 

Notes payable as of December 31, 2016 and 2015 consisted of the following:

 

   2016   2015 
Note payable accrues interest at 6% per annum; monthly interest only payments; principal payment of $300,000, $400,000 and $1,257,000 due on January 30, 2017, 2018 and 2019, respectively; secured by land and building  $1,957,000   $1,957,000 
Note payable accrues interest at 8.5% per annum; monthly principal and interest payments of $2,493; due February 2023; secured by land and building   136,026    151,428 
Note payable accrues interest at 6.0% per annum; monthly principal and interest payments of $1,439; unpaid principal balance due June 2018; secured by land and building   228,669    232,103 
Note payable accrues interest at 6.0% per annum; monthly principal and interest payments of $1,505; unpaid principal balance due December 2018; secured by land and building   191,578    197,928 
Note payable accrues interest at 10.2% per annum; monthly principal and interest payments of $4,400; due March 2023; secured by land and building   222,175    246,460 
Note payable accrues interest at 6% per annum; monthly interest only payments of $1,675; principal payment of $335,000 due October 2020; secured by land and building   335,000    335,000 
Total   3,070,448    3,119,919 
Less current portion   353,050    45,198 
Long-term portion  $2,717,398   $3,074,721 

 

 12 
 

 

AVACASS, LLC AND RELATED ENTITIES

NOTES TO COMBINED FINANCIAL STATEMENTS

For the Years Ended December 31, 2016 and 2015

 

Aggregate future maturities of notes payable as of December 31, 2016 are as follows:

 

Years ending December 31,     
2017   $353,050 
2018    858,566 
2019    1,311,000 
2020    394,865 
2021    66,369 
Thereafter    86,598 
    $3,070,448 

 

The weighted average interest rates on outstanding notes payable was 6.4%

 

Note 8 – Commitments and Contingencies

 

Cannnbis Industry

 

The Company leases real estate properties to licensed cannabis companies. The sale of cannabis related products has been approved by several states, but is currently in violation of federal law. If federal law is enforced by the United States government, it would have a negative impact on the cannabis industry and could significantly impact the Company’s ability to continue to operate.

 

Leases

 

The Company leases its retail store location in Phoenix, Arizona under a non-cancelable operating lease that expires in May 2019. Rent expense for the years ended December 31, 2016 and 2015 was $47,122 and $40,630, respectively.

 

Aggregate future rental payments under this operating lease as of December 31, 2016 are as follows:

 

Years ending December 31,     
2017   $50,988 
2018    52,008 
2019    21,848 
    $124,844 

 

 13 
 

 

AVACASS, LLC AND RELATED ENTITIES

NOTES TO COMBINED FINANCIAL STATEMENTS

For the Years Ended December 31, 2016 and 2015

 

Sale of the Company

 

The Company and its members have entered into an agreement with AdvantaMeds Solutions USA Fund I, Inc. (“AdvantaMeds”) to sell 100% of the equity interest of the Company to AdvantaMeds.

 

Note 9 – Rental Income

 

The Company currently leases real property to Todays Health Care under operating leases that expire at various dates through September 2020.

 

Aggregate future rental income under current lease arrangements are as follows:

 

Years ending December 31,     
2017   $926,193 
2018    869,800 
2019    343,600 
2020    135,000 
    $2,274,593 

 

Note 10 – Subsequent Events

 

Pursuant to ASC 855-10, the Company has evaluated all events or transactions that occurred from January 1, 2017 to May 18, 2017. The Company did not have any material recognizable subsequent events during this period.

 

 14 
 

 

NATIONAL DEVELOPMENT SERVICES, LLC

AND COLORADO FINANCIAL & DEVELOPMENT SERVICES, LLC

Combined Financial Statements

December 31, 2016 and 2015

 

Contents

 

  Page
Financial Statements:  
   
Independent Auditor’s Report 2
   
Combined Balance Sheets as of December 31, 2016 and 2015 3
   
Combined Statements of Operations for the Years Ended December 31, 2016 and 2015 4
   
Combined Statement of Members’ Interest for the Years Ended December 31, 2016 and 2015 5
   
Combined Statements of Cash Flows for the Years Ended December 31, 2016 and 2015 6
   
Notes to Combined Financial Statements 7

 

 1 
 

 

 

 

INDEPENDENT AUDITOR’S REPORT

 

To the Board of Directors

NATIONAL DEVELOPMENT SERVICES, LLC AND COLORADO FINANCIAL & DEVELOPMENT SERVICES, LLC

 

Report on the Financial Statements

 

I have audited the accompanying combined financial statements of NATIONAL DEVELOPMENT SERVICES, LLC AND COLORADO FINANCIAL & DEVELOPMENT SERVICES, LLC, which comprise the combined balance sheets as of December 31, 2015 and 2016, and the related combined statements of operations, statements of, members’ interests and cash flows for the years then ended and the related notes to the financial statements.

 

Management’s Responsibility for the Financial Statements

 

Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

 

Auditor’s Responsibility

 

My responsibility is to express an opinion on these financial statements based on my audit. I conducted my audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that I plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatements.

 

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, I express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my audit opinion.

 

aj@ajrobbins.com

3773 Cherry Creek North Drive, Suite 575 East, Denver, Colorado 80209

(B)303-331-6190 (M)720-339-5566 (F)303-845-9078

 

2 
  

 

NATIONAL DEVELOPMENT SERVICES, LLC

AND COLORADO FINANCIAL & DEVELOPMENT SERVICES, LLC

NOTES TO COMBINED FINANCIAL STATEMENTS

For the Years Ended December 31, 2016 and 2015

 

Opinion

 

In my opinion, the financial statements referred to above present fairly, in all material respects, the financial position of NATIONAL DEVELOPMENT SERVICES, LLC AND COLORADO FINANCIAL & DEVELOPMENT SERVICES, LLC, as of December 31, 2015 and 2016, and the results of its operations and its cash flows for the years then ended, in accordance with accounting principles generally accepted in the United States of America.

 

 

Denver, Colorado

May 18, 2017

 

aj@ajrobbins.com

3773 Cherry Creek North Drive, Suite 575 East, Denver, Colorado 80209

(B)303-331-6190 (M)720-339-5566 (F)303-845-9078

 

3 
  

 

NATIONAL DEVELOPMENT SERVICES, LLC

AND COLORADO FINANCIAL & DEVELOPMENT SERVICES, LLC

NOTES TO COMBINED FINANCIAL STATEMENTS

For the Years Ended December 31, 2016 and 2015

 

NATIONAL DEVELOPMENT SERVICES, LLC AND COLORADO FINANCIAL & DEVELOPMENT SERVICES, LLC

COMBINED BALANCE SHEETS

As of December 31, 2016 and 2015

 

ASSETS        
   2016   2015 
Current Assets:          
Cash  $20,821   $39,771 
Accounts receivable   140,059    85,207 
Prepaid expenses and other current assets   -    3,075 
           
Total current assets   160,880    128,053 
           
Property and equipment, net   454,061    633,135 
           
TOTAL ASSETS  $614,941   $761,188 
           
LIABILITIES AND MEMBERS’ INTEREST          
           
Current Liabilities:          
Accounts payable  $6,609   $6,041 
Accrued expenses   54,900    50,000 
Due to Todays Health Care   120,163    88,994 
Notes payable   2,295    2,970 
           
Total current liabilities   183,967    148,005 
           
Notes payable, net of current portion   2,697    23,975 
           
TOTAL LIABILITIES   186,664    171,980 
           
Commitments and contingencies (Note _)   -    - 
           
MEMBERS’ INTEREST          
Members contributions   822,716    822,716 
Accumulated deficit   (394,439)   (233,508)
Total members’ interest   428,277    589,208 
TOTAL LIABILITIES AND MEMBERS’ INTEREST  $614,941   $761,188 

 

See Independent Auditor’s Report and accompanying footnotes, which are an integral part of these combined financial statements.

 

4 
  

 

NATIONAL DEVELOPMENT SERVICES, LLC

AND COLORADO FINANCIAL & DEVELOPMENT SERVICES, LLC

NOTES TO COMBINED FINANCIAL STATEMENTS

For the Years Ended December 31, 2016 and 2015

 

NATIONAL DEVELOPMENT SERVICES, LLC AND COLORADO FINANCIAL & DEVELOPMENT SERVICES, LLC

COMBINED STATEMENTS OF OPERATIONS

For the Years Ended December 31, 2016 and 2015

 

   2016   2015 
Revenues:          
Rental Income