UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

 

FORM 10-K

 

(Mark One)
[X]  ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For The Fiscal Year Ended December 31, 2014

or

 

[_]  TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____ to ____

 

Commission File No. 000-54009

 

A1 GROUP, INC.

(Exact name of registrant as specified in its charter)

Nevada

20-5982715

(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)

 

7040 Avenida Encinas,
Suite 104-159
Carlsbad, CA 92011

(Address of principal executive offices, Zip Code)
 

545 Second Street., #6
Encinitas, CA 92024

(Former address of principal executive offices, Zip Code)

 

Registrant’s telephone number, including area code: (760) 487-7772

 

Securities registered pursuant to Section 12(b) of the Exchange Act: None.

 

Securities registered pursuant to Section 12(g) of the Exchange Act:

 

Common stock, par value $0.001 per share.

(Title of class)

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes [_] No [X]

 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes [_] No [X]

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [_]

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [X] No [_]

 

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [_]

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer [_] Accelerated filer [_]
Non-accelerated filer
(Do not check if a smaller reporting company)
[_] Smaller reporting company [X]

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [_] No [X]

 

The aggregate market value of the registrant’s common stock, par value $0.001 per share, held by non-affiliates of the registrant, based on the closing price of the common stock as of the last business day of the registrant’s most recently completed second fiscal quarter was approximately $3,598,525.

 

As of March 26, 2015, the registrant had 34,168,260 shares of common stock outstanding.

 

DOCUMENTS INCORPORATED BY REFERENCE:

 

None.

 

 
 

 

A1 GROUP, INC.

ANNUAL REPORT ON FORM 10-K

TABLE OF CONTENTS

Page

PART I 1
ITEM 1. BUSINESS 1
ITEM 1A. RISK FACTORS 6
ITEM 1B. UNRESOLVED STAFF COMMENTS 6
ITEM 2. PROPERTIES 6
ITEM 3. LEGAL PROCEEDINGS 6
ITEM 4. MINE SAFETY DISCLOSURES 6
PART II 7
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES 7
ITEM 6. SELECTED FINANCIAL DATA 8
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 8
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 10
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 10
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE 11
ITEM 9A. CONTROLS AND PROCEDURES 11
ITEM 9B. OTHER INFORMATION 12
PART III 13
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE 13
ITEM 11. EXECUTIVE COMPENSATION 14
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS 15
ITEM 13. CERTAIN RELATIONSHIP AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE. 16
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES. 16
PART IV 17
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES 17

 

ii
 

 

Use of Certain Defined Terms

 

Except as otherwise indicated by the context, references in this report to “A1 Group”, “we,” “us,” “our,” “our Company,” or “the Company” are to the combined business of A1 Group, Inc.

 

Forward-Looking Statements

 

This Annual Report on Form 10-K contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements discuss matters that are not historical facts. Because they discuss future events or conditions, forward-looking statements may include words such as “anticipate,” “believe,” “estimate,” “intend,” “could,” “should,” “would,” “may,” “seek,” “plan,” “might,” “will,” “expect,” “anticipate,” “predict,” “project,” “forecast,” “potential,” “continue” negatives thereof or similar expressions. Forward-looking statements speak only as of the date they are made, are based on various underlying assumptions and current expectations about the future and are not guarantees. Such statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, level of activity, performance or achievement to be materially different from the results of operations or plans expressed or implied by such forward-looking statements.

 

We cannot predict all of the risks and uncertainties. Accordingly, such information should not be regarded as representations that the results or conditions described in such statements or that our objectives and plans will be achieved and we do not assume any responsibility for the accuracy or completeness of any of these forward-looking statements. These forward-looking statements are found at various places throughout this Annual Report on Form 10-K and include information concerning possible or assumed future results of our operations, including statements about potential acquisition or merger targets; business strategies; future cash flows; financing plans; plans and objectives of management; any other statements regarding future acquisitions, future cash needs, future operations, business plans and future financial results, and any other statements that are not historical facts.

 

These forward-looking statements represent our intentions, plans, expectations, assumptions and beliefs about future events and are subject to risks, uncertainties and other factors. Many of those factors are outside of our control and could cause actual results to differ materially from the results expressed or implied by those forward-looking statements. In light of these risks, uncertainties and assumptions, the events described in the forward-looking statements might not occur or might occur to a different extent or at a different time than we have described. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of the Annual Report on Form 10-K. All subsequent written and oral forward-looking statements concerning other matters addressed in this Annual Report on Form 10-K and attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this Annual Report on Form 10-K.

 

Except to the extent required by law, we undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, a change in events, conditions, circumstances or assumptions underlying such statements, or otherwise.

 

iii
 

 

PART I

 

ITEM 1.BUSINESS

 

Business Overview

 

We are an electronic cigarette company with Internet sales and kiosk locations in the greater Miami area through our fully owned subsidiary A1 Vapors, Inc., which was incorporated in April 2012 as a Florida Corporation. A1 Vapors is a product development and marketing company catering to the electronic vapor cigarette and accessories industry. A1 Vapors offers a variety of options to choose from to appeal to all smokers including a diverse selection of devices and flavors.

 

“Electronic cigarettes” or “e-cigarettes” and “vaporizers” are battery-powered products that enable users to inhale nicotine vapor without smoke, tar, ash, or carbon monoxide. Electronic cigarettes look like traditional cigarettes and, regardless of their construction are comprised of three functional components:

 

·A mouthpiece, which is a small plastic cartridge that contains a liquid nicotine solution;
·The heating element that vaporizes the liquid nicotine so that it can be inhaled; and
·The electronics, which include: a lithium-ion battery, an airflow sensor, a microchip controller and an LED which illuminates to indicate use.

 

When a user draws air through the electronic cigarette and or vaporizer, the air flow is detected by a sensor, which activates a heating element that vaporizes the solution stored in the mouthpiece/cartridge, the solution is then vaporized and it is this vapor that is inhaled by the user. The cartridge contains either a nicotine solution or a nicotine free solution, either which may be flavored.

 

The Company was engaged in the business of operating sweepstakes websites featuring free giveaways of premier consumer products to users who participated in online games. Prior to this the Company was offering window blind system products and ceased such operation upon the consummation of a change of control of the Company in August 2012. Since August 2012, and until mid-August 2014, management had been building the Company to be a platform for marketing and advertising initiatives and a marketplace for consumer products. On August 14, 2014 the Company entered into a Share Exchange Agreement with A-1 Vapors, Inc. as reported in our Current Report on Form 8-K filed with the Securities and Exchange Commission (“SEC”) on August 22, 2014 (the “August 2014 Form 8-K”). The Company is now involved in the electronic cigarette retail market.

 

The Company has filed an Amendment to the Articles of Incorporation as reported in the 8-K file on January 16, 2015 requesting the state of Nevada and FINRA change its name from “FreeButton, Inc.” to the new name “A1 Group, Inc.” All of the Company’s filings will reflect the new name when the process is completed with the state and federal agencies.

 

Corporate History

 

The Company was incorporated on November 27, 2006 under the laws of the State of Nevada and extra-provincially registered under the laws of the Province of Ontario on February 2, 2007. On September 28, 2012, the Company with a majority of the shareholders and directors changed its name from Secured Window Blinds, Inc. to Freebutton, Inc. On June 23, 2014 a majority of the shareholders and directors and on November 23, 2014 changed its name from Freebutton, Inc. to A1 Group, Inc.

 

A1 Group, Inc. is now a product development and marketing company catering to the electronic vapor cigarette and accessories industry.

 

1
 

 

Recent Developments

 

On May 23, 2014, FreeButton, Inc. (now known as A1 Group, Inc.) entered into an Exchange Agreement with A-1 Vapors, Inc., to acquire A-1 Vapors. The transaction contemplated by the Exchange Agreement was consummated on August 14, 2014. As reported in our From 8-K filed with the SEC on August 22, 2014, the Company entered into a Share Exchange Agreement (the ‘Share Exchange Agreement”) which resulted in a Reverse Takeover with selling stockholders named in the prospectus, pursuant to which the Company offered and sold an aggregate of 21,000,000 shares of common stock to all the stockholders of A-1 Vapors,, Inc., a Florida corporation (“A-1 Vapors”), incorporated in the State of Florida, on April 26, 2012. The acquisition has been treated as a recapitalization of Freebutton, Inc. (now known as A1 Group, Inc.), with A1 Vapors, Inc. as the accounting acquirer in accordance with the Reverse Merger rules. As a result of the consummation of the Share Exchange Agreement A-1 Vapors became a wholly-owned subsidiary of the Company and the electronic cigarette business of A-1 Vapors is now the primary business of the Company.

 

A1 Group, Inc., (formerly known as Freebutton, Inc.) and through its wholly owned subsidiary A-1 Vapors Inc., is a product development and marketing company catering to the electronic cigarette and accessory industry, with internet sales and multiple kiosk retail locations in the Miami area. Bruce Storrs, Chairman, President, Chief Executive Officer, Treasurer, Secretary, Director and Andy Diaz Chief Operating Officer, Director of the Company, and are the sole shareholders’ of A1 Vapors, Inc.

 

As a result of the Share Exchange Agreement, Bruce Storrs and Andy Diaz became the majority shareholders and became the principal officers and directors of the Company.

 

As reported in our Form 8-K file with the SEC on May 14, 2014, on April 11, 2014 the Company entered into a Binding Letter of Intent (“LOI”) to acquire A1 Vapors, Inc. a product development and marketing firm catering to the electronic vapor cigarette industry. Under the terms of the LOI the Company will purchase all of the issued and outstanding capital stock of A1 pursuant to a definitive agreement to be entered into between the parties. Consideration for the purchase will be approximately 21 million restricted shares of the Company’s common stock. As reported in our Current Report on Form 8-k filed on May 27, 2014, on May 23, 2014 FreeButton (now known as A1 Group, Inc.) entered into an exchange agreement (the “Exchange Agreement”) with A1 Vapors. Under the terms of the Exchange Agreement, the shareholders of A1 Vapors received 21,000,000 newly-issued shares of Free Button’s (now known as A1 Group, Inc.) Common Stock (now known as A1 Group, Inc.) in exchange for all of A1 Vapor’s outstanding Common Stock. On August 22, 2014, the 21,000,000 shares were issued and A1Vapors, Inc. became a wholly-owned subsidiary of A1 Group Inc. (formerly FreeButton Inc.). The foregoing description of the LOI does not purport to be complete and is qualified in its entirety by reference to the full text of the LOI, a copy of which is filed as Exhibit 10.3 to this Annual Report on Form 10-K and incorporated herein by reference. The foregoing description of the Exchange Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the LOI, a copy of which is filed as Exhibit 10.4 to this Annual Report on Form 10-K and incorporated herein by reference.

 

FSC Agreement

 

On November 29, 2014 the Company entered into an Agreement with FSC Company (“FSC”) to assist with the development of a corporate vision and to build a comprehensive Operating Plan to guide the Company, and to assist in the designing of a strategic sales and marketing plan, with an associated branding strategy. This agreement includes the following;

 

Term:Six (6) months. Either party may terminate the Agreement after four (4) months with a thirty (30) day advance written notice.
Fees:Initial fee of ten thousand dollars ($10,000) at time this agreement is executed and six thousand ($6,000) per month during the final five (5) months of the engagement period.
Incentives:the Company and FSC agree to establish an incentive plan. The Company has to provide FSC up to five hundred thousand (500,000) shares of common stock in A1Group, Inc. following the initial one hundred and twenty (120) days of the term of this Agreement , so long as items listed in the Agreement have been satisfactory delivered and all terms and conditions of the Agreement have been met.

 

2
 

 

Convertible Promissory Notes

 

Subsequent to the period on January 16, 2015 an agreement was reached whereby the Convertible Promissory Note of $307,266.26 dated March 11, 2014 and $16,828.56 dated June 20, 2014 would be converted to 1,473,161 common shares of A1 Group, Inc. without restrictive legend. Upon deliverance of the share certificate they will be no further obligations under the convertible promissory notes. As of the filing date of the Company’s10-K the certificate had not yet be delivered. As reported in the Company’s 8-K dated March 3, 2015.

 

Our Website

 

We currently have one operating website, www.a1vapors.com. We sell our electronic cigarettes and accessories through the web-site.

 

Products

 

The Company offer disposable electronic cigarettes in multiple sizes, puff counts, styles, flavors and nicotine strengths; rechargeable electronic cigarettes that use replaceable cartridges (also known as “atomizers or cartomizers”); and rechargeable vaporizers for use with either electronic cigarette solution (“e-liquid”) or dry herbs or leaf.

 

We have established arrangements with certain third party manufacturers, Kanger and Aspire, to re-brand or “white label” most of the products that we sell, which are manufactured by Kanger and Aspire, with the A1 Vapors logo. In addition, we sell major known brands such as Cloupor.

 

Product Descriptions

 

·The disposable electronic cigarettes feature a one-piece construction that houses ass the components and is utilized until the nicotine or nicotine free solution is depleted.

 

·Rechargeable electronic cigarettes feature a rechargeable battery and replaceable cartridge (also known as an “atomizer or cartomizer”). The atomizers or cartomizers are changed when the solution is depleted from use.

 

·Vaporizers feature a tank or chamber, a heating element and a battery. The vaporizer user fills the tank with the e-liquid or the Chamber with dry herb or leaf. The vaporizer battery can be recharged and the tank and chamber can be refilled.

 

·The electronic cigarette solution or e-liquid, is the chemical means through which electronic cigarettes and vaporizers, respectively, deliver nicotine, simulate the taste of tobacco and or other flavors in addition to emulating the act of smoking by means of the electronic cigarettes “smoke like” discharge or vapor. We offer the electronic cigarette solutions in different flavors and various strengths, in replaceable cartridges for our rechargeable e-cigarettes and in bottles for use in our vaporizers.

 

Competition

 

Competition in the electronic cigarette industry is intense. We compete with other sellers of electronic cigarettes and hookahs, big tobacco companies such as; Altria Group, Inc., Lorillard, Inc., Reynolds America Inc.; through their electronic cigarettes business segments; the nature of our competitors is varied as the market is highly fragmented and the barriers to entry into the business are low. Our direct competitors sell products that are substantially similar to ours and through the same channels through which we sell our electronic cigarette products. We compete with these direct competitors for sales through distributors, wholesalers and retailers, including but not limited to national chain stores, tobacco shops, gas stations, travel stores, shopping mall kiosks, in addition to direct public sales through internet, mail order and telesales.

 

As a general matter, we have access to, market and sell the similar electronic cigarettes as our competitors and we sell our products generally at similar prices as our competitors; accordingly the key competitive factors for our success is the quality of service we offer our customers, the scope and effectiveness of our marketing efforts, including media advertising campaigns and, increasingly, the ability to identify and develop new sources of customers.

 

3
 

 

We believe that we will enjoy the following competitive advantages:

 

Marketing, Sales and Distribution

 

To this point our marketing and sales efforts have been limited. As our cash-flow permits, we will increase our advertising efforts through direct television marketing, on the Internet, trade magazine ads and point of sale materials and displays at retail locations. We will also attempt to build brand awareness through innovative social marketing activities, price promotions, in-store and on-premises promotions, public relations and trade show participation.

 

We intend to expand our physical retail locations on a geographical basis, adding more stores in areas that are proximate to our existing locations. We believe this strategy will enable us to create a stronger presence in our core market and maximize our brand awareness in the region. We intend to increase our online marketing budget and more proactively market our website store to drive online sales.

 

We have not historically focused on the wholesale market, and the sale which we have made to our retailers has been inconsistent. We intend to start focusing on the opportunity by developing a retail package specifically for the distributor sales channel. We are in product development with respect to this effort and in discussions with prospective channel partners with the goal of testing our products in their stores.

 

Customers

 

We cater to two types of consumers, cigarette smokers and hookah smokers from the ages of 18 and up.

 

Legal Environment

 

Governmental Regulations

 

Based on the December 2010 U.S. Court of Appeals for the D.C. Circuit’s decision in Sottera, Inc. v. Food & Drug Administration, 627 F.3d 891 (D.C. Cir. 2010), the United States Food and Drug Administration (the “FDA”) is permitted to regulate electronic cigarettes as “tobacco products” under the Family Smoking Prevention and Tobacco Control Act of 2009 (the “Tobacco Control Act”).

 

Under this Court decision, the FDA is not permitted to regulate electronic cigarettes as “drugs” or “devices” or a “combination product” under the Federal Food, Drug and Cosmetic Act unless they are marketed for therapeutic purposes.

 

Because we do not market our electronic cigarettes for therapeutic purposes, our electronic cigarettes are subject to being classified as “tobacco products” under the Tobacco Control Act. The Tobacco Control Act grants the FDA broad authority over the manufacture, sale, marketing and packaging of tobacco products, although the FDA is prohibited from issuing regulations banning all cigarettes or all smokeless tobacco products, or requiring the reduction of nicotine yields of a tobacco product to zero.

 

The Tobacco Control Act also requires establishment, within the FDA’s new Center for Tobacco Products, of a Tobacco Products Scientific Advisory Committee to provide advice, information and recommendations with respect to the safety, dependence or health issues related to tobacco products.

 

The Tobacco Control Act imposes significant new restrictions on the advertising and promotion of tobacco products. For example, the law requires the FDA to finalize certain portions of regulations previously adopted by the FDA in 1996 (which were struck down by the Supreme Court in 2000 as beyond the FDA’s authority). As written, these regulations would significantly limit the ability of manufacturers, distributors and retailers to advertise and promote tobacco products, by, for example, restricting the use of color, graphics and sound effects in advertising, limiting the use of outdoor advertising, restricting the sale and distribution of non-tobacco items and services, gifts, and sponsorship of events and imposing restrictions on the use for cigarette or smokeless tobacco products of trade or brand names that are used for non-tobacco products. The law also requires the FDA to issue future regulations regarding the promotion and marketing of tobacco products sold or distributed over the internet, by mail order or through other non-face-to-face transactions in order to prevent the sale of tobacco products to minors.

 

4
 

 

It is likely that the Tobacco Control Act could result in a decrease in tobacco product sales in the United States, including sales of our electronic cigarettes.

 

While the FDA has not yet mandated electronic cigarettes should be regulated as tobacco products, during 2012, the FDA indicated that it intends to regulate electronic cigarettes under the Tobacco Control Act through the issuance of deeming regulations that would include electronic cigarettes under the definition of a “tobacco product” under the Tobacco Control Act subject to the FDA’s jurisdiction. The FDA initially announced that it would issue proposed deeming regulations by April 2013 and then extended the deadline to October 31, 2013. As of the date of this report, the FDA had not taken such action.

 

The application of the Tobacco Control Act to electronic cigarettes could impose, among other things, restrictions on the content of nicotine in electronic cigarettes, the advertising, marketing and sale of electronic cigarettes, the use of certain flavorings and the introduction of new products. We cannot predict the scope of such regulations or the impact they may have on our company specifically or the electronic cigarette industry generally, though if enacted, they could have a material adverse effect on our business, results of operations and financial condition.

 

In this regard, total compliance and related costs are not possible to predict and depend substantially on the future requirements imposed by the FDA under the Tobacco Control Act. Costs, however, could be substantial and could have a material adverse effect on our business, results of operations and financial condition. In addition, failure to comply with the Tobacco Control Act and with FDA regulatory requirements could result in significant financial penalties and could have a material adverse effect on our business, financial condition and results of operations and ability to market and sell our products. At present, we are not able to predict whether the Tobacco Control Act will impact us to a greater degree than competitors in the industry, thus affecting our competitive position.

 

State and local governments currently legislate and regulate tobacco products, including what is considered a tobacco product, how tobacco taxes are calculated and collected, to whom and by whom tobacco products can be sold and where tobacco products may or may not be smoked. Certain states and cities have enacted laws which preclude the use of electronic cigarettes where traditional tobacco burning cigarettes cannot be used and others have proposed legislation that would categorize electronic cigarettes as tobacco products, equivalent to their tobacco burning counterparts. If the use of electronic cigarettes is banned anywhere the use of traditional tobacco burning cigarettes is banned, electronic cigarettes may lose their appeal as an alternative to cigarettes; which may have the effect of reducing the demand for our products and as a result have a material adverse effect on our business, results of operations and financial condition.

 

At present, neither the Prevent All Cigarette Trafficking Act (which prohibits the use of the U.S. Postal Service to mail most tobacco products and which amends the Jenkins Act, which would require individuals and businesses that make interstate sales of cigarettes or smokeless tobacco to comply with state tax laws) nor the Federal Cigarette Labeling and Advertising Act (which governs how cigarettes can be advertised and marketed) apply to electronic cigarettes. The application of either or both of these federal laws to electronic cigarettes would have a material adverse effect on our business, results of operations and financial condition.

 

The Tobacco industry expects significant regulatory developments to take place over the next few years, driven principally by the World Health Organization’s Framework Convention on Tobacco Control (“FCTC”). The FCTC is the first international public health treaty on tobacco, and its objective is to establish a global agenda for tobacco regulation with the purpose of reducing initiation of tobacco use and encouraging cessation. Regulatory initiatives that have been proposed, introduced or enacted include:

 

  · The levying of substantial and increasing tax and duty charges;
  · Restrictions or bans on advertising, marketing and sponsorship;
  · The display of larger health warnings, graphic health warnings and other labeling requirements;
  · Restrictions on a packaging design, including the use of colors and generic packaging;
  · Restrictions on bans on the display of tobacco product packaging at the point of sale, and restrictions or bans on cigarette vending machines;

 

5
 

 

  · Restrictions regarding testing, disclosure and performance standards for tar, nicotine, carbon monoxide and other smoke constituent levels;
  · Requirements regarding testing, disclosure and use of tobacco product ingredients;
  · Increased restrictions on smoking in public and work places and, in some instances in private places and outdoors
  · Elimination of duty free allowances for travelers; and
  · Encouraging litigation against tobacco companies.

 

If electronic cigarettes are subject to one or more significant regulatory initiates enacted under the FCTC, our business, results of operations and financial condition could be materially and adversely affected.

 

Available Information

 

Reports we file pursuant to the Exchange Act of 1934, as amended (the "Exchange Act"), including annual, quarterly and current reports and other information with the Commission and our filings are available to the public over the Internet at the Commission's website at http://www.sec.gov. The public may read and copy any materials filed by us with the Commission at the Public Reference Room at 100 F Street NE, Washington, D.C. 20549, on official business days during the hours of 10:00 am to 3:00 pm. The public may obtain information on the operation by calling the Commission at 800-732-0330.

 

Patent and Trademarks

 

We do no currently own any domestic or foreign patents relating to electronic cigarettes.

 

Employees

 

As of December 2014, we had four employees both of whom are employed on a full-time basis.

 

ITEM 1A.RISK FACTORS

 

Smaller reporting companies are not required to provide the information required by this item.

 

ITEM 1B.UNRESOLVED STAFF COMMENTS

 

Not applicable to a “smaller reporting company” as defined in Item 10(f)(1) of Regulation S-K.

 

ITEM 2.PROPERTIES

 

Our principal executive office is located at 7040 Avenida Encinas, Suite 104-159, Carlsbad CA 92011. We also have two retail locations at Miami International Mall, 1455 NW 107th Avenue, Doral, FL. 33172 and Bayside Market Place, 401 Biscayne Blvd., Miami, Florida 33132

 

ITEM 3.LEGAL PROCEEDINGS

 

None.

 

ITEM 4.MINE SAFETY DISCLOSURES

 

Not applicable.

 

6
 

 

PART II

 

ITEM 5.MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

 

Market Information

 

Our common stock has traded on the OTC Bulletin Board and OTCQB under the symbol “SWCB” since August 13, 2010. Beginning September 2012, our symbol was changed to “FBTN”. Beginning November 2014, our symbol was changed to “AWON”. The following table sets forth the range of the quarterly high and low bid price information for fiscal years 2014 and 2013 as reported by the OTCQB and OTC Bulletin Board.

 

  

High Bid*
($)

  

Low Bid*
($)

 
2014          
First Quarter   0.88    0.48 
Second Quarter   0.68    0.25 
Third Quarter   0.40    0.20 
Fourth Quarter   0.30    0.05 
2013          
First Quarter   0.66    0.40 
Second Quarter   0.69    0.43 
Third Quarter   0.89    0.61 
Fourth Quarter   0.89    0.61 

__________

* The quotations of the closing prices reflect inter-dealer prices, without retail mark-up, markdown or commission, and may not necessarily represent actual transactions.

 

The market price of our common stock is subject to significant fluctuations in response to variations in our quarterly operating results, general trends in the market, and other factors, over many of which we have little or no control. In addition, broad market fluctuations, as well as general economic, business and political conditions, may adversely affect the market for our common stock, regardless of our actual or projected performance.

 

Holders

 

As of March 30, 2015, there were 26 holders of record of our common stock. This does not reflect the number of persons or entities who held stock in nominee or street name through various brokerage firms.

 

Dividend Policy

 

We have never declared or paid dividends on our common stock. We do not anticipate paying any dividends on our common stock in the foreseeable future. We currently intend to retain all available funds and any future earnings to fund the development and growth of our business. Any future determination to declare dividends will be subject to the discretion of our board of directors and will depend on various factors, including applicable laws, our results of operations, financial condition, future prospects and any other factors deemed relevant by our board of directors.

 

Equity Compensation Plan Information

 

See the “Equity Compensation Plan Information” table in Item 12 of this Annual Report on Form 10-K.

 

7
 

 

Changes In Control Of Registrants

 

The information regarding the Company’s change on control in connection with the Acquisition set forth in Recent Developments (Item 1) in the Securities Exchange and acquisition of Agreement between FreeButton Inc. (now known as A1 Group, Inc.) and A-1 Vapors, Inc. is incorporated herein by reference.

 

At Closing the Company issued 21,000,000 shares of Common Stock to the former A-1 Vapors Shareholders in exchange for 100% of their ownership in A-1 Vapors. Prior the subject acquisition, the A-1 Vapors shareholders owned no shares of the company.

 

After giving the effect to the issuance of the Company Shares the number of Company Common Stock issued and outstanding is 34,168,260 of which the A-1 Vapors shareholders own approximately 61%.

 

Recent Sales of Unregistered Securities

 

On October 6, 2014, the Company received $$27,200 in Subscription receivables to issue 181,333 common shares through a private placement at $0.15 per share.

 

On December 23, 2014 the issued 324,000 common shares in the conversion of $32,400 of Convertible Promissory Note and accrued interest at $0.10 per share.

 

All sales of unregistered securities of the Company during fiscal year 2014 have previously been reported by the Company on our Quarterly Reports on Form 10-Q or Current Reports on Form 8-K filed with the Commission.

 

There were no repurchase of equity securities made by the Company during the fourth quarter of fiscal year 2014.

 

ITEM 6.SELECTED FINANCIAL DATA

 

Not applicable to a “smaller reporting company” as defined in Item 10(f)(1) of Regulation S-K.

 

ITEM 7.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

This Management’s Discussion and Analysis of Financial Condition and Results of Operations is intended to provide a reader of our financial statements with a narrative from the perspective of our management on our financial condition, results of operations, liquidity, and certain other factors that may affect our future results. The following discussion and analysis should be read in conjunction with our audited consolidated financial statements and the accompanying notes thereto included in “Item 8. Financial Statements and Supplementary Data.” In addition to historical financial information, the following discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. See “Forward-Looking Statements.” Our results and the timing of selected events may differ materially from those anticipated in these forward-looking statements as a result of many factors.

 

Business Overview

 

We are an electronic cigarette company with Internet sales and kiosk locations in the greater Miami area through our fully owned subsidiary A1 Vapors, Inc. A1 Vapors is a product development and marketing company catering to the electronic vapor cigarette and accessories industry. A1 Vapors offers a variety of options to choose from to appeal to all smokers including a diverse selection of devices and flavors.

 

“Electronic cigarettes” or “e-cigarettes” and “vaporizers” are battery-powered products that enable users to inhale nicotine vapor without smoke, tar, ash, or carbon monoxide. Electronic cigarettes look like traditional cigarettes and, regardless of their construction are comprised of three functional components:

 

·A mouthpiece, which is a small plastic cartridge that contains a liquid nicotine solution;
·The heating element that vaporizes the liquid nicotine so that it can be inhaled; and
·The electronics, which include: a lithium-ion battery, an airflow sensor, a microchip controller and an LED which illuminates to indicate use.

 

8
 

 

When a user draws air through the electronic cigarette and or vaporizer, the air flow is detected by a sensor, which activates a heating element that vaporizes the solution stored in the mouthpiece/cartridge, the solution is then vaporized and it is this vapor that is inhaled by the user. The cartridge contains either a nicotine solution or a nicotine free solution, either which may be flavored.

 

Plan of Operations

 

Our Plan is to become a leading retailer of electronic cigarette and vapor related products in the North American market. We intend to accomplish that objective through competing on price and quality, expanding our presence at physical locations, expanding distribution points and expanding our online presence.

 

The brands that we select to sell in addition to the A-1 Vapors, white-label brand, are selected on their general popularity with our target consumer base. We believe that this strategy will enable us to continue to offer “best-in-class” products which have the potential to increase our sales the most, while avoiding risk of product development and manufacturing. Our ability to negotiate reasonable pricing with these manufactures is also a contributing factor to selection.

 

We will continue to seek out and identify new products to introduce to our consumer base which we believe will increase our revenue per person and generate greater repeat business such as starter kits, a variety of batteries and new flavors to our line of e-liquid.

 

Going Concern

 

Our auditor has indicated in their reports on our financial statements for the fiscal years ended December 31, 2014, that conditions exist that raise substantial doubt about our ability to continue as a going concern due to our recurring losses from operations, deficit in equity, and the need to raise additional capital to fund operations. A “going concern” opinion could impair our ability to finance our operations through the sale of debt or equity securities.

 

Results of Operations

 

Fiscal Year Ended December 31, 2014 compared to Fiscal Year Ended December 31, 2013

 

Revenue. We generated $273,878 of revenue and had Cost of Goods of $92,551 with net revenues of $181,327 during the fiscal year ended December 31, 2014 and we generated $207,836 of revenue and had Cost of Goods of $99,953 with net revenues of $107,883 during the fiscal year ended December 31, 2013.

 

Operating Expenses. Total expenses for the fiscal year ended December 31, 2014 were $268,364 resulting in an operating loss for the fiscal year of $87,037 as compared to total expenses of $81,056 resulting in an operating profit of $26,827 for the fiscal year ended December 31, 2013. The operating loss for the fiscal year ended December 31, 2014 is a result of office and general expenses in the amount of $268,364, made up of management fee of $34,500, rent expense of $117,656, commissions of $30,643, marketing expenses of $19,031 and professional fees in the amount of $11,375 as compared to office and general expenses in the amount of $81,056, made up of management fee of $0, rent expense of $46,527, commissions of $7,598, marketing expenses of $393 and professional fees in the amount of $225 for the fiscal year ended December 31, 2013. The increase in office and general expenses from fiscal year 2013 to fiscal year 2014 was due to expenses related to reverse takeover of A-1 Vapors Inc., of Freebutton, Inc. (now known as A1Group, Inc.) and cost associated with this merger. The increase in management fees from fiscal year 2013 to fiscal year 2014 described above was due to the increased management time needed to manage the acquisition of the Assets of the new entity. In addition, costs increased due to the transition from A-1 Group/Vapors from a private corporation into a public entity.

 

Interest expense for the year ended December 31, 2014, was $20,684 compared to interest expense for the year ended December 31, 2013, in the amount of $0. Interest expense principally consists of interest on the convertible promissory notes issued by the Company as previously discussed in our Quarterly Reports on Forms 10-Q for the quarter ended September 30, 2014. Gain on debt settlement of $10,251 for the year ended December 31, 2014 was the result of the merger of the A-1 Vapors Inc. and Freebutton, Inc. (now known as A1 Group, Inc.), there was $0 Gain/loss on debt settlement for the year ending December 31, 2013.

 

9
 

 

Capital Resources and Liquidity

 

As of December 31, 2014, we had $24,031 of cash compared to $3,856 of cash for the year ended December 31, 2013. We anticipate that our current cash and cash equivalents and cash generated from financing activities will be insufficient to satisfy our liquidity requirements for the next 12 months. To date the Company has incurred operating losses since inception of $528,868. As at December 31, 2014, the Company has a working capital deficit of $351,774.

 

The Company requires additional funding to meet its ongoing obligations and to fund anticipated operating losses. Our auditor has expressed substantial doubt about our ability to continue as a going concern. The ability of the Company to continue as a going concern is dependent on raising capital to fund its initial business plan and ultimately to attain profitable operations. These financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts, or amounts and classification of liabilities that might result from this uncertainty.

 

We expect to incur marketing and professional and administrative expenses as well expenses associated with maintaining our filings with the Commission. We will require additional funds during this time and will seek to raise the necessary additional capital. If we are unable to obtain additional financing, we may be required to reduce the scope of our business development activities, which could harm our business plans, financial condition and operating results. Additional funding may not be available on favorable terms, if at all. The Company intends to continue to fund its business by way of equity or debt financing and advances from related parties.

 

In the event we seek to raise additional capital through the issuance of debt or its equivalents, this will result in increased interest expense. If we raise additional capital through the issuance of equity or convertible debt securities, the percentage ownership of our company held by existing shareholders will be reduced and those shareholders may experience significant dilution. In addition, new securities may contain certain rights, preferences or privileges that are senior to those of our common stock. We cannot assure you that we will be able to raise the working capital as needed in the future on terms acceptable to us, if at all. Any inability to raise capital as needed would have a material adverse effect on our business, financial condition and results of operations.

 

If we cannot raise additional funds, we will have to cease business operations. As a result, investors in the Company’s common stock would lose all of their investment.

 

Off Balance Sheet Arrangements

 

There are no off-balance sheet arrangements currently contemplated by management or in place that are reasonably likely to have a current or future effect on the business, financial condition, changes in financial condition, revenue or expenses, result of operations, liquidity, capital expenditures and/or capital resources.

 

Recent Accounting Pronouncements

 

The Company has implemented all new accounting pronouncements that are in effect and that may impact its financial statements and does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.

 

ITEM 7A.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

Not applicable to a “smaller reporting company” as defined in Item 10(f)(1) of Regulation S-K.

 

ITEM 8.FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

 

The full text of the Company's audited consolidated financial statements for the fiscal years ended December 31, 2014 and 2013, begins on page F-1 of this Annual Report on Form 10-K.

 

10
 

 

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

 

None.

 

ITEM 8A.CONTROLS AND PROCEDURES

 

Evaluation of Disclosure Controls and Procedures

 

Our management, including our chief executive officer and chief financial officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) under the Exchange Act as of December 31, 2014. Our management does not expect that our disclosure controls and procedures will prevent all error and all fraud. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.

 

Based on the evaluation as of December 31, 2014, for the reasons set forth below, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures were not effective to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Commission’s rules and forms, and that such information is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure.

 

Management's Annual Report on Internal Control Over Financial Reporting.

 

Our management is responsible for establishing and maintaining adequate internal control over financial reporting for the Company. Our internal control system was designed to, in general, provide reasonable assurance to our management and the Board regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles, but because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

 

Our chief executive officer and chief financial officer evaluated the effectiveness of our internal control over financial reporting as of December 31, 2014, and based on that evaluation they concluded that our internal control over financial reporting was not effective.

 

The framework used by management in making that assessment was the criteria set forth in the document entitled “Internal Control – Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on that re-evaluation due to material weakness identified below, our management, including our chief executive officer and chief financial officer, concluded that our disclosure controls and procedures were not effective as of December 31, 2014 to ensure that information required to be disclosed in our Exchange Act reports was (1) recorded, processed, summarized and reported in a timely manner, and (2) accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding required disclosure, because of material weaknesses in our internal controls over financial reporting.

 

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company's annual or interim financial statements will not be prevented or detected on a timely basis. In its assessment of the effectiveness of internal control our financial reporting as of December 31, 2014, the Company determined that the following items constituted a material weakness:

 

·The Company does not have an independent audit committee in place, which would provide oversight of the Company’s officers, operations and financial reporting function;
·The Company’s disclosure controls and procedures do not provide adequate segregation of duties; and
·The Company does not have effective controls over period-end financial disclosure and reporting processes.

 

11
 

 

The management believes that the material weaknesses set forth in the last two items listed above did not have an effect on our financial results. However, management believes that the lack of a functioning audit committee and lack of a majority of outside directors on our board of directors, results in ineffective oversight in the establishment and monitoring of required internal controls and procedures which could result in a material misstatement in our financial statements in future periods.

 

Management believes that the appointment of one or more outside directors, who shall be appointed to a fully-functioning audit committee, will remedy the lack of a functioning audit committee and a lack of a majority of outside directors on our Board.

 

We will continue to monitor and evaluate the effectiveness of our internal controls and procedures and our internal controls over financial reporting on an ongoing basis and are committed to taking further action and implementing additional enhancements or improvements, as necessary and as funds allow.

 

Changes in Internal Control over Financial Reporting

 

There were no changes that have affected, or are reasonably likely to materially affect, our internal control over financial reporting (as defined in Rules 13a-15(f) or 15d-15(f) under the Exchange Act) during the fiscal quarter ended December 31, 2014.

 

ITEM 8B.OTHER INFORMATION

 

None.

 

 

 

 

 

 

 

 

 

 

 

12
 

 

PART III

 

ITEM 9.DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

 

Our executive officers and director are as follows:

 

Name

Age

Position

Bruce Storrs (1) 56 President, Chief Executive Officer, Treasurer, Secretary, and Director
Andy Diaz (2) 45 Chief Operating Officer, and Director
Michele Evangelista (3) 51 Director
Moses Lopez (4) 24

Director

__________

(1) Bruce Storrs. Mr. Storrs was appointed Chief Executive Officer of the Company effective as of the Closing. Mr. Storrs founded Advanced Scientific in 1985, which focused on selling medical hospital and pharmaceutical supplies to medical centers and military hospitals and was sold in 1994. Between 1994 and 2002, he started two additional companies, Cyprus Resources and Capital Health, which were subsequently sold. In 2002 he worked as a consultant and investors to companies in the Health and Wellness industry as well as founding Better Bodies by Chemistry, which manufactures and distributes vitamins and supplements. He is also co-founder of Pacific Rim Distributors, retail and wholesale company selling and distributing medical, health and beauty products. In December 2012, Mr. Storrs invested in A-1 Vapors, Inc. and joined as an advisor to the company, and subsequently appointed as CEO in June 2014. Mr. Storrs holds a BSBM with Wilmington National University and has attended San Diego State University.

 

(2) Andy Diaz. Mr. Diaz was appointed as Chief Operating Officer of the Company as of the Closing. In 2005 Mr. Diaz founded A1A Sod, Sand & Soil Inc., growing the business from 1 to 25 employees and winning contract with the City of Miami and the State of Florida, generating in excess of $2 million for 2013. In 2012 Mr. Diaz co-founded A-1 Vapors, opening its first retail location in Doral, Florida, and expanding to two retail locations, as well as an on-line operation.

 

(3) Michele Evangelista. Ms. Evangelista will serve as Director of the Company. Since 2012 Ms. Evangelista has served as a Medical Sales rep for Advanced Scientific Supply. Ms. Evangelista holds a B.S. from Iona College.

 

(4) Moses Lopez. Mr. Lopez will serve as a Director of the Company. Since 2012, Mr. Lopez has served in a senior sales capacity at V2 Cigs. In 2012, Mr. Lopez co-founded A-1 Vapors, and was instrumental in the initial quality control and research activities as well as establishing the Company’s online operations. Mr. Lopez graduated from Ferguson High School.

 

Term of Office

 

Our directors are appointed for a one-year term to hold office until the next annual general meeting of our stockholders or until removed from office in accordance with our bylaws. The Company’s directors hold office after the expiration of his or her term until his or her successor is elected and qualified, or until he or she resigns or are removed in accordance with the Company’s bylaws and provisions of the Nevada Revised Statutes.

 

There are no arrangements or understandings between any of the Directors and any other person pursuant to which Mr. Storrs, Mr. Diaz, Ms. Evangelista and Mr. Lopez were selected as a director.

 

Family Relationships

 

There are no family relationships between any of our directors or executive officers.

 

Our Chief Executive Officer and Chairman, Bruce Storrs, was married to Michele Evangelista, a director.

 

Other Directorships

 

Other than as disclosed above, during the last 5 years, none of our directors held any other directorships in any company with a class of securities registered pursuant to section 12 of the Exchange Act or subject to the requirements of section 15(d) of such Act or any company registered as an investment company under the Investment Company Act of 1940.

 

13
 

 

Involvement in Legal Proceedings

 

To our knowledge, there have been no material legal proceedings during the last ten years that would require disclosure under the federal securities laws that are material to an evaluation of the ability or integrity of any of our directors or executive officers.

 

Potential Conflicts of Interest

 

We are not aware of any current or potential conflicts of interest with our director or executive officers.

 

Code of Ethics

 

The Company currently does not have a code of ethics. However, we are in the process of formulating a code of ethics and intend to adopt one in the near future.

 

ITEM 10.EXECUTIVE COMPENSATION

 

Summary Compensation Table

 

The following summary compensation table sets forth all compensation awarded to, earned by, or paid to, the named persons, during the years ended December 31, 2014 and 2013 as our only named executive officer:

 

Summary Compensation of Named Executive Officers

 

Name and Principal Position 

Fiscal Year

  

Salary

($)

  

Bonus

($)

  

Stock

Awards

($)

  

Option Awards
($)

  

All Other Compensation ($)

  

Total
($)

 
Bruce Storrs   2014                    24,000(1)   24,000 
President, Chief Executive Officer, Secretary, Treasurer   2013                    0(2)   0 
Andy Diaz   2014                    10,500(3)   10,500 
Chief Operating Officer   2013                    0(4)   0 

__________

(1) Represents Mr. Storrs compensation from A1 Group, Inc. was from August 14, 2014 through December 31, 2014.

(2) Mr. Storrs was not employed by A-1 Vapors in 2013 and received no salary, bonus or award compensation.

(3) Represents Mr. Diaz’s compensation for A1 Group, Inc. was from August 14, 2014 through December 31, 2014.

(4) Mr. Diaz served as the sole officer of A-1 Vapors in 2013 and received no salary, bonus or award compensation.

 

Outstanding Equity Awards at Fiscal Year End

 

None of our executive officers received any equity awards, including, options, restricted stock, performance awards or other equity incentives during the fiscal year ended December 31, 2014 and 2013 for either A1 Group, Inc., or A-1 Vapors, Inc.

 

Employment Agreements

 

On August 15, 2014 A1 Group, Inc., (the “Company”) signed an initial two (2) year Employment Agreement with it Chief Executive Officer, Mr. Bruce Storrs. The Company has agreed to a salary of $3,500 per month starting September 1, 2014 and a lump sum signing bonus of $10,000 due on August 29, 2014. The Storrs Agreement also calls for participation in an additional bonus plan to be determined by the Company’s board of directors.

 

On August 15, 2014 A1 Group, Inc., (the “Company”) signed an initial two (2) year Employment Agreement with it Chief Operating Officer, Mr. Andy Diaz. The Company has agreed to a salary of $3,500 per month starting September 1, 2014.

 

During the period ending December 31, 2014, the Company paid a total of $34,500 in management fees.

 

The foregoing descriptions of the terms of Storrs Agreement and Diaz Agreement do not purport to be complete are qualified in their entirety by reference to the provisions of such agreements as reported in our From 8-K filed with the SEC on August 22, 2014.

 

14
 

 

Compensation of Directors

 

During the fiscal years ended December 31, 2014 and 2013, the Company directors did not receive any compensation solely for services as a director.

 

Our directors Bruce Storrs, Andy Diaz, Michele Evangelista and Moses Lopez will not receive any compensation solely for services as a director. It is our current policy that our directors are reimbursed for reasonable out-of-pocket expenses incurred in attending each board of directors meeting or meeting of a committee of the board of directors.

 

Board Committees

 

We have not formed an Audit Committee, Compensation Committee or Nominating and Corporate Governance Committee as of the filing of this Annual Report. Our Board of Directors performs the principal functions of an Audit Committee. We currently do not have an audit committee financial expert on our Board of Directors. We believe that an audit committee financial expert is not required because the cost of hiring an audit committee financial expert to act as one of our directors and to be a member of an Audit Committee outweighs the benefits of having an audit committee financial expert at this time.

 

Section 16(a) Beneficial Ownership Reporting Compliance

 

Section 16(a) of the Exchange Act requires our directors, officers and persons who beneficially own more than 10% of a registered class of our equity securities, to file reports of ownership and changes in ownership with the SEC and are required to furnish us with copies of these reports. Based solely on our review of the reports filed with the SEC, we believe that all persons subject to Section 16(a) of the Exchange Act timely filed all required reports in 2014.

 

Compensation Committee Interlocks and Insider Participation

 

During fiscal years 2014 and 2013, we did not have a standing compensation committee. Our Board was responsible for the functions that would otherwise be handled by the compensation committee. Our four directors conducted deliberations concerning executive officer compensation, including directors who were also executive officers.

 

ITEM 11.SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

 

The following table sets forth certain information with respect to the beneficial ownership of our voting securities by (i) each director and named executive officer, (ii) all executive officers and directors as a group; and (iii) each shareholder known to be the beneficial owner of 5% or more of the outstanding common stock of the Company as of March 30, 2015.

 

Beneficial ownership is determined in accordance with the rules of the SEC. Generally, a person is considered to beneficially own securities: (i) over which such person, directly or indirectly, exercises sole or shared voting or investment power, and (ii) of which such person has the right to acquire beneficial ownership at any time within 60 days (such as through exercise of stock options or warrants). For purposes of computing the percentage of outstanding shares held by each person or group of persons, any shares that such person or persons has the right to acquire within 60 days of March 30, 2015 are deemed to be outstanding, but are not deemed to be outstanding for the purpose of computing the percentage ownership of any other person. The inclusion herein of any shares listed as beneficially owned does not constitute an admission of beneficial ownership. Unless otherwise indicated below, the address of each person listed in the table below is c/o 7040 Avenida Encinas, Suite 104-159, Carlsbad, CA 92011.

 

Name and Address of Beneficial Owner 

Amount and Nature of Beneficial Ownership Common Stock (1)

 

Directors and Officers

 

No. of Shares

  

% of Class

 
Bruce Storrs   10,500,000    30.7% 
President, Chief Executive Officer, Treasure, Secretary and Director          
Andy Diaz   10,500,000    30.7% 
Chief Operating Officer and Director          
All officers and directors as a group (2 persons)   21,000,000    61.4% 

__________

(1) Based on 34,168,260 shares of common stock issued and outstanding as of March 30, 2015. Each of Mr. Storrs and Mr. Diaz has sole beneficial ownership of the shares held by such individual.

 

15
 

 

ITEM 12.CERTAIN RELATIONSHIP AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.

 

Transactions with Related Persons

 

Except as noted below, there has not been, nor is there currently proposed, any transaction of series of similar transactions to which the Company was or will be a party in which the amount involved exceeds the lesser of $120,000 or one percent of the average of the Company’s total assets at year end for the last two completed fiscal years; and in which any director officer, other stockholders of more than 5% of the Company’s Common Stock or any member of their immediate family had or will have a direct or indirect material interest.

 

Bruce Storrs, the Company’s Chief Executive Officer, advanced funds and had outstanding balances to A-1Vapors $33,631 and $14,081 for the years ended December 31, 2014 and December 31, 2013 respectively.

 

Andy Diaz, the Company’s Chief Operating Officer, advanced funds and had outstanding balances to A-1Vapors $1,950 and $17,105 for the years ended December 31, 2014 and December 31, 2013 respectively.

 

Director Independence

 

Bruce Storrs, Andy Diaz, and Moses Lopez members of our board are not independent using the definition of independence under the applicable NASDAQ listing standards and the standards established by the Commission.

 

ITEM 13.PRINCIPAL ACCOUNTANT FEES AND SERVICES.

 

Fees paid to Auditors

 

The following table shows the aggregate fees we paid for professional services provided to us by Bedinger & Company for 2014 and 2013:

 

   2014   2013 
Audit Fees  $7,793   $0 
Audit-Related Fees   0    0 
Tax Fees   0    0 
All Other Fees   0    0 
    0      
Total  $7,793   $0 

 

Audit Fees

 

For the fiscal years ended December 31, 2014 and 2013, we paid approximately $7,793 and $0, respectively, for professional services rendered for the audit and review of our financial statements.

 

Audit Related Fees

 

For the fiscal years ended December 31, 2014 and 2013, we paid approximately $0 and $0 respectively, for audit related services.

 

Tax Fees

 

For our fiscal years ended December 31, 2014 and 2013, we paid $0 and $0 respectively, for professional services rendered for tax compliance, tax advice, and tax planning.

 

All Other Fees

 

We did not incur any other fees related to services rendered by our independent registered public accounting firm for the fiscal years ended December 31, 2014 and 2013.

 

The SEC requires that before our independent registered public accounting firm is engaged by us to render any auditing or permitted non-audit related service, the engagement be either: (i) approved by our Audit Committee or (ii) entered into pursuant to pre-approval policies and procedures established by the Audit Committee, provided that the policies and procedures are detailed as to the particular service, the Audit Committee is informed of each service, and such policies and procedures do not include delegation of the Audit Committee’s responsibilities to management.

 

We do not have an Audit Committee. Our Board pre-approves all services provided by our independent registered public accounting firm. All of the above services and fees paid during 2014 and 2013 were pre-approved by our Board.

 

16
 

 

PART IV

 

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES

 

Please see the “Exhibit Index,” which is incorporated herein by reference, following the signature page for a list of our exhibits.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

17
 

 

SIGNATURES

 

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

Dated: March 26, 2015 A1 GROUP, INC.
   
  By: /s/ Bruce Storrs
 

Bruce Storrs

President, Chief Executive Officer, Treasurer and Secretary, Treasurer (Duly Authorized Officer, Principal Executive Officer and Principal Accounting Officer)

 

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

 

Signature   Title   Date
         

/s/ Bruce Storrs

  President, Chief Executive Officer, Treasurer and Secretary, and Director   March 26, 2015
Bruce Storrs   (Principal Executive Officer and Principal Accounting Officer)    
         

/s/ Andy Diaz

  Chief Operating Officer and Director   March 26, 2015
Andy Diaz        

 

18
 

 

EXHIBIT INDEX

 

3.1Agreement and Plan of Merger, Dated May 23, 2014 by and among FreeButton, Inc., and A-1 Vapors Inc. incorporated herein by reference to Exhibit 2.1 with Form 8-K filed August 22, 2014.
3.2Certificate of Merger for State of Florida as incorporated herein by reference to Exhibit 2.2 with Form 8-K filed August 22, 2014.
3.3Certificate of Merger for State of Nevada as incorporated herein by reference to Exhibit 2.3 with Form 8-K filed August 22, 2014.
10.1Storrs Employment Agreement as incorporated herein by reference to Exhibit 10.1 with Form 8-K filed August 22, 2014.
10.2Diaz Employment Agreement as incorporated herein by reference to Exhibit 10.1 with Form 8-K filed August 22, 2014.
31.1Certification of Principal Executive Officer and Principal Accounting Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1+Certification of Principal Executive Officer and Principal Accounting Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS* XBRL Instance Document
101.SCH* XBRL Taxonomy Extension Schema Document
101.CAL* XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF* XBRL Taxonomy Extension Definition Linkbase Document
101.LAB* XBRL Taxonomy Extension Label Linkbase Document
101.PRE* XBRL Taxonomy Extension Presentation Linkbase Document
  
+ In accordance with the SEC Release 33-8238, deemed being furnished and not filed.
* Furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise not subject to liability under these sections.

 

19
 

 

 

 

 

 

 

 

 

 

 

A1 GROUP, INC.

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Audited)

December 31, 2014

 

 

 

 

 

 

 

 

 

 

F-1
 

 

A1 GROUP, INC.

(Formerly Freebutton, Inc.)

(A Development Stage Company)

 

FINANCIAL STATEMENTS

(Audited)

December 31, 2014

 

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM F-3
   
CONDENSED CONSOLIDATED BALANCE SHEETS F-4
   
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS F-5
   
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT) F-6
   
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS F-7
   
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS F-8

 

 

 

 

 

 

 

 

 

 

F-2
 

 

B E D I N G E R & C O M P A N Y

 

C E R T I F I E D      P U B L I C      A C C O U N T A N T S

 

Report of Independent Registered Public Accounting Firm

 

 

To the Board of Directors and Stockholders of A1 Group, Inc.

 

 

We have audited the accompanying balance sheets of A1 Group, Inc. (the “Company”) as of December 31, 2014 and 2013, and the related statements of operations, changes in stockholders’ equity, and cash flows for each of the years in the two-year period ended December 31, 2014. Multimedia Platforms, Inc.’s management is responsible for these financial statements. Our responsibility is to express an opinion on these financial statements based on our audits.

 

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

 

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Multimedia Platforms, Inc. as of December 31, 2014 and 2013, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2014 in conformity with accounting principles generally accepted in the United States of America.

 

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note A to the financial statements, the Company has suffered recurring losses from operations and has a significant amount of accumulated deficit that raise substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

 

Bedinger & Company

 

Concord, California

 

March 25, 2015

 

 

 

 

 

 

 

 

 

 

 

 

1200 CONCORD AVENUE, SUITE 250, CONCORD, CA 94520 • (925) 603-0800 • (925) 603-0804 FAX

 

MEMBERS OF THE AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS,
THE CENTER FOR PUBLIC COMPANY AUDIT FIRMS,
AND THE CALIFORNIA SOCIETY OF CERTIFIED PUBLIC ACCOUNTANTS,
REGISTERED WITH THE PUBLIC COMPANY ACCOUNTING OVERSIGHT BOARD

 

F-3
 

 

A1 GROUP, INC.

(A Development Stage Company)

 

CONDENSED CONSOLIDATED BALANCE SHEETS

 

   December 31,
2014
   December 31,
2013
 
   (Audited)   (Audited) 
ASSETS          
           
CURRENT ASSETS          
Cash  $24,031   $3,856 
Accounts receivable       2,067 
Inventory   14,184    24,757 
           
TOTAL CURRENT ASSETS   38,215    30.680 
           
OTHER ASSETS   4,193    4,193 
           
TOTAL ASSETS  $42,408   $34,873 
           
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)          
           
CURRENT LIABILITIES          
Accounts payable  $3,890   $1,560 
Accrued interest   30,626     
Convertible Promissory Notes (Note 6)   324,095     
Related Party Loans   35,571    31,186 
           
 TOTAL CURRENT LIABILITIES   394,182    32,746 
           
TOTAL LIABILITIES   394,182    32,746 
           
STOCKHOLDERS’ EQUITY (DEFICIT)          
Capital stock (Note 3)          
Authorized          
75,000,000 shares of common stock, $0.001 par value,          
Issued and outstanding          
34,168,260 shares of common stock (December 31, 2013 –500)   34,168    500 
Additional paid-in capital   32,076    (500)
Subscription receivable   110,850     
Deficit accumulated during the development stage   (528,868)   2,127 
           
TOTAL STOCKHOLDERS’ EQUITY (DEFICIT)   (351,774)   2,127 
           
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)  $42,408   $34,873 

 

Going Concern (Note 1)

 

The accompanying notes are an integral part of these financial statements.

 

F-4
 

 

A1 GROUP, INC.

(A Development Stage Company)

 

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Audited)

 

   Year ended
December 31,
2014
   Year ended
December 31,
2013
 
REVENUE          
           
Revenue  $273,878   $207,836 
Cost of Goods Sold   92,551    99,953 
           
GROSS PROFIT  $181,327   $107,883 
           
EXPENSES          
Selling, general and administrative expenses  $268,364   $81,056 
           
TOTAL EXPENSES   (268,364)   (81,056)
           
NET OPERATING PROFIT (LOSS)   (87,037)   26,827 
           
OTHER INCOME (EXPENSE)          
Other income   3,400     
Loan interest   (20,684)    
Gain (loss) on debt settlement   10,251     
           
TOTAL OTHER INCOME (EXPENSE)   (7,033)    
           
NET INCOME (LOSS)  $(94,070)  $26,827 
         
BASIC AND DILUTED LOSS PER COMMON SHARE  $(0.00)  $(53.65)
           

WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING - BASIC AND DILUTED

   33,865,238    500 

 

The accompanying notes are an integral part of these financial statements.

 

F-5
 

 

A1 GROUP, INC.

(A Development Stage Company)

 

STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)

FOR THE PERIOD FROM APRIL 26, 2012 (INCEPTION) TO DECEMBER 31, 2014

(Audited)

 

   Common Stock   Additional   Share   Deficit Accumulated During the     
   Number of       Paid-in    Subscription   Development     
   shares   Amount   Capital   Receivable   Stage   Total 
Balances April 26, 2012                  
                         
Shares issued to founders during period   500    500    (500)            
                               
Net loss for the year ended December 31, 2012                   (24,700)   (24,700)
Balance, December 31, 2012   500    500    (500)       (24,700)   (24,700)
                               
Net loss for the year ended December 31, 2013                   26,827    26,827 
Balance, December 31, 2013   500    500    (500)       2,127    2,127 
                               
Adjustment re: Share Exchange Agreement August 14, 2014   33,843,760    33,344    500    60,850    (436,925)   (342,231)
                               
Shares issued for cash on September 25, 2014, at $0.15 per share               22,800        22,800 
Shares issued for cash on October 6, 2014, at $0.15 per share               27,200        27,200 
Promissory notes converted on December 23, 2014 at $0.10 per share   324,000    324    32,076            32,400 
                               
Net loss for period ended December 31, 2014                   (94,070)   (94,070)
                               
Balance, December 31, 2014   34,168,260   $34,168   $32,076   $110,850   $(528,868)  $(351,774)

 

The accompanying notes are an integral part of these financial statements.

 

F-6
 

 

A1 GROUP, INC.

(A Development Stage Company)

 

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Audited)

 

   Year ended
December 31,
2014
   Year ended
December 31,
2013
 
OPERATING ACTIVITIES          
Net income (loss) for the period  $(94,070)  $26,827 
Adjustments to reconcile net loss to net cash used in operating activities:          
Accounts receivable   2,067    (2,067)
Inventory   10,573    (24,757)
Changes in operating assets and liabilities:          
Increase (decrease) in accounts payables   (9,337)   1,560 
Increase (decrease) in accrued interest   17,544     
Increase (decrease) in other liability   (30,000)   (4,193)
           
NET CASH USED IN OPERATING ACTIVITIES   (103,223)   (2,630)
           
NET CASH USED IN INVESTING ACTIVITIES          
Cash assumed from share exchange agreement   36,613     
           
NET CASH USED IN INVESTING ACTIVITIES   36,613     
           
CASH FLOW FROM FINANCING ACTIVITIES          
Proceeds from subscription receivable   50,000     
Proceeds from conversion of promissory notes   32,400     
Proceeds from related parties   4,385    6,232 
           
NET CASH PROVIDED BY FINANCING ACTIVITIES   86,785    6,232 
           
NET INCREASE (DECREASE) IN CASH   20,175    3,602 
           
CASH, BEGINNING   3,856    254 
           
CASH, ENDING  $24,031   $3,856 
           
SUPPLEMENTAL CASH FLOW INFORMATION           
Cash paid during the period for:          
Interest  $   $ 
Income taxes  $   $ 
           
Non-cash investing and financing activities          
Promissory note issued for assets and business acquisition  $   $ 
Common stock issued for service  $   $ 
Debt forgiveness of related party  $   $ 

 

The accompanying notes are an integral part of these financial statements.

 

F-7
 

 

A1 GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (AUDITED)

DECEMBER 31, 2014

 

 

 

NOTE 1 – NATURE OF OPERATIONS AND BASIS OF PRESENTATION

 

The Company was incorporated on November 27, 2006 under the laws of the State of Nevada and extra-provincially registered under the laws of the Province of Ontario on February 2, 2007. On September 28, 2012, the Company with a majority of the shareholders and directors changed its name from Secured Window Blinds, Inc. to Freebutton, Inc. On June 23, 2014 a majority of the shareholders and directors and on November 23, 2014 changed its name from Freebutton, Inc. to A1 Group, Inc.

 

A1 Group, Inc. is now a product development and marketing company catering to the electronic vapour cigarette and accessories industry.

 

On August 14, 2014, the Company entered into a Share Exchange Agreement (the “Share Exchange Agreement”) which resulted in a Reverse Takeover with selling stockholders named in the prospectus, pursuant to which the Company offered and sold an aggregate of 21,000,000 shares of common stock to all the stockholders of A-1 Vapors,, Inc., a Florida corporation (“A-1 Vapors”), incorporated in the State of Florida, on April 26, 2012. The acquisition has been treated as a recapitalization of Freebutton, Inc. with A-1 Vapors, Inc. as the accounting acquirer in accordance with the Reverse Merger rules. As a result of the consummation of the Share Exchange Agreement A-1 Vapors became a wholly-owned subsidiary of the Company and the electronic cigarette business of A-1 Vapors is now the primary business of the Company.

 

Going concern

To date the Company has generated revenues from its business operations and has incurred operating losses since inception of $528,868. As at December 31, 2014, the Company has a working capital deficit of $351,774. The Company requires additional funding to meet its ongoing obligations and to fund anticipated operating losses. The ability of the Company to continue as a going concern is dependent on increasing sales and raising capital to fund its initial business plan and ultimately to attain profitable operations. Accordingly, these factors raise substantial doubt as to the Company’s ability to continue as a going concern. The Company intends to continue to fund its business by way of private placements and advances from related parties as may be required. These financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts, or amounts and classification of liabilities that might result from this uncertainty.

 

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Basis of Presentation

 

Segmented Reporting

Financial Accounting Standards Board (“FSAB”) Accounting Standard Codification (“ASC”) 280, “Disclosure about Segments of an Enterprise and Related Information”, changed the way public companies report information about segments of their business in their quarterly reports issued to shareholders. It also requires entity-wide disclosures about the products and services the entity provides, the material countries in which it holds assets and reports revenues and its major customers.

 

Comprehensive Loss

FASB Statement Number 130, “Reporting Comprehensive Income,” establishes standards for the reporting and display of comprehensive loss and its components in the financial statements. As at December 31, 2014, the Company has no items that represent a comprehensive loss and, therefore, has not included a schedule of comprehensive loss in the financial statements.

 

Use of Estimates and Assumptions

Preparation of the financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect certain 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 period. Accordingly, actual results could differ from those estimates.

 

Financial Instruments

All significant financial assets, financial liabilities and equity instruments of the Company are either recognized or disclosed in the financial statements together with other information relevant for making a reasonable assessment of future cash flows, interest rate risk and credit risk. Where practical the fair values of financial assets and financial liabilities have been determined and disclosed; otherwise only available information pertinent to fair value has been disclosed.

 

F-8
 

 

A1 GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (AUDITED)

DECEMBER 31, 2014

 

 

 

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

 

Revenue Recognition

It is our policy that revenues are recognized in accordance with ASC 605-10.  Under ASC 605-10, product revenues are recognized when persuasive evidence of an arrangement exists, delivery has occurred, the sales price is fixed and determinable and collectability is reasonably assured. Revenue is recognized at the point of sale for in person purchases and upon shipping for Internet sales.

 

Loss per Common Share

Basic earnings (loss) per share includes no dilution and is computed by dividing income (loss) available to common stockholders by the weighted average number of common shares outstanding for the period. Dilutive earnings (loss) per share reflect the potential dilution of securities that could share in the earnings of the Company. Because the Company does not have any potential dilutive securities, the accompanying presentation is only on the basic loss per share.

 

Income Taxes

The Company follows the liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax balances and tax loss carry-forwards. Deferred tax assets and liabilities are measured using enacted or substantially enacted tax rates expected to apply to the taxable income in the years in which those differences are expected to be recovered or settled. 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. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the date of enactment or substantive enactment.

 

Principles of consolidation

The Company consolidates its 100% owned subsidiary pursuant to Accounting Standards Codification (“ASC”) No. 810, “Consolidation”. All intercompany transactions and balances have been eliminated.

 

Inventory

We value our inventories at the lower of cost, determined on a first-in, first-out method, or market value. Our inventory consists solely of finished goods. We review inventories on hand at least quarterly and record provisions for estimated excess, slow moving and obsolete inventory, as well as inventory with a carrying value in excess of net realizable value. The regular and systematic inventory valuation reviews include a current assessment of future product demand, historical experience and obsolete finished product.

 

Stock-based Compensation

The Company follows FASB ASC 718-10, "Stock Compensation", which addresses the accounting for transactions in which an entity exchanges its equity instruments for goods or services, with a primary focus on transactions in which an entity obtains employee services in share-based payment transactions. ASC 718-10 is a revision to SFAS No. 123, "Accounting for Stock-Based Compensation," and supersedes Accounting Principles Board ("APB") Opinion No. 25, "Accounting for Stock Issued to Employees," and its related implementation guidance. ASC 718-10 requires measurement of the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award (with limited exceptions). Incremental compensation costs arising from subsequent modifications of awards after the grant date must be recognized. No stock-based compensation has been issued as of December 31, 2014.

 

Advertising Costs

The Company accounts for advertising costs in accordance with provisions in ASC 720-35-25 which states that advertising costs can be expensed as incurred or the first time the advertising takes place.

 

Recent Accounting Pronouncements

The Company has implemented all new accounting pronouncements that are in effect and that may impact its financial statements and does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.

 

F-9
 

 

A1 GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (AUDITED)

DECEMBER 31, 2014

 

 

 

NOTE 3 – STOCKHOLDERS’ EQUITY/DEFICIT

 

The Stockholders’ Equity/Deficit section of the Company contains the following classes of Capital Stock as of December 31, 2014.

-Common stock $0.001 par value: 75,000,000 shares authorized: 34,168,260 shares issued and outstanding.

 

On August 14, 2014, 21,000,000 shares were returned to the Company in anticipation of the acquisition of A1 Vapors, Inc.

 

On August 14, 2014, the Company entered into a Share Exchange Agreement (the ‘Share Exchange Agreement”) with selling stockholders named in the prospectus, pursuant to which the Company offered and sold an aggregate of 21,000,000 shares of common stock to all the stockholders of A-1 Vapors, Inc., a Florida corporation (“A-1 Vapors”).

 

As a result of the Reverse Merger with A-1 Vapors, Inc. and A1 Group, Inc. (formerly Freebutton, Inc.) carried forward 12,844,260 common shares, and subscription receivable representing 272,336 common shares valued at $342,231 in net liabilities assumed of A1 Group, Inc. (formerly Freebutton, Inc.) prior to August 14, 2014. The net liabilities consisted of $36,613 in cash, $24,749 in accrued liabilities and $354,095 in promissory notes.

 

On August 14, 2014, the Company converted $10,851 of debt in Subscription receivables to issue 72,336 common shares through a debt conversion agreement at $0.15 per share.

 

On September 25, 2014, the Company received $22,800 in Subscription receivables to issue 152,000 common shares through a private placement at $0.15 per share.

 

On October 6, 2014, the Company received $$27,200 in Subscription receivables to issue 181,333 common shares through a private placement at $0.15 per share.

 

On December 23, 2014 the issued 324,000 common shares in the conversion of $32,400 of Convertible Promissory Note and accrued interest at $0.10 per share.

 

NOTE 4 – RELATED PARTY TRANSACTIONS

 

The Company entered into the following transactions with a related party:

 

As of the period ending December 31, 2014, the CEO has advanced $33,621 and the COO has advanced $1,950 to the Company. The advances are unsecured, non-interest bearing and are payable on demand. Subsequent to the period on January 12, 2015 the amount owing to the COO was paid in full.

 

Employment Agreement with its Chief Operating and Chief Executive Officers

On August 15, 2014 A-1 Group, Inc., (the “Company”) signed an initial two (2) year Employment Agreement with it Chief Executive Officer. The Company has agreed to a salary of $3,500 per month starting September 1, 2014 and a lump sum signing bonus of $10,000 due on August 29, 2014.

 

On August 15, 2014 A-1 Group, Inc., (the “Company”) signed an initial two (2) year Employment Agreement with it Chief Operating Officer. The Company has agreed to a salary of $3,500 per month starting September 1, 2014.

 

During the period ending December 31, 2014, the Company paid a total of $34,500 in management fees.

 

NOTE 5 – COMMITMENTS

 

Kiosk Space

The Company began leasing kiosk space in greater Miami in 2013 and run through 2015. At December 31, 2014, contractual obligations were as follows:

 

     ·    Period beginning October 1, 2014 to December 31, 2014 - Rent Obligations - $27,327
     ·    Period ending December 31, 2015 – Rent Obligations - $39,125

  

F-10
 

 

A1 GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (AUDITED)

DECEMBER 31, 2014

 

 

 

NOTE 5 – COMMITMENTS (continued)

 

FSC Agreement

On November 29, 2014 the Company entered into an Agreement with FSC Company (“FSC”) to assist with the development of a corporate vision and to build a comprehensive Operating Plan to guide the Company, and to assist in the designing of a strategic sales and marketing plan, with an associated branding strategy. This agreement includes the following;

 

Term:Six (6) months. Either party may terminate the Agreement after four (4) months with a thirty (30) day advance written notice.
Fees:Initial fee of ten thousand dollars ($10,000) at time this agreement is executed and six thousand ($6,000) per month during the final five (5) months of the engagement period.
Incentives:the Company and FSC agree to establish an incentive plan. The Company has to provide FSC up to five hundred thousand (500,000) shares of common stock in A1Group, Inc. following the initial one hundred and twenty (120) days of the term of this Agreement , so long as items listed in the Agreement have been satisfactory delivered and all terms and conditions of the Agreement have been met.

 

NOTE 6 – CONVERTIBLE PROMISSORY NOTE

 

On October 23, 2013 the Company signed a Convertible Promissory Note for $10,000, with an interest rate of 8% with a maturity date of October 23, 2014. The issuer of the Convertible Promissory Note has the option to convert all or portion of the Promissory Note into common shares of the Company. The Conversion price share would be $0.10, unless the Company has, between the issue date of the Promissory Note and its Maturity date, sold its capital stock in financing in which the Company received gross proceeds of an excess of $90,000 at a differing price. On December 23, 2014 the Convertible Promissory Note of $10,000 plus accrued interest of $800 were converted to 108,000 restricted common shares of the Company at $0.10 per share.

 

On December 23, 2013 the Company signed a Convertible Promissory Note for $20,000, with an interest rate of 8% with a maturity date of December 23, 2014. The issuer of the Convertible Promissory Note has the option to convert all or portion of the Promissory Note into common shares of the Company. The Conversion price share would be $0.10, unless the Company has, between the issue date of the Promissory Note and its Maturity date, sold its capital stock in financing in which the Company received gross proceeds of an excess of $180,000 at a differing price. On December 23, 2014 the Convertible Promissory Note of $20,000 plus accrued interest of $1,600 were converted to 216,000 restricted common shares of the Company at $0.10 per share.

 

On March 11, 2014 the Company signed a consolidated and extension of the Company’s Promissory Notes. The New total amount of the combined Promissory Note is $307,266.26 with an interest rate of 8% and maturity date of August 28, 2014. The Conversion price share would be $0.10, unless the Company has, between the issue date of the Promissory Note and its Maturity date, sold its capital stock in financing in which the Company received gross proceeds of an excess of $1,000,000 at a differing price. In the event the Company does not pay the outstanding balance by August 28, 2014, the interest rate of the Promissory Note increases to 12% per annum. The promissory note is in default and the 12% interest rate is in effect. (Refer to Note 9 – Subsequent Events).

 

On June 20, 2014 the Company signed a Convertible Promissory Note for $16,828.56, with an interest rate of 8% with a maturity date of December 20, 2014. The issuer of the Convertible Promissory Note has the option to convert all or portion of the Promissory Note into common shares of the Company. The Conversion price share would be $0.10, unless the Company has, between the issue date of the Promissory Note and its Maturity date, sold its capital stock in financing in which the Company received gross proceeds of an excess of $152,000 at a differing price. (Refer to Note 9 – Subsequent Events).

 

The conversion of the Promissory Note(s) is contingent upon an “Event Default” and the Promissory Note is not currently convertible. If the Promissory Note does become convertible the non-cash expense to the Company is dependent on the trading value of the Company’s stock on the day of conversion and the $0.10 conversion price. The estimated non-cash expense if the Promissory notes had been converted as of December 31, 2014 would have been $678,735.

 

Subsequent to the period on January 16, 2015 an agreement was reached whereby the Convertible Promissory Note of $307,266.26 dated March 11, 2014 and $16,828.56 dated June 20, 2014 would be converted to 1,473,161 common shares of A1 Group, Inc. without restrictive legend. Upon deliverance of the share certificate they will be no further obligations under the convertible promissory notes. As of the filing date of the Company’s10-K the certificate had not yet be delivered.

 

F-11
 

 

A1 GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (AUDITED)

DECEMBER 31, 2014

 

 

 

NOTE 7 – ASSET AND BUSINESS ACQUISITION

 

A1 Vapors, Inc. – Share Exchange Agreement

On August 14, 2014 FreeButton (now known as “A1 Group, Inc.”) entered into an exchange agreement (the “Exchange Agreement”) with A1 Vapors, Inc. Under the terms of the Exchange Agreement, the shareholders of A1 Vapors, Inc. received 21,000,000 newly-issued shares of FreeButton’s Common Stock in exchange for all of A1 Vapor’s outstanding Common Stock. A1 Vapors, Inc. has become a wholly-owned subsidiary of A1 Group, Inc. (formerly known as FreeButton). The acquisition has been treated as a recapitalization of the Company with Al Vapors as the accounting acquirer in accordance with the Reverse Merger rules. As a result of the proposed consummation of the Share Exchange Agreement A1 Vapors, Inc. will become a wholly-owned subsidiary of the Company and the electronic vapour cigarette industry will become the primary business of the company.

 

NOTE 8 – INCOME TAXES

 

For the years ended December 31, 2014 and 2013, the Company incurred net operating losses and, accordingly, no provision for income taxes has been recorded. In addition, no benefit for income taxes has been recorded due to the uncertainty of the realization of any tax assets. At December 31, 2014 and 2013, the Company had approximately $32,925 and $nil of federal and state net operating losses. The net operating loss carry forwards, if not utilized, will begin to expire in 2026. The provision for income taxes consisted of the following components for the years ended December 31:

 

Components of net deferred tax assets, including a valuation allowance, are as follows at December 31:

 

   December 31 
   2014   2013 
Deferred tax assets:          
Net operating loss carry forwards  $32,925   $nil 
Valuation allowance   (32,925)   (nil) 
Total deferred tax assets  $   $ 

 

The valuation allowance for deferred tax assets as of December 31, 2014 and 2013 was $32,925 and $nil respectively. In assessing the recovery of the deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income in the periods in which those temporary differences become deductible. Management considers the scheduled reversals of future deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. As a result, management determined it was more likely than not the deferred tax assets would not be realized as of December 31, 2014 and 2013, and recorded a full valuation allowance.

 

Reconciliation between the statutory rate and the effective tax rate is as follows at December 31:

 

  2014 & 2013
   
Federal statutory tax rate (35.0) %
Permanent difference and other 35.0 %

 

F-12
 

 

A1 GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (AUDITED)

DECEMBER 31, 2014

 

 

NOTE 9 – SUBSEQUENT EVENTS

 

Convertible Redeemable Notes

Subsequent to the period on January 8, 2015 the Company entered into two (2) 8% Convertible Redeemable Note each for $26,500 (total of $53,000). Term is for one (1) year due January 8, 2016. Details of the Notes as follows;

 

Conversion Discount: The principal and accrued interest under the Notes will be convertible into shares at a 50% discount to the lowest closing bid and price with a 15 day look back.
Prepayment Option: During the first 180 days the Notes are in effect may be prepaid with a prepayment premium equal to 150% of the principal outstanding plus accrued interest. The Notes cannot be prepaid after the 180th day.
Expenses: The Investor(s) will deduct legal fees of $1,500 from each Note (total of $3,000).

 

Convertible Promissory Notes

Subsequent to the period on January 16, 2015 an agreement was reached whereby the Convertible Promissory Note of $307,266.26 dated March 11, 2014 and $16,828.56 dated June 20, 2014 would be converted to 1,473,161 common shares of A1 Group, Inc. without restrictive legend. Upon deliverance of the share certificate there will be no further obligations under the convertible promissory notes. As of the filing date of the Company’s10-K the certificate had not yet be delivered.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

F-13

 



Exhibit 31.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER AND PRINCIPAL ACCOUNTING OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

 

I, Bruce Storrs., certify that:

1.I have reviewed this annual report on Form 10-K of A1 Group Inc.;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5.The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Dated: March 26, 2015 A1 GROUP, INC.
   
  By: /s/ Bruce Storrs
 

Bruce Storrs

President, Chief Executive Officer and Secretary

(Duly Authorized Officer, Principal Executive Officer and Principal Accounting Officer)

 

 



Exhibit 32.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER AND PRINCIPAL ACCOUNTING OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED

PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

I, Bruce Storrs., President and Chief Executive Officer of A1 Group, Inc., hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1.the annual report on Form 10-K of A1 Group, Inc. for the fiscal year ended December 31, 2014 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2.the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of A1 Group, Inc.

 

Dated: March 26, 2015 A1 GROUP, INC.
   
  By: /s/ Bruce Storrs.
 

Bruce Storrs

President, Chief Executive Officer and Secretary

(Duly Authorized Officer, Principal Executive Officer and Principal Accounting Officer)

 

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