ITEM 8. FINANCIAL
STATEMENTS AND SUPPLEMENTARY DATA
TABLE OF CONTENTS
Report of Independent
Registered Public Accounting Firm
To the shareholders and the board of directors
of Cruzani, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated
balance sheets of Cruzani, Inc. as of December 31, 2020 and 2019, the related statements of operations, stockholders' equity (deficit),
and cash flows for the years then ended, and the related notes (collectively referred to as the "financial statements"). In
our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31,
2020 and 2019, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles
generally accepted in the United States.
Substantial Doubt about the Company’s
Ability to Continue as a Going Concern
The accompanying financial statements have been
prepared assuming that the Company will continue as a going concern. As discussed in Note 3 to the financial statements, the Company has
suffered recurring losses from operations and has a significant accumulated deficit. In addition, the Company continues to experience
negative cash flows from operations. These factors raise substantial doubt about the Company's ability to continue as a going concern.
Management's plans in regard to these matters are also described in Note 3. The financial statements do not include any adjustments that
might result from the outcome of this uncertainty.
Basis for Opinion
These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audit. We
are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are
required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and
regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the
standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged
to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding
of internal control over financial reporting 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.
Our audit included performing procedures to
assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond
to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.
Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating
the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.
/S/ BF Borgers CPA PC
BF Borgers CPA PC
We have served as the Company's auditor since 2020
Lakewood, CO
June 2, 2021
Cruzani, Inc. and
Subsidiaries
Consolidated Balance Sheets
(Audited)
|
|
December 31,
2020
|
|
|
December 31,
2019
|
|
ASSETS
|
|
|
|
|
|
|
Total Assets
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
|
|
|
|
|
|
|
|
|
Current Liabilities:
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
326,400
|
|
|
$
|
316,400
|
|
Accrued interest
|
|
|
1,150,820
|
|
|
|
1,193,596
|
|
Accrued officer compensation
|
|
|
292,000
|
|
|
|
172,000
|
|
Notes payable, net of discounts of $77,004 and $35,547, respectively
|
|
|
1,391,432
|
|
|
|
1,693,848
|
|
Derivative liabilities
|
|
|
2,140,159
|
|
|
|
472,605
|
|
Loans payable
|
|
|
254,500
|
|
|
|
254,500
|
|
Total Current Liabilities
|
|
|
5,555,311
|
|
|
|
4,102,949
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities
|
|
|
5,555,311
|
|
|
|
4,102,949
|
|
|
|
|
|
|
|
|
|
|
Commitments and Contingencies (Note 9)
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS’ DEFICIT:
|
|
|
|
|
|
|
|
|
Series A Preferred stock, 3,500,000 shares authorized, par value $0.01; 3,381,520 shares issued and outstanding
|
|
|
33,815
|
|
|
|
33,815
|
|
Series B Preferred stock, 10,000 shares authorized, par value $0.01; 5,000 shares issued and outstanding
|
|
|
50
|
|
|
|
50
|
|
Series C Preferred stock, 10,000,000 shares authorized, par value $0.01; 5,000,000 shares issued and outstanding
|
|
|
50,000
|
|
|
|
50,000
|
|
Series D Preferred stock, 125,000 shares authorized, par value $0.0001; 125,000 shares issued and outstanding
|
|
|
12
|
|
|
|
12
|
|
Series E Preferred stock, 500,000 shares authorized, par value $0.01; 34,985 and 53,000 shares issued and outstanding; respectively
|
|
|
34,985
|
|
|
|
34,985
|
|
Series E Preferred stock to be issued
|
|
|
166,331
|
|
|
|
140,831
|
|
Total preferred stock
|
|
|
285,194
|
|
|
|
259,694
|
|
Common stock 3,000,000,000 shares authorized, $0.00001 par value; 1,339,044,282 and 297,041,945 shares issued and outstanding, respectively at December 31, 2020 and December 31,2019
|
|
|
13,390
|
|
|
|
2,970
|
|
Treasury stock, at cost - 2,917 shares
|
|
|
(773,500
|
)
|
|
|
(773,500
|
)
|
Additional paid in capital
|
|
|
76,679,297
|
|
|
|
75,958,049
|
|
Accumulated deficit
|
|
|
(81,759,691
|
)
|
|
|
(79,575,663
|
)
|
Total Stockholders’ Deficit
|
|
|
(5,555,311
|
)
|
|
|
(4,102,909
|
)
|
Total Liabilities and Stockholders’ Deficit
|
|
$
|
-
|
|
|
$
|
-
|
|
The accompanying notes are an integral
part of these unaudited condensed consolidated financial statements.
Cruzani, Inc. and
Subsidiaries
Consolidated Statements of Operations
(Audited)
|
|
For the Years Ended
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
Operating Expenses:
|
|
|
|
|
|
|
Compensation expense
|
|
$
|
120,000
|
|
|
$
|
120,000
|
|
General and administrative
|
|
|
497,324
|
|
|
|
166,255
|
|
Professional fees
|
|
|
48,325
|
|
|
|
104,930
|
|
Total operating expenses
|
|
|
665,649
|
|
|
|
391,185
|
|
|
|
|
|
|
|
|
|
|
Loss from operations
|
|
|
(665,649
|
)
|
|
|
(391,185
|
)
|
|
|
|
|
|
|
|
|
|
Other Income (Expense):
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
(611,789
|
)
|
|
|
(1,024,755
|
)
|
Change in fair value of derivatives
|
|
|
(1,837,933
|
)
|
|
|
19,557
|
|
Loss on receivables
|
|
|
-
|
|
|
|
(442,365
|
)
|
Loss on issuance of convertible preferred stock
|
|
|
-
|
|
|
|
(194,547
|
)
|
Gain on extinguishment of debt and accrued interest
|
|
|
931,342
|
|
|
|
492,016
|
|
Loss on convertible notes
|
|
|
-
|
|
|
|
(46,250
|
)
|
Total other income (expense)
|
|
|
(1,518,380
|
)
|
|
|
(1,196,345
|
)
|
|
|
|
|
|
|
|
|
|
Loss before provision for income taxes
|
|
|
(2,184,029
|
)
|
|
|
(1,587,530
|
)
|
Provision for income taxes
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Net Loss
|
|
$
|
(2,184,029
|
)
|
|
$
|
(1,587,530
|
)
|
|
|
|
|
|
|
|
|
|
Basic loss per share
|
|
$
|
(0.01
|
)
|
|
$
|
(0.01
|
)
|
|
|
|
|
|
|
|
|
|
Basic weighted average shares outstanding
|
|
|
488,903,229
|
|
|
|
197,963,314
|
|
The accompanying notes are an integral
part of these unaudited condensed consolidated financial statements.
Cruzani, Inc. and
Subsidiaries
Consolidated Statement of Changes in Stockholders’ Deficit
For the Twelve Months Ended December 31, 2019
(Audited)
|
|
Series A
|
|
|
Series B
|
|
|
Series C
|
|
|
Series D
|
|
|
Series E
|
|
|
Series E
Preferred
Stock to be
|
|
|
|
|
|
|
|
|
Additional
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred Stock
|
|
|
Preferred Stock
|
|
|
Preferred Stock
|
|
|
Preferred Stock
|
|
|
Preferred Stock
|
|
|
issued
|
|
|
Common Stock
|
|
|
Paid-In
|
|
|
Treasury
|
|
|
Accumulated
|
|
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Stock
|
|
|
Deficit
|
|
|
Total
|
|
Balance December 31, 2018
|
|
|
3,381,520
|
|
|
$
|
33,815
|
|
|
|
5,000
|
|
|
$
|
50
|
|
|
|
5,000,000
|
|
|
$
|
50,000
|
|
|
|
125,000
|
|
|
$
|
12
|
|
|
|
53,000
|
|
|
$
|
53,000
|
|
|
|
|
|
|
$
|
140,831
|
|
|
|
73,442,239
|
|
|
$
|
734
|
|
|
$
|
75,544,112
|
|
|
$
|
(773,500
|
)
|
|
$
|
(77,988,132
|
)
|
|
$
|
(2,939,077
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares issued for extinguishment of convertible debt
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29,160,864
|
|
|
|
292
|
|
|
|
154,840
|
|
|
|
-
|
|
|
|
|
|
|
|
155,132
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(131,631
|
)
|
|
|
(131,631
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance March 31, 2019
|
|
|
3,381,520
|
|
|
|
33,815
|
|
|
|
5,000
|
|
|
|
50
|
|
|
|
5,000,000
|
|
|
|
50,000
|
|
|
|
125,000
|
|
|
|
12
|
|
|
|
53,000
|
|
|
|
53,000
|
|
|
|
-
|
|
|
|
140,831
|
|
|
|
102,603,103
|
|
|
|
1,026
|
|
|
|
75,698,952
|
|
|
|
(773,500
|
)
|
|
|
(78,119,763
|
)
|
|
|
(2,915,577
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash proceeds for Series E Preferred stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
33,785
|
|
|
|
33,785
|
|
|
|
|
|
|
|
25,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
59,285
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares issued for extinguishment of Preferred stock
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
66,331,384
|
|
|
|
663
|
|
|
|
135,603
|
|
|
|
-
|
|
|
|
|
|
|
|
136,266
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(832,419
|
)
|
|
|
(832,419
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance June 30, 2019
|
|
|
3,381,520
|
|
|
|
33,815
|
|
|
|
5,000
|
|
|
|
50
|
|
|
|
5,000,000
|
|
|
|
50,000
|
|
|
|
125,000
|
|
|
|
12
|
|
|
|
86,785
|
|
|
|
86,785
|
|
|
|
-
|
|
|
|
166,331
|
|
|
|
168,934,487
|
|
|
|
1,689
|
|
|
|
75,834,555
|
|
|
|
(773,500
|
)
|
|
|
(78,952,182
|
)
|
|
|
(3,552,445
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares issued for extinguishment of Preferred stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(51,800
|
)
|
|
|
(51,800
|
)
|
|
|
|
|
|
|
|
|
|
|
128,107,458
|
|
|
|
1,281
|
|
|
|
123,494
|
|
|
|
|
|
|
|
|
|
|
|
72,975
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
89,308
|
|
|
|
89,308
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance September 30, 2019
|
|
|
3,381,520
|
|
|
$
|
33,815
|
|
|
|
5,000
|
|
|
$
|
50
|
|
|
|
5,000,000
|
|
|
$
|
50,000
|
|
|
|
125,000
|
|
|
$
|
12
|
|
|
|
34,985
|
|
|
$
|
34,985
|
|
|
|
-
|
|
|
$
|
166,331
|
|
|
|
297,041,945
|
|
|
$
|
2,970
|
|
|
$
|
75,958,049
|
|
|
$
|
(773,500
|
)
|
|
$
|
(78,862,874
|
)
|
|
$
|
(3,390,162
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(712,789
|
)
|
|
|
(712,789
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2019
|
|
|
3,381,520
|
|
|
$
|
33,815
|
|
|
|
5,000
|
|
|
$
|
50
|
|
|
|
5,000,000
|
|
|
$
|
50,000
|
|
|
|
125,000
|
|
|
$
|
12
|
|
|
|
34,985
|
|
|
$
|
34,985
|
|
|
|
-
|
|
|
$
|
166,331
|
|
|
|
297,041,945
|
|
|
$
|
2,970
|
|
|
$
|
75,958,049
|
|
|
$
|
(773,500
|
)
|
|
$
|
(79,575,663
|
)
|
|
$
|
(4,102,949
|
)
|
The accompanying notes are an integral
part of these unaudited condensed consolidated financial statements.
Cruzani, Inc. and Subsidiaries
Consolidated Statement of Changes in Stockholders’ Deficit
For the Nine months Ended September 30, 2020
(Audited)
|
|
Series A
|
|
|
Series B
|
|
|
Series C
|
|
|
Series D
|
|
|
Series E
|
|
|
Series E
Preferred
Stock to be
|
|
|
|
|
|
|
|
|
Additional
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred Stock
|
|
|
Preferred Stock
|
|
|
Preferred Stock
|
|
|
Preferred Stock
|
|
|
Preferred Stock
|
|
|
issued
|
|
|
Common Stock
|
|
|
Paid-In
|
|
|
Treasury
|
|
|
Accumulated
|
|
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Stock
|
|
|
Deficit
|
|
|
Total
|
|
Balance December 31, 2019
|
|
|
3,381,520
|
|
|
$
|
33,815
|
|
|
|
5,000
|
|
|
$
|
50
|
|
|
|
5,000,000
|
|
|
$
|
50,000
|
|
|
|
125,000
|
|
|
$
|
12
|
|
|
|
34,985
|
|
|
$
|
34,985
|
|
|
|
|
|
|
$
|
166,331
|
|
|
|
297,041,945
|
|
|
$
|
2,970
|
|
|
$
|
75,958,049
|
|
|
$
|
(773,500
|
)
|
|
$
|
(79,575,663
|
)
|
|
$
|
(4,102,950
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(130,188
|
)
|
|
|
(130,188
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance March 31, 2020
|
|
|
3,381,520
|
|
|
|
33,815
|
|
|
|
5,000
|
|
|
|
50
|
|
|
|
5,000,000
|
|
|
|
50,000
|
|
|
|
125,000
|
|
|
|
12
|
|
|
|
34,985
|
|
|
|
34,985
|
|
|
|
-
|
|
|
|
166,331
|
|
|
|
297,041,945
|
|
|
|
2,970
|
|
|
|
75,958,049
|
|
|
|
(773,500
|
)
|
|
|
(79,705,850
|
)
|
|
|
(4,233,138
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares issued for extinguishment of accrued interest
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
73,343,869
|
|
|
|
733
|
|
|
|
31,998
|
|
|
|
-
|
|
|
|
|
|
|
|
32,732
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(332,448
|
)
|
|
|
(332,448
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance June 30, 2020
|
|
|
3,381,520
|
|
|
|
33,815
|
|
|
|
5,000
|
|
|
|
50
|
|
|
|
5,000,000
|
|
|
|
50,000
|
|
|
|
125,000
|
|
|
|
12
|
|
|
|
34,985
|
|
|
|
34,985
|
|
|
|
-
|
|
|
|
166,331
|
|
|
|
370,385,814
|
|
|
|
3,704
|
|
|
|
75,990,047
|
|
|
|
(773,500
|
)
|
|
|
(80,038,298
|
)
|
|
|
(4,532,854
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares issued for extinguishment of debt and accrued interest
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
205,217,291
|
|
|
|
2,052
|
|
|
|
148,119
|
|
|
|
-
|
|
|
|
-
|
|
|
|
150,172
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(343,357
|
)
|
|
|
(343,357
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance September 30, 2020
|
|
|
3,381,520
|
|
|
|
33,815
|
|
|
|
5,000
|
|
|
|
50
|
|
|
|
5,000,000
|
|
|
|
50,000
|
|
|
|
125,000
|
|
|
|
12
|
|
|
|
34,985
|
|
|
|
34,985
|
|
|
|
-
|
|
|
|
166,331
|
|
|
|
575,603,105
|
|
|
|
5,756
|
|
|
|
76,138,167
|
|
|
|
(773,500
|
)
|
|
|
(80,381,656
|
)
|
|
|
(4,726,040
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares issued for extinguishment of debt and accrued interest
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
763,441,176
|
|
|
|
7,634
|
|
|
|
527,264
|
|
|
|
-
|
|
|
|
|
|
|
|
534,898
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(1,378,035
|
)
|
|
|
(1,378,035
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2020
|
|
|
3,381,520
|
|
|
$
|
33,815
|
|
|
|
5,000
|
|
|
$
|
50
|
|
|
|
5,000,000
|
|
|
$
|
50,000
|
|
|
|
125,000
|
|
|
$
|
12
|
|
|
|
34,985
|
|
|
$
|
34,985
|
|
|
|
-
|
|
|
$
|
166,331
|
|
|
|
1,339,044,281
|
|
|
$
|
13,390
|
|
|
$
|
76,665,430
|
|
|
$
|
(773,500
|
)
|
|
$
|
(81,759,691
|
)
|
|
$
|
(5,555,311
|
)
|
The accompanying notes are an integral
part of these unaudited condensed consolidated financial statements.
Cruzani, Inc. and
Subsidiaries
(formerly US Highland, Inc.)
Consolidated Statements of Cash Flows
|
|
For the Years Ended
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
CASH FLOW FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
Net loss
|
|
$
|
(2,184,029
|
)
|
|
$
|
(1,587,530
|
)
|
Adjustments to reconcile net loss to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
Change in fair value of derivatives
|
|
|
1,837,933
|
|
|
|
(19,557
|
)
|
Loss on convertible debt
|
|
|
-
|
|
|
|
46,250
|
|
Loss on receivables
|
|
|
-
|
|
|
|
442,365
|
|
Loss on issuance of convertible preferred stock
|
|
|
-
|
|
|
|
194,547
|
|
Financing note associated with 3a10 financing
|
|
|
-
|
|
|
|
100,000
|
|
Fees on extinguishment of debt
|
|
|
15,225
|
|
|
|
-
|
|
Reconciliation of debt balances
|
|
|
257,824
|
|
|
|
-
|
|
Issuance of non-cash consulting notes
|
|
|
225,000
|
|
|
|
|
|
Debt discount amortization
|
|
|
131,143
|
|
|
|
296,259
|
|
Gain on extinguishment of debt and accrued interest
|
|
|
(931,342
|
)
|
|
|
(492,016
|
)
|
Changes in Operating Assets and Liabilities:
|
|
|
|
|
|
|
|
|
Other assets
|
|
|
-
|
|
|
|
(17,161
|
)
|
Accounts payable
|
|
|
10,000
|
|
|
|
-
|
|
Accrued interest
|
|
|
480,647
|
|
|
|
815,264
|
|
Accrued officer compensation
|
|
|
120,000
|
|
|
|
104,000
|
|
Net Cash Used in Operating Activities
|
|
|
(37,600
|
)
|
|
|
(117,579
|
)
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Proceeds from convertible debt
|
|
|
37,600
|
|
|
|
4,000
|
|
Proceeds from loans
|
|
|
-
|
|
|
|
25,500
|
|
Preferred stock sold for cash
|
|
|
-
|
|
|
|
86,500
|
|
Net Cash Provided by Financing Activities
|
|
|
37,600
|
|
|
|
116,000
|
|
|
|
|
|
|
|
|
|
|
Net Increase (Decrease) in Cash
|
|
|
-
|
|
|
|
(1,579
|
)
|
Cash at Beginning of Year
|
|
|
-
|
|
|
|
1,579
|
|
Cash at End of Year
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
Cash paid during the period for:
|
|
|
|
|
|
|
|
|
Interest
|
|
$
|
-
|
|
|
$
|
-
|
|
Income taxes
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure of non-cash activity:
|
|
|
|
|
|
|
|
|
Common stock issued for conversion of debt and accrued interest
|
|
$
|
359,596
|
|
|
$
|
155,432
|
|
The accompanying notes are an integral
part of these unaudited condensed consolidated financial statements.
Cruzani, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
For the Years Ended December 31, 2020 and 2019
NOTE 1 – BACKGROUND
Organization
Cruzani, Inc. (“Cruzani” or
the “Company”) is currently evaluating strategic options. We have divested ourselves of our current assets and are
currently performing due diligence on a wide variety of alternatives. Most recently, we were a franchise development company that
builds and represents popular franchise concepts, and other related businesses, throughout the United States as well as international
markets. The Company was originally formed as a limited liability company on February 5, 1999 under the name The Powerhouse, L.L.C.
pursuant to the laws of the State of Oklahoma. On November 9, 2006, Powerhouse Productions, L.L.C. filed Articles of Conversion
changing the entity from a limited liability company to a corporation under the name Harcom Productions, Inc. On January 25, 2010,
Articles of Merger were filed with the State of Oklahoma merging U.S. Highland, Inc., an Oklahoma corporation into Harcom Productions,
Inc. and the name of the corporation was changed to US Highland, Inc. US Highland, Inc. was a recreational power sports Original
Equipment Manufacturer (“OEM”), developing motorcycles, quads, single cylinder engines, and v-twin engines under its
own brand and for other OEMs. During 2017, the Company exited the recreational power sports OEM and leisure activity vehicles markets.
On June 29, 2018, the Company filed Amended
and Restated Articles of Incorporation with the State of Nevada to change its name to Cruzani, Inc. The name change is subject
to approval by the Financial Industry Regulatory Authority (known as “FINRA”).
On June 30, 2018, Supreme Sweets
Acquisition Corp. (n/k/a Oventa, Inc.), a subsidiary of the Company, and the Company (collectively, the “Company”)
entered into an asset purchase agreement (the “Asset Purchase Agreement”) with Supreme Sweets Inc. and 2498411 Ontario,
Inc., as sellers (collectively, the “Seller”), pursuant to which in exchange for CAD $200,000 and a twenty percent
(20%) interest in Oventa, Inc., the Company agreed to acquire the trade secret assets of Seller upon the terms and subject to the
conditions set forth in the Asset Purchase Agreement. A second closing occurred on July 31, 2018, pursuant to which the
Company acquired the furniture, fixtures and equipment of Seller in exchange for CAD $100,000. Seller is engaged in the business
of preparing delicious snacks, pastries and baked goods with high quality ingredients for exceptional taste, including low calorie
and gluten-free alternatives. The Asset Purchase Agreement included a provision, pursuant to which the Company could unwind the
transaction if certain milestones were not achieved. The milestones contemplated in the Asset Purchase Agreement were not met,
and accordingly, on December 31, 2018, by written notice to the Seller, the Company unwound the transaction. The capital
injected into Oventa, Inc., however, has been secured pursuant to financing statements filed on behalf of the Company, and the
Company expects to receive a return of its injected capital of approximately US $339,813 during the calendar year 2019. Collectability
is based on claims filed for cash that was paid.
On September 27, 2018, the Company
entered into a stock purchase agreement (the “Stock Purchase Agreement”) with Sandrea Gibson, as seller (the “Seller”),
and Recipe Food Co., as the target (the “Target”), pursuant to which in exchange for up to CAD $237,000, the Company
agreed to acquire 80% of the issued and outstanding stock of the Target from the Seller upon the terms and subject to the conditions
set forth in the Stock Purchase Agreement. Seller is engaged in the business of preparing and serving delicious, healthy meals
on a counter-service basis with high quality ingredients, including low calorie alternatives. Difficulties integrating the Target
into the Company group, which forced the Company to cease injecting additional capital into the Target. The Target is currently
on the market for disposition to a third-party buyer on an arms-length basis, which the Company can undertake due to its supermajority
ownership.
On July 8, 2019, Mr. Dickson entered into
a Securities Purchase Agreement (“Purchase Agreement”) with Conrad Huss to sell 5,000,000 shares of Series C Preferred
and 5,000 shares of Series B preferred Stock held by Mr. Dickson. As a result, Mr. Huss acquired the right to vote 99.06 % of the
voting control of the Company. The Series B Preferred Stock is also convertible into common stock which, in the aggregate, would
represent up to .01% of the outstanding common stock after the conversion. The Series B Preferred Stock is also convertible into
common stock which, in the aggregate, would represent up to 99.05% of the outstanding common stock after the conversion.
On July 8, 2019, Everett Dickson, who had
been the sole officer of the Company, resigned as an officer of the Company, and Conrad Huss was appointed the Interim President
and Chief Executive Officer of the Company. Mr. Huss is the sole beneficial owner of 5,000,000 and 5,000 shares of Series B and
C Preferred Stocks, respectively. Mr. Dickson also resigned as a director of the Company, effective on July 8th, 2019. Mr. Dickson’s
resignation was not the result of any disagreement with the management of the Company
Business
Cruzani, Inc. is currently evaluating various
strategic options to engage in.
NOTE 2 – SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
Basis of Presentation
The Company’s consolidated financial
statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S.
GAAP”).
Use of Estimates
The preparation of financial statements
in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements
and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Concentrations of Credit Risk
The Company currently has no cash on hand
or other assets
Cash equivalents
The Company considers all highly liquid
investments with a maturity of three months or less when purchased to be cash equivalents. There were no cash equivalents for the
year ended December 31, 2019 or 2018.
Reclassifications
Certain reclassifications have been made
to the prior year financial information to conform to the presentation used in the financial statements for the year ended December
31, 2020. There is no net effect as the result of these reclassifications.
Fair value of financial instruments
The Company follows paragraph 825-10-50-10
of the FASB Accounting Standards Codification for disclosures about fair value of its financial instruments and paragraph 820-10-35-37
of the FASB Accounting Standards Codification (“Paragraph 820-10-35-37”) to measure the fair value of its financial
instruments. Paragraph 820-10-35-37 establishes a framework for measuring fair value in accounting principles generally accepted
in the United States of America (U.S. GAAP), and expands disclosures about fair value measurements. To increase consistency and
comparability in fair value measurements and related disclosures, Paragraph 820-10-35-37 establishes a fair value hierarchy which
prioritizes the inputs to valuation techniques used to measure fair value into three (3) broad levels. The fair value hierarchy
gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority
to unobservable inputs. The three (3) levels of fair value hierarchy defined by Paragraph 820-10-35-37 are described below:
Level 1: Quoted market prices available
in active markets for identical assets or liabilities as of the reporting date.
Level 2: Pricing inputs other than quoted
prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date.
Level 3: Pricing inputs that are generally
unobservable inputs and not corroborated by market data.
The carrying amount of the Company’s
financial assets and liabilities, such as cash, prepaid expenses and accrued expenses approximate their fair value because of the
short maturity of those instruments. The Company’s notes payable approximates the fair value of such instruments based upon
management’s best estimate of interest rates that would be available to the Company for similar financial arrangements at
December 31, 2018.
Income taxes
The Company follows Section 740-10-30 of
the FASB Accounting Standards Codification, which requires recognition of deferred tax assets and liabilities for the expected
future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred
tax assets and liabilities are based on the differences between the financial statement and tax bases of assets and liabilities
using enacted tax rates in effect for the fiscal year in which the differences are expected to reverse. Deferred tax assets are
reduced by a valuation allowance to the extent management concludes it is more likely than not that the assets will not be realized.
Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the fiscal years
in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities
of a change in tax rates is recognized in the Statements of Income in the period that includes the enactment date.
The Company adopted section 740-10-25 of
the FASB Accounting Standards Codification (“Section 740-10-25”) with regards to uncertainty income taxes. Section
740-10-25 addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded
in the financial statements. Under Section 740-10-25, the Company may recognize the tax benefit from an uncertain tax position
only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the
technical merits of the position. The tax benefits recognized in the financial statements from such a position should be measured
based on the largest benefit that has a greater than fifty percent (50%) likelihood of being realized upon ultimate settlement.
Section 740-10-25 also provides guidance on de-recognition, classification, interest and penalties on income taxes, accounting
in interim periods and requires increased disclosures. The Company had no material adjustments to its liabilities for unrecognized
income tax benefits according to the provisions of Section 740-10-25.
Stock-based Compensation
We account for equity-based transactions
with nonemployees under the provisions of ASC Topic No. 505-50, Equity-Based Payments to Non-Employees (“ASC 505-50”).
ASC 505-50 establishes that equity-based payment transactions with nonemployees shall be measured at the fair value of the consideration
received or the fair value of the equity instruments issued, whichever is more reliably measurable. The fair value of common stock
issued for payments to nonemployees is measured at the market price on the date of grant. The fair value of equity instruments,
other than common stock, is estimated using the Black-Scholes option valuation model. In general, we recognize the fair value of
the equity instruments issued as deferred stock compensation and amortize the cost over the term of the contract.
We account for employee stock-based compensation
in accordance with the guidance of FASB ASC Topic 718, Compensation—Stock Compensation, which requires all share-based
payments to employees, including grants of employee stock options, to be recognized in the financial statements based on their
fair values. The fair value of the equity instrument is charged directly to compensation expense and credited to additional paid-in
capital over the period during which services are rendered.
Net income (loss) per common share
Basic net loss per common share is computed
by dividing net loss by the weighted average number of shares of common stock outstanding during the period. Diluted net loss
per common share is computed by dividing net loss by the weighted average number of shares of common stock and potentially outstanding
shares of common stock during the period. The Company’s diluted loss per share is the same as the basic loss per share for
the years ended December 31, 2019 and 2018, as the inclusion of any potential shares would have had an anti-dilutive effect due
to the Company generating a loss.
Recently issued accounting pronouncements
In March 2016, the FASB issued ASU No.
2016-09, Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. This
ASU makes targeted amendments to the accounting for employee share-based payments. This guidance is to be applied using various
transition methods such as full retrospective, modified retrospective, and prospective based on the criteria for the specific amendments
as outlined in the guidance. The guidance is effective for annual periods, and interim periods within those annual periods, beginning
after December 15, 2016. The Company adopted this ASU and it did not have a material impact its financial position and results
of operations.
In February 2016, the FASB issued ASU 2016-02,
Leases (Topic 842). The ASU requires that a lessee recognize the assets and liabilities that arise from operating leases.
A lessee should recognize in the statement of financial position a liability to make lease payments (the lease liability) and a
right-of-use asset representing its right to use the underlying asset for the lease term. For leases with a term of 12 months or
less, a lessee is permitted to make an accounting policy election by class of underlying asset not to recognize lease assets and
lease liabilities. This new guidance will be effective for annual reporting periods beginning after December 15, 2018, including
interim periods within those annual reporting periods, and early adoption is permitted. In transition, lessees and lessors are
required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach.
The Company adopted this ASU and it did not have a material impact its financial position and results of operations.
In May 2014, the FASB issued ASU 2014-09,
Revenue from Contracts with Customers (“Topic 606”), which updated through several revisions and clarifications
since its original issuance and supersedes previous revenue recognition guidance. This guidance introduces a new principles-based
framework for revenue recognition, requiring an entity to recognize revenue representing the transfer of promised goods or services
to customers in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services.
The update also requires new qualitative and quantitative disclosures, beginning in the quarter of adoption, regarding the nature,
amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes
in judgments, information about contract balances and performance obligations, and assets recognized from costs incurred to obtain
or fulfil a contract. The update may be applied using one of two prescribed transition methods: retrospectively to the prior reporting
period presented (full retrospective method), or retrospectively with the cumulative effect of initially applying the guidance
recognized at the date of initial application (the modified retrospective method. The Company adopted this ASU and it did not have
a material impact its financial position and results of operations.
In August 2016, the FASB issued ASU 2016-15, Statement
of Cash Flows: Clarification of Certain Cash Receipts and Cash Payments (“ASU 2016-15”), which eliminates
the diversity in practice related to classification of certain cash receipts and payments in the statement of cash flows, by adding
or clarifying guidance on eight specific cash flow issues. This new guidance will be effective for annual reporting periods beginning
after December 15, 2017, and interim periods within those fiscal years and early adoption is permitted, including adoption in an
interim period. The Company adopted this ASU and it did not have a material impact its financial position and results of operations.
In November 2016, the FASB issued ASU 2016-18,
Statement of Cash Flows (Topic 230): Restricted Cash (“ASU 2016-18”), which provides guidance that will require
that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally
described as restricted cash or restricted cash equivalents. As a result, amounts generally described as restricted cash and restricted
cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total
amounts shown on the statement of cash flows. This new guidance will be effective for annual reporting periods beginning after
December 15, 2017, and interim periods within those fiscal years and early adoption is permitted, including adoption in an interim
period. The Company adopted this ASU and it did not have a material impact its financial position and results of operations.
In January 2017, the FASB issued ASU 2017-01,
Business Combinations (Topic 805): Clarifying the Definition of a Business. This ASU clarifies the definition of a business
when evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. This
new guidance will be effective for annual reporting periods beginning after December 15, 2017, including interim periods within
those periods. The Company adopted this ASU and it did not have a material impact its financial position and results of operations.
In January 2017, the FASB issued ASU 2017-04,
Intangibles—Goodwill and Other (Topic 350). This ASU simplifies the subsequent measurement of goodwill by eliminating
the second step of the goodwill impairment test, which required computing the implied fair value of goodwill. Under the amendments
in this update, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting
unit with its carrying amount. An impairment charge should be recognized for the amount by which the carrying amount exceeds the
reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that
reporting unit. This new guidance will be effective January 1, 2020. The Company is currently evaluating the provisions of this
guidance and assessing its impact on the Company’s consolidated financial statements and disclosures.
In May 2017, the FASB issued ASU 2017-09,
Compensation-Stock Compensation (Topic 718): Scope of Modification Accounting. This ASU clarifies an entity’s
ability to modify the terms or conditions of a share-based payment award presented. An entity should account for the effects of
a modification unless all the following are met: the fair value of the modified award has not changed from the fair value on the
date of issuance; the vesting conditions of the modified award are the same as the vesting conditions of the original award immediately
before the original award is modified; and, the classification of the modified award as an equity instrument or a liability instrument
is the same as the classification of the original award immediately before the original award is modified. This new guidance will
be effective for annual reporting periods beginning after December 15, 2017, including interim periods within those periods. The
Company adopted this ASU and it did not have a material impact its financial position and results of operations.
In July 2017, the FASB issued ASU 2017-11,
Earnings Per Share (Topic 260); Distinguishing Liabilities from Equity (Topic 480); Derivatives and Hedging (Topic 815): (Part
I) Accounting for Certain Financial Instruments with Down Round Features, (Part II) Replacement of the Indefinite Deferral for
Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests
with a Scope Exception. This ASU clarifies the recognition, measurement, and effect on earnings per share of certain freestanding
equity-classified financial instruments that include down round features affect entities that present earnings per share in accordance
with the guidance in Topic 260, Earnings Per Share. When determining whether certain financial instruments should be classified
as liabilities or equity instruments, a down round feature no longer precludes equity classification when assessing whether the
instrument is indexed to an entity’s own stock. The amendments also clarify existing disclosure requirements for equity-classified
instruments. This new guidance will be effective for annual reporting periods beginning after December 15, 2018, including interim
periods within those periods. The Company has elected to early adopt this ASU and as a result outstanding warrants were not accounted
for as a derivative.
The Company has implemented all new accounting
pronouncements that are in effect. These pronouncements did not have any material impact on the financial statements unless otherwise
disclosed, and the Company 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.
NOTE 3 – GOING CONCERN
The accompanying consolidated financial
statements have been prepared in conformity with generally accepted accounting principles which contemplate continuation of the
Company as a going-concern basis. The going concern basis assumes that assets are realized, and liabilities are extinguished in
the ordinary course of business at amounts disclosed in the consolidated financial statements. The Company has incurred recurring
losses from operation and does not currently have revenue generating operations. The Company has an accumulated deficit of $81,759,691,
and a net loss for the year ended December 31, 2020 of ($2,184,029). However, the Company only used approximately $38,000 to conduct
its operations as detailed in the Statement of Cash flows. The Company’s ability to continue as a going concern depends upon
its ability to obtain adequate funding to support its operations through continuing investments of debt and/or equity by qualified
investors/creditors, internally generated working capital and monetization of intellectual property assets. These factors raise
substantial doubt about the Company’s ability to continue as a going concern. These consolidated financial statements do
not include any adjustments that might be necessary if the Company is unable to continue as a going concern. Management is currently
pursuing a business strategy which includes raising the necessary funds to finance the Company’s development and marketing
efforts.
NOTE 4 – LOANS PAYABLE
The loan payable balances are as follows:
|
|
Rate
|
|
December 31,
2020
|
|
|
December 31,
2019
|
|
Loan 1
|
|
1%
|
|
$
|
27,000
|
|
|
$
|
27,000
|
|
Loan 2
|
|
1%
|
|
|
3,000
|
|
|
|
3,000
|
|
Loan 3
|
|
8%
|
|
|
64,000
|
|
|
|
39,000
|
|
Loan 4
|
|
8%
|
|
|
160,500
|
|
|
|
155,400
|
|
Total
|
|
|
|
$
|
254,500
|
|
|
$
|
224,400
|
|
Above notes are past due as of the issuance
of these financial statements.
NOTE 5 – NOTES PAYABLE
The following table summarizes the convertible
notes as of December 31, 2020 and December 31, 2019:
Creditor
|
|
Date
Issued
|
|
Interest
Rate
|
|
Maturity
Date
|
|
31-Dec-20
|
|
|
31-Dec-19
|
|
Third party individual*
|
|
25-Jul-13
|
|
12%
|
|
31-Dec-16
|
|
$
|
-
|
|
|
$
|
500,000
|
|
Adar Bays, LLC
|
|
11-Feb-16
|
|
24%
|
|
11-Feb-17
|
|
|
-
|
|
|
|
68,004
|
|
GW Holdings Group, LLC*
|
|
17-May-16
|
|
24%
|
|
17-May-17
|
|
|
24,000
|
|
|
|
24,000
|
|
Travel Data Solutions
|
|
18-Nov-17
|
|
10%
|
|
30-Nov-19
|
|
|
100,000
|
|
|
|
100,000
|
|
GW Holdings Group, LLC*
|
|
16-Mar-18
|
|
24%
|
|
15-Mar-19
|
|
|
36,750
|
|
|
|
36,750
|
|
Livingston Asset Management, LLC
|
|
19-Jul-19
|
|
10%
|
|
31-Mar-20
|
|
|
-
|
|
|
|
100,000
|
|
Travel Data Solutions
|
|
18-Jan-19
|
|
10%
|
|
31-Jan-20
|
|
|
25,000
|
|
|
|
25,000
|
|
Oasis Capital, LLC
|
|
various
|
|
10%
|
|
various
|
|
|
1,016,086
|
|
|
|
875,641
|
|
Livingston Asset Management, LLC
|
|
1-Apr-20
|
|
10%
|
|
31-Dec-20
|
|
|
25,000
|
|
|
|
-
|
|
Livingston Asset Management, LLC
|
|
1-May-20
|
|
10%
|
|
31-Jan-21
|
|
|
25,000
|
|
|
|
-
|
|
Livingston Asset Management, LLC
|
|
20-May-20
|
|
10%
|
|
20-Feb-21
|
|
|
10,000
|
|
|
|
-
|
|
Livingston Asset Management, LLC
|
|
1-Jun-20
|
|
10%
|
|
28-Feb-21
|
|
|
25,000
|
|
|
|
-
|
|
Livingston Asset Management, LLC
|
|
11-Jun-20
|
|
10%
|
|
10-Mar-21
|
|
|
1,100
|
|
|
|
|
|
Livingston Asset Management, LLC
|
|
1-Jul-20
|
|
10%
|
|
31-Mar-21
|
|
|
25,000
|
|
|
|
-
|
|
Livingston Asset Management, LLC
|
|
20-Jul-20
|
|
10%
|
|
20-Apr-21
|
|
|
4,500
|
|
|
|
|
|
Livingston Asset Management, LLC
|
|
1-Aug-20
|
|
10%
|
|
30-Apr-21
|
|
|
25,000
|
|
|
|
-
|
|
Livingston Asset Management, LLC
|
|
14-Aug-20
|
|
10%
|
|
14-May-21
|
|
|
9,500
|
|
|
|
-
|
|
Livingston Asset Management, LLC
|
|
24-Aug-20
|
|
10%
|
|
24-May-21
|
|
|
12,500
|
|
|
|
-
|
|
Livingston Asset Management, LLC
|
|
1-Sep-20
|
|
10%
|
|
30-Jun-21
|
|
|
25,000
|
|
|
|
-
|
|
Livingston Asset Management, LLC
|
|
1-Oct-20
|
|
10%
|
|
31-Jul-21
|
|
|
25,000
|
|
|
|
-
|
|
Livingston Asset Management, LLC
|
|
1-Nov-20
|
|
10%
|
|
31-Aug-21
|
|
|
25,000
|
|
|
|
-
|
|
Livingston Asset Management, LLC
|
|
1-Dec-20
|
|
10%
|
|
30-Sep-21
|
|
|
25,000
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible notes payable-gross
|
|
|
|
|
|
|
|
$
|
1,468,436
|
|
|
$
|
1,729,395
|
|
Discount
|
|
|
|
|
|
|
|
|
(77,004
|
)
|
|
|
(35,547
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,391,432
|
|
|
$
|
1,693,848
|
|
|
|
*
|
- GW Holdings Group, LLC entered into litigation with the Company on these obligations. See subsequent events for current status
|
|
|
**
|
- See Note 11 for more detail
|
|
|
NOTE 6 – DERIVATIVE LIABILITIES
The embedded conversion options of the
Company’s convertible debentures summarized in Note 4, and its convertible preferred Series E stock. contain conversion features
that qualify for embedded derivative classification. The fair value of these liabilities is re-measured at the end of every reporting
period and the change in fair value is reported in the statement of operations as a gain or loss on derivative financial instruments.
The Company uses Level 3 inputs for its
valuation methodology for its conversion option liabilities as their fair values were determined by using the Binomial option pricing
model based on various assumptions. The model incorporates the price of a share of the Company’s common stock (as quoted
on the Over the Counter Bulletin Board), volatility, risk free rate, dividend rate and estimated life. Significant changes in any
of these inputs in isolation would result in a significant change in the fair value measurement. As, required, these are classified
based on the lowest level of input that is significant to the fair value measurement.
The following is the Company’s derivative
liability measured at fair value on a recurring basis at December 31, 2020 and December 31, 2019:
|
|
December 31,
2020
|
|
|
December 31
2019
|
|
Level One
|
|
$
|
-0-
|
|
|
$
|
-0-
|
|
Level Two
|
|
$
|
-0-
|
|
|
$
|
-0-
|
|
Level Three
|
|
$
|
2,140,159
|
|
|
$
|
472,605
|
|
The following table shows the assumptions
used in the calculations of its derivatives:
|
|
Expected
Volatility
|
|
|
Risk-free
Interest
Rate
|
|
|
Expected
Dividend
Yield
|
|
|
Expected
Life
(in years)
|
|
At December 31, 2019
|
|
|
291.74
|
%
|
|
|
2.45
|
%
|
|
|
0
|
%
|
|
|
0.25 – 0.50
|
|
At December 31, 2020
|
|
|
252.67
|
%
|
|
|
.92
|
%
|
|
|
0
|
%
|
|
|
0.25 – 0.50
|
|
Balance at December 31, 2018
|
|
|
433,924
|
|
Addition of new derivative liabilities
|
|
|
194,547
|
|
Change in fair value of derivative liability
|
|
|
42,821
|
|
Derecognition of derivatives upon settlement of convertible preferred stock
|
|
|
(218,904
|
)
|
Derecognition of derivatives upon settlement of convertible notes
|
|
|
(79,783
|
)
|
Balance at December 31, 2019
|
|
$
|
472,605
|
|
Balance at December 31, 2019
|
|
|
472,605
|
|
Addition of new derivative liabilities
|
|
|
172,601
|
|
Change in fair value of derivative liability
|
|
|
1,837,932
|
|
Derecognition of derivatives upon settlement of convertible notes
|
|
|
(342,980
|
)
|
Balance at December 31, 2020
|
|
$
|
2,140,149
|
|
NOTE 7 – WARRANTS
In connection with the issuance of the
convertible note (the “Note”) with L2 Capital, LLC (“L2”) and funding of the initial tranche of $50,000
on the Note, the Company also issued a common stock purchase warrant to purchase up to 381,905 shares of the Company’s common
stock pursuant to the terms therein as a commitment fee. At the time that each subsequent tranche under the Note is funded by L2
in cash, then on such funding date, the warrant shares shall immediately and automatically be increased by the quotient of 100%
of the face value of the respective tranche and 110% of the VWAP of the common stock on the Trading Day (as defined in the Note)
immediately prior to the funding date of the respective tranche. As of December 31, 2019, the Company had received multiple tranches
for which it issued warrants to purchase shares of the Company’s common stock.
These warrants have a variable exercise
price per the above and expire in five years. The aggregate fair value of the warrants, which was allocated against the debt
proceeds totaled $280,438 based on the Black Scholes Merton pricing model using the following estimates: exercise price ranging
from $0.001 – 0.0071, 2.80% – 2.94% risk free rate, 252.42 – 258.24% volatility and expected life of the warrants
of 5 years. The fair value was credited to additional paid in capital and debited to debt discount to be amortized over the term
of the loan.
A summary of the status of the Company’s
outstanding stock warrants and changes during the periods is presented below:
|
|
Shares
available to
purchase
with
warrants
|
|
|
Weighted
Average
Price
|
|
|
Weighted
Average
Fair Value
|
|
Outstanding, December 31, 2019
|
|
|
22,669,092
|
|
|
$
|
.0011
|
|
|
$
|
.0014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issued
|
|
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Exercised
|
|
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Forfeited
|
|
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Expired
|
|
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Outstanding, December 31, 2019
|
|
|
22,669,092
|
|
|
$
|
0.0011
|
|
|
$
|
0.0014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issued
|
|
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Exercised
|
|
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Forfeited
|
|
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Expired
|
|
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Outstanding, December 31, 2020
|
|
|
22,669,092
|
|
|
$
|
0.0011
|
|
|
$
|
0.0014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable, December 31, 2020
|
|
|
22,669,092
|
|
|
$
|
0.0011
|
|
|
$
|
0.0014
|
|
The Company uses Level 3 inputs for its
valuation methodology for its conversion option liabilities as their fair values were determined by using the Binomial option pricing
model based on various assumptions. The model incorporates the price of a share of the Company’s common stock (as quoted
on the Over the Counter Bulletin Board), volatility, risk free rate, dividend rate and estimated life. Significant changes in any
of these inputs in isolation would result in a significant change in the fair value measurement. As, required, these are classified
based on the lowest level of input that is significant to the fair value measurement. The following table shows the assumptions
used in the calculations:
Range of Exercise Prices
|
|
|
Number Outstanding
12/31/2020
|
|
|
Weighted Average
Remaining Contractual
Life
|
|
|
Weighted Average
Exercise Price
|
|
$
|
0.001 – 0.0071
|
|
|
|
22,669,092
|
|
|
|
2.69 years
|
|
|
$
|
0.0011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Range of Exercise Prices
|
|
|
Number Outstanding
12/31/2019
|
|
|
Weighted Average
Remaining Contractual
Life
|
|
|
Weighted Average
Exercise Price
|
|
$
|
0.001 – 0.0071
|
|
|
|
22,669,092
|
|
|
|
3.69 years
|
|
|
$
|
0.0011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NOTE 8 – COMMON STOCK
During the twelve months ended December
31, 2019, the company issued shares of common stock as follows:
Recipient of shares
|
|
Date
|
|
Shares
|
|
|
Principal
|
|
|
Accrued interest
|
|
|
Fees
|
|
|
Total
|
|
Livingston Asset Management LLC
|
|
27-May-20
|
|
|
29,288,000
|
|
|
$
|
-
|
|
|
$
|
11,301
|
|
|
$
|
1,000
|
|
|
$
|
12,301
|
|
Trillium Partners, LP
|
|
12-Jun-20
|
|
|
11,936,286
|
|
|
|
-
|
|
|
|
4,013
|
|
|
|
1,000
|
|
|
|
5,013
|
|
Trillium Partners, LP
|
|
29-Jun-20
|
|
|
16,059,792
|
|
|
|
-
|
|
|
|
6,709
|
|
|
|
1,000
|
|
|
|
7,709
|
|
Livingston Asset Management LLC
|
|
29-Jun-20
|
|
|
16,059,792
|
|
|
|
-
|
|
|
|
6,709
|
|
|
|
1,000
|
|
|
|
7,709
|
|
Trillium Partners, LP
|
|
21-Jul-20
|
|
|
17,545,881
|
|
|
|
-
|
|
|
|
6,369
|
|
|
|
1,000
|
|
|
|
7,369
|
|
Trillium Partners, LP
|
|
29-Jul-20
|
|
|
30,386,595
|
|
|
|
1,300
|
|
|
|
10,462
|
|
|
|
1,000
|
|
|
|
12,762
|
|
Oasis Capital, LLC
|
|
26-Aug-20
|
|
|
38,689,997
|
|
|
|
19,430
|
|
|
|
|
|
|
|
|
|
|
|
12,187
|
|
Livingston Asset Management, LLC
|
|
31-Aug-20
|
|
|
21,547,021
|
|
|
|
-
|
|
|
|
10,343
|
|
|
|
-
|
|
|
|
10,343
|
|
Trillium Partners, LP
|
|
04-Sep-20
|
|
|
23,703,521
|
|
|
|
9,550
|
|
|
|
803
|
|
|
|
1,025
|
|
|
|
11,378
|
|
Livingston Asset Management, LLC
|
|
17-Sep-20
|
|
|
21,492,859
|
|
|
|
16,425
|
|
|
|
339
|
|
|
|
-
|
|
|
|
16,764
|
|
Oasis Capital, LLC
|
|
28-Sep-20
|
|
|
51,851,417
|
|
|
|
23,333
|
|
|
|
|
|
|
|
|
|
|
|
23,333
|
|
Livingston Asset Management, LLC
|
|
05-Oct-20
|
|
|
26,834,167
|
|
|
|
13,941
|
|
|
|
110
|
|
|
|
2,050
|
|
|
|
16,101
|
|
Oasis Capital LLC
|
|
08-Oct-20
|
|
|
59,641,290
|
|
|
|
26,839
|
|
|
|
-
|
|
|
|
-
|
|
|
|
26,839
|
|
Livingston Asset Management, LLC
|
|
14-Oct-20
|
|
|
38,869,667
|
|
|
|
19,516
|
|
|
|
449
|
|
|
|
1,025
|
|
|
|
20,990
|
|
Livingston Asset Management, LLC
|
|
29-Oct-20
|
|
|
69,365,086
|
|
|
|
2,275
|
|
|
|
7,111
|
|
|
|
1,025
|
|
|
|
10,411
|
|
Oasis Capital LLC
|
|
09-Nov-20
|
|
|
76,261,018
|
|
|
|
20,594
|
|
|
|
|
|
|
|
|
|
|
|
20,594
|
|
Livingston Asset Management, LLC
|
|
11-Nov-20
|
|
|
76,253,571
|
|
|
|
30,350
|
|
|
|
652
|
|
|
|
1,025
|
|
|
|
32,027
|
|
Oasis Capital LLC
|
|
23-Nov-20
|
|
|
91,359,963
|
|
|
|
20,556
|
|
|
|
|
|
|
|
|
|
|
|
20,556
|
|
Livingston Asset Management, LLC
|
|
30-Nov-20
|
|
|
76,211,914
|
|
|
|
25,200
|
|
|
|
449
|
|
|
|
1,025
|
|
|
|
26,674
|
|
Livingston Asset Management, LLC
|
|
09-Dec-20
|
|
|
71,705,000
|
|
|
|
23,650
|
|
|
|
422
|
|
|
|
1,025
|
|
|
|
25,097
|
|
Livingston Asset Management, LLC
|
|
22-Dec-20
|
|
|
56,315,857
|
|
|
|
18,525
|
|
|
|
161
|
|
|
|
1,025
|
|
|
|
19,711
|
|
Oasis Capital LLC
|
|
31-Dec-20
|
|
|
120,623,643
|
|
|
|
9,900
|
|
|
|
11,812
|
|
|
|
|
|
|
|
21,712
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,042,002,336
|
|
|
$
|
281,383
|
|
|
$
|
78,213
|
|
|
$
|
15,225
|
|
|
$
|
367,579
|
|
During the twelve months ended December
31, 2019, the company issued shares of common stock as follows:
Oasis Capital LLC (formerly L2 Capital,
LLC) converted $33,149 of principal into 16,660,864 shares of common stock.
Device Corp. converted $9,700 and $1,050
of principal and interest, respectively, into 12,500,000 shares of common stock. The loans from Device Corp have no specific terms
of conversion and have therefore not been classified as convertible. The shares were valued on the date of conversion at the closing
stock price, for a loss on conversion of debt of $46,250.
During the year ended December 31, 2018,
the Company issued 56,169,737 shares of common stock to settle $259,547 of principal and $19,870 of accrued interest on its convertible
notes.
On November 20, 2018, the Company and its
stockholders approved a 1 for 20 reverse stock split. The reverse stock split was deemed effective by the Financial Industry Regulatory
Authority (“FINRA”) on January 10, 2019. All shares throughout these financial statements have been retroactively adjusted
to reflect the reverse stock split.
NOTE 9 – PREFERRED STOCK
Series A Convertible Preferred Stock,
has a par value of $0.01, may be converted at the holder’s election into shares of common stock at the conversion rate of
ten shares of common stock for one share of Series A Preferred Stock. Each share is entitled to 10 votes, voting with the
common stock as a single class, has liquidation rights of $2.00 per share and is not entitled to receive dividends. As of December
31, 2019, and December 31, 2018, there are 3,381,520 and 3,381,520 shares of Series A preferred stock outstanding, respectively.
Series B Convertible Preferred Stock,
has a par value of $0.01, may be converted at the holder’s election into shares of common stock at the conversion rate of
4,000 shares of common stock for one share of Series B Preferred Stock. Each share is entitled to 4,000 votes, voting with
the common stock as a single class, has liquidation rights of $0.01 per share and is not entitled to receive dividends. As of December
31, 2019, and December 31, 2018, there are 5,000 and 5,000 shares of Series B preferred stock outstanding, respectively.
Series C Convertible Preferred Stock,
has a par value of $0.01, may be converted at the holder’s election into shares of common stock at the conversion rate of
400 shares of common stock for one share of Series C Preferred Stock. Each share is entitled to 400 votes, voting with the
common stock as a single class, has liquidation rights of $0.01 per share and is entitled to receive four hundred times the dividends
declared and paid with respect to each share of Common Stock. As of December 31, 2019, and December 31, 2018, there are 5,000,000
and 5,000,000 shares of Series C preferred stock outstanding, respectively.
Series D Convertible Preferred Stock,
has a par value of $0.0001, may be converted at a ratio of the Stated Value plus dividends accrued but unpaid divided by the fixed
conversion price of $0.0015, which conversion price is subject to adjustment. Series D is non-voting, has liquidation rights to
be paid in cash, before any payment to common or junior stock, 140% of the Stated Value ($2.00) per share plus any dividends accrued
but unpaid thereon and is entitled to 8% cumulative dividends. As of December 31, 2019, and December 31, 2018, there are 125,000
and 125,000 shares of Series D preferred stock outstanding, respectively.
Series E Convertible Preferred Stock,
has a par value of $0.001, and a stated value of $1.00 per share, subject to adjustment. The shares of Series E Convertible Preferred
Stock can convert at a conversion price that is equal to the amount that is 61% of the lowest trading price of the Company’s
common stock during the 20 trading days immediately preceding such conversion. The shares of Series E Convertible Preferred Stock
are subject to redemption by the Company at its option from the date of issuance until the date that is 180 days therefrom, subject
to premium that ranges from 120% to 145%, increasing by 5% during each 30-day period following issuance. Series E carries a 12%
cumulative dividend, which will increase to 22% upon an event of default, is non-voting, and has liquidation rights to be paid
in cash, before any payment to common or junior stock. The Series E are mandatorily redeemable after twelve months, and therefore
have been classified as mezzanine equity.
On July 1, 2018, the Company entered into
a Stock Purchase Agreement with Device Corp. (“Device”) whereby Device will purchase up to $250,000 Series E preferred
stock for $1 per share. As of December 31, 2019, the Company has received $166,331 for the purchase of the Series E. Originally,
these purchases were recorded as debt because the Preferred shares were not issued. As of the Balance sheet date and the date of
this report, these shares have not been issued to the Purchaser. As such, the Company feels these securities should be classified
as Mezzanine equity until they are fully issued.
On January 15, 2019, the Company entered
into a Stock Purchase Agreement with Geneva Roth Remark Holdings, Inc. (“Geneva”) whereby Geneva will purchase 53,000
shares of Series E preferred stock for $53,000. As of December 31, 2019, and December 31, 2018, there are 34,985 and 53,000 shares
of Series E preferred stock outstanding, respectively. As of December 31, 2019, the Company fair valued its Series E preferred
stock derivative liability at $40,000.
During the twelve months ended December
31, 2019, Geneva Roth Remark Holdings converted 18,01515 Series E preferred shares into 194,438,842 shares of common stock.
During the third quarter of the 2019 fiscal
year, Mr. Huss sold $15,000 worth of Series E preferred to other investors.
NOTE 10 – RELATED PARTY TRANSACTIONS
On July 8, 2019, the Company executed an
employment agreement with Conrad Huss, the new CEO. The agreement is effective for three months with a salary of $10,000 per month.
As of December 31, 2019, $292,000 has been credited to accrued compensation.
NOTE
11 – WRITE-OFF OF THIRD-PARTY NOTE
On
July 25, 2013, the Company entered into a convertible promissory note (“Note”), in the amount of $500,000 and warrants to
purchase 12,500,000 shares of company common stock, of which 10,000,000 of those warrants were exercisable at $0.05 per share and 2,500,000
of the warrants were exercisable at $0.10 per share. The Note has an interest rate of 8% per annum and a maturity date of July 31, 2014.
On
July 25, 2013, the Company entered into a convertible promissory note (“Note”), in the amount of $500,000 and warrants to
purchase 10,197,916 shares of company common stock, of which 8,158,333 of those warrants were exercisable at $0.05 per share and 2,039,583
of the warrants were exercisable at $0.10 per share. The Note has an interest rate of 8% per annum and a maturity date of July 31, 2014.
The
Company has continued filing reports with the SEC and will be current with the SEC again in the near future, as well as having maintained
its active status with the Nevada Secretary of State, since that time. We are currently in contact with the current management of the
Company who have provided us with documentation as to the above noted amounts.
The
Company has stated and records and filings show that the Notes were due and payable as of July 31, 2014 at the latest, and that no payments
have been made and that no statements that the Company has renewed the note have been agreed to.
The
New York Statute of Limitations provides, in relevant part:
Section
213: Actions to be commenced within six years: where not otherwise provided for; on contract; on sealed instrument; on bond or note,
and mortgage upon real property; by state based on misappropriation of public property; based on mistake; by corporation against director,
officer or stockholder; based on fraud. The following actions must be commenced within six years.
Section
213(2). an action upon a contractual obligation or liability, express or implied, except as provided in section two hundred thirteen-a
of this article or article 2 of the uniform commercial code or article 36-B of the general business law;
Based
on the New York Statute of Limitations, it is our view that the above referenced Note is no longer enforceable obligations under New
York law as it became past due no later than July 31, 2014, more than six (6) years ago.
[CPLR
213(2)]
Nevada
Nevada
also has a five (5) year statute of limitations for written contracts. Nevada Statutes Title VIII Section 95.11(2)(b). Wherein it states
in pertinent part: “A legal or equitable action on a contract, obligation, or liability founded on a written instrument”
As such the Note being due as of July 31, 2014, would also be time-barred under Nevada Law.
Conclusion
Based
on the New York and Nevada Statute of Limitations, it is our view that the above referenced Note is no longer an enforceable obligation
under New York or Nevada law as it became past due no later than July 31, 2014, more than six (6) years ago.
The
balance of the Note was $500,000 and accrued interest was $431,342. Therefore, the total gain was $931,342.
NOTE 12 – INCOME TAX
In accordance with ASC 740, we are required
to recognize the impact of an uncertain tax position in the consolidated financial statements when it is more likely than not the
position will be sustained upon examination by the tax authorities. An uncertain tax position will not be recognized if it has
less than a 50% likelihood of being sustained upon examination by the tax authorities. We had no unrecognized tax benefits from
uncertain tax positions as of December 31, 2020 and 2019. It is also our policy, in accordance with authoritative guidance, to
recognize interest and penalties related to income tax matters in interest and other expense in our Statements of Operations.
Deferred income tax assets and liabilities
are recognized for the estimated future tax consequences attributable to differences between the financial reporting and tax bases
of assets and liabilities and are measured using enacted tax rates in effect for the year in which those temporary differences
are expected to be recovered or settled. A valuation allowance is provided for the amount of deferred tax assets that, based on
available evidence, are not expected to be realized. As a result of our cumulative losses, management has concluded that a full
valuation allowance against our net deferred tax assets is appropriate.
Deferred taxes are provided on a liability
method whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carry
forwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences
between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance
when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be
realized. The Company has evaluated Staff Accounting Bulletin No. 118 regarding the impact of the decreased tax rates of the Tax
Cuts & Jobs Act. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on
the date of enactment. The U.S. federal income tax rate of 21% is being used from 2018 due to the new tax law recently enacted.
The provision for income taxes on our loss
from continuing operations for the fiscal years ended December 31, 2020 and 2019 are as follows:
|
|
2020
|
|
|
2019
|
|
Book net income
|
|
$
|
(2,184,029
|
)
|
|
$
|
(1,587,530
|
)
|
Less:
|
|
|
|
|
|
|
|
|
Change in Fair value of derivatives
|
|
|
1,837,933
|
|
|
|
(19,557
|
)
|
Amortization of discount on convertible debt
|
|
|
131,143
|
|
|
|
296,259
|
|
Loss on issuance of convertible preferred stock
|
|
|
-
|
|
|
|
194,547
|
|
Loss on convertible notes
|
|
|
-
|
|
|
|
46,250
|
|
Gain on extinguishment of debt and accrued interest
|
|
|
(931,342
|
)
|
|
|
(492,016
|
)
|
Taxable net income
|
|
$
|
(1,147,522
|
)
|
|
$
|
(1,562,047
|
)
|
Change in Valuation allowance
|
|
|
299,913
|
|
|
|
408,241
|
|
Income tax expense based on taxable net income
|
|
|
(299,913
|
)
|
|
|
(408,241
|
)
|
Income tax expense
|
|
|
-
|
|
|
|
-
|
|
Note: The marginal tax rate is calculated
as follows:
Statutory rate
|
|
2020
|
|
|
2019
|
|
Federal income tax rate
|
|
|
21.0
|
%
|
|
|
21.0
|
%
|
Incremental New York State rate
|
|
|
6.5
|
%
|
|
|
6.5
|
%
|
Impact of Federal rate on New York State rate
|
|
|
-1.4
|
%
|
|
|
-1.4
|
%
|
Marginal income tax rate
|
|
|
26.1
|
%
|
|
|
26.1
|
%
|
As percentages of net income, the following
are the components of tax expense:
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
Book net income
|
|
|
100.0
|
%
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
Less:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in Fair value of derivatives
|
|
|
-84.2
|
%
|
|
|
1.2
|
%
|
|
|
|
|
|
|
|
|
|
Amortization of discount on convertible debt
|
|
|
-6.0
|
%
|
|
|
-18.7
|
%
|
|
|
|
|
|
|
|
|
|
Loss on issuance of convertible preferred stock
|
|
|
0.0
|
%
|
|
|
-12.3
|
%
|
|
|
|
|
|
|
|
|
|
Loss on convertible notes
|
|
|
0.0
|
%
|
|
|
-2.9
|
%
|
|
|
|
|
|
|
|
|
|
Gain on extinguishment of debt
|
|
|
42.6
|
%
|
|
|
31.0
|
%
|
|
|
|
|
|
|
|
|
|
Taxable net income
|
|
|
52.5
|
%
|
|
|
98.4
|
%
|
Change in Valuation allowance
|
|
|
-52.5
|
%
|
|
|
-98.4
|
%
|
|
|
|
|
|
|
|
|
|
Income tax expense based on taxable net income
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Income tax expense
|
|
|
-
|
|
|
|
-
|
|
At December 31, 2020, the Company had net
operating loss carryforwards of approximately $9.6 million that may be offset against future taxable income from the year 2021
to 2040. No tax benefit has been reported in the December 31, 2020 financial statements since the potential tax benefit is offset
by a valuation allowance of the same amount.
Due to the change in ownership provisions
of the Tax Reform Act of 1986, net operating loss carry forwards for Federal Income tax reporting purposes are subject to annual
limitations. Our operating loss carry forwards may be limited as to use in future years due to the transfer of preferred securities
from our former Chief Executive to our current Chief Executive, Conrad R Huss. With few exceptions, the Company is no longer subject
to U.S. federal, state and local income tax examinations by tax authorities for years before 2018.
NOTE 13 – COMMITMENTS AND CONTINGENCIES
During the normal course of business, the
Company may be exposed to litigation. When the Company becomes aware of potential litigation, it evaluates the merits of the case
in accordance with FASB ASC 450-20-50, Contingencies. The Company evaluates its exposure to the matter, possible legal or settlement
strategies and the likelihood of an unfavorable outcome. If the Company determines that an unfavorable outcome is probable and
can be reasonably estimated, it establishes the necessary accruals.
On September 21, 2018, Pro Drive Outboards,
LLC (“Pro-Drive”) filed a lawsuit against the Company, in which Pro-Drive alleges that the Company breached a contract
that Pro-Drive entered into with the Company. Pro-Drive is seeking damages in excess of $500,000. The Company has filed an answer,
including the defenses of defective service of process and statute of limitations and a motion to dismiss. The judge granted a
motion to dismiss, and the plaintiff’s deadline to appeal has passed, thus concluding the matter.
On February 13, 2017, Baum Glass &
Jayne PLLC (“Plaintiff”) obtained a default judgment against the Company in the amount of $27,083.74. Plaintiff has
not attempted enforced collection. The amount was included in accounts payable as of December 31, 2020 and December 31, 2019.
On June 20, 2018, GW Holdings Group, Inc.
(“GW”) filed a lawsuit against the Company, in which GW alleges that the Company breached two Stock Purchase Agreements
that GW entered into with the Company. See Note 13-SUBSEQUENT EVENTS below for current status of this litigation. As of December
31, 2020 and December 31, 2019, the balance on these notes is $60,750.
NOTE 14 – SUBSEQUENT EVENTS
Management has evaluated subsequent events
pursuant to the requirements of ASC Topic 855, from the balance sheet date through the date the financial statements were issued
and has determined that no material subsequent events exist other than the following.
GW Holdings Group lawsuit
On February 16, 2021, the Company received
notice that a default judgment had been entered against it in the Southern District of New York. The total amount of the judgment
was for $348,548. The company will accrue an approximately $260,000 charge to earnings in the first quarter of calendar year 2021
to reflect the judgment.
Sale of debt
Subsequent to the Balance sheet date, Oasis
Capital LLC sold $250,000 of debt to other investors. This note was originally dated as of May 10, 2018.
Issuance of common shares
Subsequent to the Balance sheet date the
Company has issued 1,095,458,048 shares as follows. There are currently, 2,434,502,239 shares outstanding
Shares outstanding at December 31, 2020
|
|
|
1,339,044,282
|
|
|
|
|
|
|
Shares issued for extinguishment of debt
|
|
|
1,571,710,494
|
|
Shares issued for conversion of Preferred stock
|
|
|
89,243,590
|
|
Total shares issued
|
|
|
1,660,954,084
|
|
Shares outstanding at May 15, 2021
|
|
|
2,999,998,366
|
|
Extinguishment of debt
Subsequent to December 31, 2020, the Company
extinguished $555,1793 of debt principal plus $1110,817 of accrued interest and incurred $6,155 in fees for the issuance of 1,570,710,494
shares as follows:
Creditor
|
|
Date
|
|
Shares
|
|
|
Principal
|
|
|
Accrued interest
|
|
|
Fees
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oasis Capital LLC
|
|
14-Jan-21
|
|
|
132,565,384
|
|
|
$
|
29,827
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
29,827
|
|
Oasis Capital LLC
|
|
27-Jan-21
|
|
|
98,310,546
|
|
|
|
22,120
|
|
|
|
100
|
|
|
|
-
|
|
|
|
22,220
|
|
Oasis Capital LLC
|
|
10-Feb-21
|
|
|
155,422,101
|
|
|
|
41,964
|
|
|
|
-
|
|
|
|
-
|
|
|
|
41,964
|
|
GW Holdings Group LLC
|
|
2-Mar-21
|
|
|
20,203,797
|
|
|
|
10,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
10,000
|
|
Oasis Capital LLC
|
|
8-Mar-21
|
|
|
175,494,746
|
|
|
|
71,075
|
|
|
|
-
|
|
|
|
-
|
|
|
|
71,075
|
|
GW Holdings Group LLC
|
|
9-Mar-21
|
|
|
3,818,181
|
|
|
|
2,520
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,520
|
|
Trillium Partners LLC
|
|
3-Mar-21
|
|
|
86,508,841
|
|
|
|
|
|
|
|
37,039
|
|
|
|
1,025
|
|
|
|
38,064
|
|
Trillium Partners LLC
|
|
11-Mar-21
|
|
|
86,900,826
|
|
|
|
42,000
|
|
|
|
9,550
|
|
|
|
1,025
|
|
|
|
52,575
|
|
Trillium Partners LLC
|
|
17-Mar-21
|
|
|
89,695,455
|
|
|
|
58,000
|
|
|
|
174
|
|
|
|
1,025
|
|
|
|
59,199
|
|
Oasis Capital LLC
|
|
19-Mar-21
|
|
|
193,311,158
|
|
|
|
95,689
|
|
|
|
-
|
|
|
|
-
|
|
|
|
95,689
|
|
Oasis Capital LLC
|
|
6-Apr-21
|
|
|
203,298,776
|
|
|
|
91,484
|
|
|
|
-
|
|
|
|
-
|
|
|
|
91,484
|
|
Trillium Partners LLC
|
|
12-Apr-21
|
|
|
92,267,673
|
|
|
|
25,000
|
|
|
|
24,722
|
|
|
|
1,025
|
|
|
|
50,747
|
|
Oasis Capital LLC
|
|
26-Aprr-21
|
|
|
50,000,000
|
|
|
|
20,250
|
|
|
|
-
|
|
|
|
-
|
|
|
|
20,250
|
|
Oasis Capital LLC
|
|
6-Apr-21
|
|
|
50,000,000
|
|
|
|
20,250
|
|
|
|
-
|
|
|
|
-
|
|
|
|
20,250
|
|
Trillium Partners LLC
|
|
29-Apr-21
|
|
|
53,055,556
|
|
|
|
25,000
|
|
|
|
238
|
|
|
|
1,025
|
|
|
|
26,263
|
|
Trillium Partners LLC
|
|
5-May-21
|
|
|
80,857,455
|
|
|
|
-
|
|
|
|
38,9944
|
|
|
|
1,030
|
|
|
|
40,024
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Totals
|
|
|
|
|
1,571,710,494
|
|
|
$
|
555,179
|
|
|
$
|
110,817
|
|
|
$
|
6,155
|
|
|
$
|
672,152
|
|
Conversion of Preferred stock
The Company issued 154,863,248 shares of
common stock for the conversion of 34,700 shares of preferred stock as follows:
Trillium Partners LLC
|
|
23-Mar-21
|
|
|
49,871,795
|
|
|
|
20,370
|
|
Trillium Partners LLC
|
|
31-Mar-21
|
|
|
39,371,795
|
|
|
|
14,330
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
89,243,590
|
|
|
|
34,700
|
|
Issuance of debt
Subsequent to December 31, 2020, the Company
issued $125,000 of convertible debt as follows:
Creditor
|
|
Date
Issued
|
|
Interest
Rate
|
|
|
Maturity
Date
|
|
Amount
|
|
Livingston Asset Management, LLC
|
|
1-Jan-21
|
|
|
10
|
%
|
|
31-Oct-21
|
|
$
|
25,000
|
|
Livingston Asset Management, LLC
|
|
1-Feb-21
|
|
|
10
|
%
|
|
30-Nov-21
|
|
|
25,000
|
|
Livingston Asset Management, LLC
|
|
1-Mar-21
|
|
|
10
|
%
|
|
31-Dec-21
|
|
|
25,000
|
|
Livingston Asset Management, LLC
|
|
1-Apr-21
|
|
|
10
|
%
|
|
31-Jan-22
|
|
|
25,000
|
|
Livingston Asset Management, LLC
|
|
1-May-21
|
|
|
10
|
%
|
|
28-Feb-21
|
|
|
25,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
125,000
|
|