UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
☒ QUARTERLY REPORT PURSUANT TO SECTION
13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2021
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.: 000-54624
CRUZANI, INC.
|
(Exact name of registrant as specified in its charter)
|
Nevada
|
|
26-4144571
|
(State or other jurisdiction
of incorporation)
|
|
(IRS Employer
Identification No.)
|
211 Greenwood Avenue, 2-2, Unit 129, Bethel CT 06801
|
(Address of principal executive offices)
|
|
(646) 893-1112
|
(Registrant’s telephone number, including area code)
|
Former name, former address and former fiscal year,
if changed since last report
Indicate by check mark whether the registrant
(1) has filed all reports to be filed by Section 13 and Section 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 files such reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes ☐ No ☒
Indicate by check mark whether the registrant
has submitted electronically every Interactive Data File required to be submitted 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 ☒ No ☐
Indicate by check mark whether the registrant
is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company.
See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,”
and “emerging growth company” in Rule 12b-2 of the Exchange Act.
☐
|
Large accelerated filer
|
☐
|
Accelerated filer
|
☒
|
Non-accelerated filer
|
☒
|
Smaller reporting company
|
|
|
☐
|
Emerging growth company
|
If an emerging growth company, indicate by check
mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting
standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant
is a shell company (as defined in Rule 12-b2 of the Exchange Act). Yes ☐ No ☒
Securities registered pursuant to Section 12(b)
of the Act:
Title of each class
|
|
Trading Symbol(s)
|
|
Name of each exchange on which registered
|
Common stock
|
|
CZNI
|
|
OTC Markets - Pink
|
Indicate the number of shares outstanding of each
of the issuer’s classes of common stock, as of the latest practicable date. As of August 16, 2021, there were 4,594,521,642 shares
of Common Stock, par value $0.00001 per shares outstanding.
Table of Contents
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements.
Cruzani, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
|
|
June 30,
2021
|
|
|
December 31,
2020
|
|
|
|
(Unaudited)
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
|
|
|
|
|
|
|
|
|
Current Liabilities:
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
326,400
|
|
|
$
|
326,400
|
|
Accrued liabilities
|
|
|
1,114,002
|
|
|
|
1,150,820
|
|
Accrued officer compensation
|
|
|
352,000
|
|
|
|
292,000
|
|
Convertible Notes, net of discounts of $69,993 and $77,004, respectively
|
|
|
1,045,319
|
|
|
|
1,391,432
|
|
Derivative liabilities
|
|
|
-
|
|
|
|
2,140,159
|
|
Put premium on stock settled debt
|
|
|
656,730
|
|
|
|
-
|
|
Loans payable
|
|
|
254,500
|
|
|
|
254,500
|
|
Total Current Liabilities
|
|
|
3,748,950
|
|
|
|
5,555,311
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities
|
|
|
3,493,098
|
|
|
|
5,555,311
|
|
|
|
|
|
|
|
|
|
|
Commitments and Contingencies (Note 12)
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
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; - and 34,985 shares issued and outstanding; respectively
|
|
|
-
|
|
|
|
34,985
|
|
Series E Preferred stock to be issued
|
|
|
166,331
|
|
|
|
140,831
|
|
|
|
|
|
|
|
|
|
|
Common stock 3,000,000,000 shares authorized, $0.00001 par value; 3,701,732,545 and 1,339,044,282 shares issued and outstanding, respectively at June 30, 2021 and December 31, 2020
|
|
|
37,017
|
|
|
|
13,390
|
|
Treasury stock, at cost – 2,917 shares
|
|
|
(773,500
|
)
|
|
|
(773,500
|
)
|
Additional paid in capital
|
|
|
78,970,365
|
|
|
|
76,679,297
|
|
Accumulated deficit
|
|
|
(82,233,041
|
)
|
|
|
(81,759,691
|
)
|
Total Stockholders’ Deficit
|
|
|
(3,493,098
|
)
|
|
|
(5,555,311
|
)
|
Total Liabilities and Stockholders’ Deficit
|
|
$
|
-
|
|
|
$
|
-
|
|
The accompanying notes are an integral part
of these unaudited condensed consolidated financial statements.
Cruzani, Inc. and Subsidiaries
Condensed Consolidated Statement
of Operations
(Unaudited)
|
|
For the Three Months Ended
June 30,
|
|
|
|
2021
|
|
|
2020
|
|
|
|
|
|
|
|
|
Operating Expenses:
|
|
|
|
|
|
|
Compensation expense
|
|
|
30,000
|
|
|
|
30,000
|
|
Consulting fees
|
|
|
75,000
|
|
|
|
75,000
|
|
General and administrative expenses
|
|
|
5,135
|
|
|
|
4,000
|
|
Professional fees
|
|
|
39,000
|
|
|
|
11,100
|
|
Total operating expenses
|
|
|
149,135
|
|
|
|
120,100
|
|
|
|
|
|
|
|
|
|
|
Loss from operations
|
|
|
(149,135
|
)
|
|
|
(120,100
|
)
|
|
|
|
|
|
|
|
|
|
Other Income (Expense):
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
(124,070
|
)
|
|
|
(97,240
|
)
|
Change in fair value of derivatives
|
|
|
-
|
|
|
|
(115,108
|
)
|
Gain on new methodology for accounting for debt conversion features
|
|
|
995,692
|
|
|
|
-
|
|
Total other income (expense)
|
|
|
871,261
|
|
|
|
(212,348
|
)
|
|
|
|
|
|
|
|
|
|
Income (loss) before provision for income taxes
|
|
|
722,486
|
|
|
|
(212,348
|
)
|
Provision for income taxes
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Net Income (Loss)
|
|
$
|
722,486
|
|
|
$
|
(332,448
|
)
|
|
|
|
|
|
|
|
|
|
Basic income (loss) per share
|
|
$
|
0.00
|
|
|
$
|
(0.00
|
)
|
Diluted income (loss) per share
|
|
$
|
0.00
|
|
|
$
|
(0.00
|
)
|
Basic weighted average shares outstanding
|
|
|
2,937,156,538
|
|
|
|
303,870,323
|
|
Diluted weighted average shares outstanding
|
|
|
6,891,790,621
|
|
|
|
303,870,323
|
|
The accompanying notes are an integral part
of these unaudited condensed consolidated financial statements.
Cruzani, Inc. and Subsidiaries
Condensed Consolidated Statement of Operations
(Unaudited)
|
|
For the Six Months Ended
June 30,
|
|
|
|
2021
|
|
|
2020
|
|
|
|
|
|
|
|
|
Operating Expenses:
|
|
|
|
|
|
|
Compensation expense
|
|
|
60,000
|
|
|
|
60,000
|
|
Consulting fees
|
|
|
150,000
|
|
|
|
75,000
|
|
General and administrative expenses
|
|
|
8,210
|
|
|
|
4,000
|
|
Professional fees
|
|
|
39,000
|
|
|
|
11,100
|
|
Total operating expenses
|
|
|
257,210
|
|
|
|
150,100
|
|
|
|
|
|
|
|
|
|
|
Loss from operations
|
|
|
(257,210
|
)
|
|
|
(150,100
|
)
|
|
|
|
|
|
|
|
|
|
Other Income (Expense):
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
(204,392
|
)
|
|
|
(217,367
|
)
|
Change in fair value of derivatives
|
|
|
(741,027
|
)
|
|
|
(95,169
|
)
|
Loss on debt litigation
|
|
|
(266,412
|
)
|
|
|
|
|
Gain on new methodology for accounting for debt conversion features
|
|
|
995,692
|
|
|
|
-
|
|
Total other income (expense)
|
|
|
(216,140
|
)
|
|
|
(312,356
|
)
|
|
|
|
|
|
|
|
|
|
Loss before provision for income taxes
|
|
|
(473,350
|
)
|
|
|
(462,636
|
)
|
Provision for income taxes
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Net Income (Loss)
|
|
$
|
(473,350
|
)
|
|
$
|
(462,636
|
)
|
|
|
|
|
|
|
|
|
|
Basic income (loss) per share
|
|
$
|
(0.00
|
)
|
|
$
|
(0.00
|
)
|
Basic weighted average shares outstanding
|
|
|
2,340,048,882
|
|
|
|
310,698,700
|
|
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 Six Months Ended June 30, 2021
(Unaudited)
|
|
Series A
|
|
|
Series B
|
|
|
Series C
|
|
|
Series D
|
|
|
Series E
|
|
|
Series E Preferred
|
|
|
|
|
|
|
|
|
Additional
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred Stock
|
|
|
Preferred Stock
|
|
|
Preferred Stock
|
|
|
Preferred Stock
|
|
|
Preferred Stock
|
|
|
Stock to be 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, 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
|
|
|
$
|
76,679,297
|
|
|
$
|
(773,500
|
)
|
|
$
|
(81,759,691
|
)
|
|
$
|
(5,555,310
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares issued for extinguishment of convertible debt
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,042,231,035
|
|
|
|
10,422
|
|
|
|
1,092,823
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,103,246
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares issued for extinguishment of Convertible Preferred stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(20,370
|
)
|
|
|
(20,370
|
)
|
|
|
|
|
|
|
|
|
|
|
49,871,795
|
|
|
|
499
|
|
|
|
19,871
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(1,195,836
|
)
|
|
|
(1,195,836
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance March 31, 2021
|
|
|
3,381,520
|
|
|
$
|
33,815
|
|
|
|
5,000
|
|
|
$
|
50
|
|
|
|
5,000,000
|
|
|
$
|
50,000
|
|
|
|
125,000
|
|
|
$
|
12
|
|
|
|
14,615
|
|
|
$
|
14,615
|
|
|
|
-
|
|
|
$
|
166,331
|
|
|
|
2,431,147,111
|
|
|
$
|
24,311
|
|
|
$
|
77,791,992
|
|
|
$
|
(773,500
|
)
|
|
$
|
(82,955,527
|
)
|
|
$
|
(5,647,900
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares issued for extinguishment of convertible debt
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,231,213,640
|
|
|
|
12,312
|
|
|
|
1,163,128
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,175,440
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares issued for extinguishment of Convertible Preferred stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(14,615
|
)
|
|
|
(14,615
|
)
|
|
|
|
|
|
|
|
|
|
|
39,371,795
|
|
|
|
394
|
|
|
|
15,246
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,025
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
722,486
|
|
|
|
722,486
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, June 30, 2021
|
|
|
3,381,520
|
|
|
$
|
33,815
|
|
|
|
5,000
|
|
|
$
|
50
|
|
|
|
5,000,000
|
|
|
$
|
50,000
|
|
|
|
125,000
|
|
|
$
|
12
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
$
|
166,331
|
|
|
|
3,701,732,545
|
|
|
$
|
37,017
|
|
|
$
|
78,970,365
|
|
|
$
|
(773,500
|
)
|
|
$
|
(82,233,041
|
)
|
|
$
|
(3,748,949
|
)
|
Cruzani, Inc. and
Subsidiaries
Consolidated Statement of Changes in Stockholders’
Deficit
For the Six months Ended June 30, 2020
(Unaudited)
|
|
Series A
|
|
|
Series B
|
|
|
Series C
|
|
|
Series D
|
|
|
Series E
|
|
|
Series E Preferred
|
|
|
|
|
|
|
|
|
Additional
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred Stock
|
|
|
Preferred Stock
|
|
|
Preferred Stock
|
|
|
Preferred Stock
|
|
|
Preferred Stock
|
|
|
Stock to be 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 convertible debt
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
73,343,869
|
|
|
|
733
|
|
|
|
31,998
|
|
|
|
-
|
|
|
|
-
|
|
|
|
32,731
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
)
|
Cruzani, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited)
|
|
For the Six Months
Ended
June 30,
|
|
|
|
2021
|
|
|
2020
|
|
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
Net income
|
|
$
|
(473,350
|
)
|
|
$
|
(462,636
|
)
|
Adjustments to reconcile net income to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
Change in fair value of derivatives
|
|
|
741,027
|
|
|
|
95,169
|
|
Gain on new methodology for accounting for debt conversion features
|
|
|
(995,692
|
)
|
|
|
-
|
|
Consulting notes
|
|
|
150,000
|
|
|
|
75,000
|
|
Expenses incurred on extinguishment of convertible debt and accrued interest
|
|
|
8,210
|
|
|
|
4,000
|
|
Loss on legal settlement
|
|
|
266,412
|
|
|
|
-
|
|
Debt discount amortization
|
|
|
100,358
|
|
|
|
46,864
|
|
Reconciliation of debt balances
|
|
|
(4,000
|
)
|
|
|
-
|
|
Changes in Operating Assets and Liabilities:
|
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities
|
|
|
108,034
|
|
|
|
170,503
|
|
Accrued officer compensation
|
|
|
60,000
|
|
|
|
60,000
|
|
Net Cash Used in Operating Activities
|
|
|
(39,000
|
)
|
|
|
(11,100
|
)
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Net Cash Provided by Investing Activities
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Notes issued for cash
|
|
|
39,000
|
|
|
|
11,100
|
|
Net Cash Provided by Financing Activities
|
|
|
39,000
|
|
|
|
11,100
|
|
|
|
|
|
|
|
|
|
|
Net Increase (Decrease) in Cash
|
|
|
-
|
|
|
|
-
|
|
Cash at Beginning of Period
|
|
|
-
|
|
|
|
-
|
|
Cash at End of Period
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
Cash paid during the period for:
|
|
|
|
|
|
|
|
|
Interest
|
|
$
|
-
|
|
|
$
|
-
|
|
Income taxes
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure of non-cash activity:
|
|
|
|
|
|
|
|
|
Common stock issued for extinguishment of debt and accrued interest
|
|
$
|
955,779
|
|
|
$
|
32,732
|
|
Common stock issued for extinguishment of Preferred stock
|
|
$
|
34,985
|
|
|
$
|
-
|
|
The accompanying notes are an integral part
of these unaudited condensed consolidated financial statements.
Cruzani, Inc. and Subsidiaries
Notes to Unaudited Consolidated Condensed Financial
Statements
June 30, 2021
NOTE 1 – SUMMARY OF BUSINESS AND BASIS
OF PRESENTATION
Organization and Business
Cruzani, Inc. (“Cruzani” or the “Company”)
had been 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.
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 February 7, 2019,
effective as of December 31, 2018, the Company terminated the Asset Purchase Agreement with Supreme Sweets Inc. and 2498411 Ontario, Inc,
by written notice to the Seller, and the Company unwound the transaction. The $339,813 of capital injected into Oventa, Inc was written
off as uncollectable as of June 30, 2021.
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. There were difficulties integrating the Target into the Company group, which forced the Company
to cease injecting additional capital into the Target and recognize a loss of $102,552 for amounts that had already been loaned to the
Target.
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.
Basis of Presentation
The accompanying unaudited interim consolidated
condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States of
America (“U.S. GAAP”). These unaudited consolidated condensed financial statements should be read in conjunction with the
audited financial statements and footnotes for the year ended December 31, 2020 included on the Company’s Form 10-K. The results
of the three months ended June 30, 2021 are not necessarily indicative of the results to be expected for the full year ending December
31, 2021.
In the opinion of management, all adjustments
necessary to present fairly the financial position as of June 30, 2021 and the results of operations and cash flows presented herein have
been included in the financial statements. All such adjustments are of a normal and recurring nature. Interim results are not necessarily
indicative of results of operations for the full year.
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
We maintain our cash in bank deposit accounts,
the balances of which at times may exceed federally insured limits. We continually monitor our banking relationships and consequently
have not experienced any losses in our accounts. We believe we are not exposed to any significant credit risk on cash.
Reclassifications
Certain reclassifications have been made to the
prior year financial information to conform to the presentation used in the financial statements for the six months ended June 30, 2021.
There is no effect on the accumulated deficit as the result of these reclassifications.
Principles of Consolidation
The accompanying unaudited interim consolidated
condensed financial statements include the accounts of the Company. All financial information has been prepared in conformity with accounting
principles generally accepted in the United States of America. All significant intercompany transactions and balances have been eliminated.
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 June 30, 2021 and December
31, 2020.
Convertible Notes with Fixed
Rate Conversion Options
The Company may enter into convertible notes, some of which contain,
predominantly, fixed rate conversion features, whereby the outstanding principal and accrued interest may be converted by the holder,
into common shares at a fixed discount to the market price of the common stock at the time of conversion. This results in a fair value
of the convertible note being equal to a fixed monetary amount. The Company records the convertible note liability at its fixed monetary
amount by measuring and recording a premium, as applicable, on the note date with a charge to interest expense in accordance with ASC
480 - “Distinguishing Liabilities from Equity”.
Recently issued accounting pronouncements
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 2 – GOING CONCERN
The accompanying unaudited interim consolidated
condensed financial statements have been prepared in conformity with generally accepted accounting principles which contemplate continuation
of the Company on 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 operations and has an accumulated deficit of ($82,233,041). 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 3 – LOANS PAYABLE
The loan payable balances are as follows:
|
|
Rate
|
|
|
June 30,
2021
|
|
|
December 31,
2020
|
|
Loan 1
|
|
|
1
|
%
|
|
$
|
27,000
|
|
|
$
|
27,000
|
|
Loan 2
|
|
|
1
|
%
|
|
|
3,000
|
|
|
|
3,000
|
|
Loan 3
|
|
|
8
|
%
|
|
|
64,000
|
|
|
|
64,000
|
|
Loan 4
|
|
|
8
|
%
|
|
|
160,500
|
|
|
|
160,500
|
|
Total
|
|
|
|
|
|
$
|
254,500
|
|
|
$
|
254,500
|
|
Above notes are past due as of
the issuance of these financial statements.
NOTE 4 – CONVERTIBLE NOTES
The following table summarizes the convertible notes
as of June 30, 2021 and December 31, 2020:
|
|
Date
|
|
|
Interest
|
|
|
Maturity
|
|
|
|
|
|
|
|
Creditor
|
|
Issued
|
|
|
Rate
|
|
|
Date
|
|
|
30-Jun-21
|
|
|
31-Dec-20
|
|
Travel Data Solutions, Inc.
|
|
|
18-Nov-17
|
|
|
|
10
|
%
|
|
|
30-Nov-19
|
|
|
$
|
100,000
|
|
|
$
|
100,000
|
|
(1) GW Holdings Group
|
|
|
(1
|
)
|
|
|
(1
|
)
|
|
|
(1
|
)
|
|
|
273,000
|
|
|
|
60,750
|
|
Travel Data Solutions, Inc.
|
|
|
18-Jan-19
|
|
|
|
10
|
%
|
|
|
31-Jan-20
|
|
|
|
25,000
|
|
|
|
25,000
|
|
Oasis Capital, LLC (See Note 5)
|
|
|
(2
|
)
|
|
|
(2
|
)
|
|
|
(2
|
)
|
|
|
266,507
|
|
|
|
1,020,086
|
|
Trillium Partners, LP
|
|
|
(3
|
)
|
|
|
(3
|
)
|
|
|
(3
|
)
|
|
|
-
|
|
|
|
-
|
|
Livingston Asset Management, LLC
|
|
|
1-Apr-20
|
|
|
|
10
|
%
|
|
|
31-Dec-20
|
|
|
|
25,000
|
|
|
|
25,000
|
|
Livingston Asset Management, LLC
|
|
|
1-May-20
|
|
|
|
10
|
%
|
|
|
31-Jan-21
|
|
|
|
25,000
|
|
|
|
25,000
|
|
Livingston Asset Management, LLC
|
|
|
20-May-20
|
|
|
|
10
|
%
|
|
|
20-Feb-21
|
|
|
|
10,000
|
|
|
|
10,000
|
|
Livingston Asset Management, LLC
|
|
|
1-Jun-20
|
|
|
|
10
|
%
|
|
|
10-Mar-21
|
|
|
|
25,000
|
|
|
|
25,000
|
|
Livingston Asset Management, LLC
|
|
|
11-Jun-20
|
|
|
|
10
|
%
|
|
|
01-Feb-21
|
|
|
|
1,100
|
|
|
|
1,100
|
|
Livingston Asset Management, LLC
|
|
|
1-Jul-20
|
|
|
|
10
|
%
|
|
|
31-Mar-21
|
|
|
|
25,000
|
|
|
|
25,000
|
|
Livingston Asset Management, LLC
|
|
|
20-Jul-20
|
|
|
|
10
|
%
|
|
|
20-Apr-21
|
|
|
|
4,500
|
|
|
|
4,500
|
|
Livingston Asset Management, LLC
|
|
|
1-Aug-20
|
|
|
|
10
|
%
|
|
|
30-Apr-21
|
|
|
|
25,000
|
|
|
|
25,000
|
|
Livingston Asset Management, LLC
|
|
|
14-Aug-20
|
|
|
|
10
|
%
|
|
|
14-May-21
|
|
|
|
9,500
|
|
|
|
9,500
|
|
Livingston Asset Management, LLC
|
|
|
24-Aug-20
|
|
|
|
10
|
%
|
|
|
24-May-21
|
|
|
|
12,500
|
|
|
|
12,500
|
|
Livingston Asset Management, LLC
|
|
|
1-Sep-20
|
|
|
|
10
|
%
|
|
|
30-Jun-21
|
|
|
|
25,000
|
|
|
|
25,000
|
|
Livingston Asset Management, LLC
|
|
|
1-Oct-20
|
|
|
|
10
|
%
|
|
|
31-Jul-21
|
|
|
|
25,000
|
|
|
|
25,000
|
|
Livingston Asset Management, LLC
|
|
|
1-Nov-20
|
|
|
|
10
|
%
|
|
|
30-Aug-21
|
|
|
|
25,000
|
|
|
|
25,000
|
|
Livingston Asset Management, LLC
|
|
|
1-Dec-20
|
|
|
|
10
|
%
|
|
|
30-Sep-21
|
|
|
|
25,000
|
|
|
|
25,000
|
|
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
|
|
|
|
-
|
|
Trillium Partners, LP
|
|
|
24-Mar-21
|
|
|
|
10
|
%
|
|
|
31-Dec-21
|
|
|
|
17,000
|
|
|
|
-
|
|
Livingston Asset Management, LLC
|
|
|
1-Apr-21
|
|
|
|
10
|
%
|
|
|
31-Jan-22
|
|
|
|
25,000
|
|
|
|
-
|
|
Livingston Asset Management, LLC
|
|
|
1-May-21
|
|
|
|
10
|
%
|
|
|
28-Feb-22
|
|
|
|
25,000
|
|
|
|
-
|
|
Trillium Partners, LP
|
|
|
25-May-21
|
|
|
|
12
|
%
|
|
|
25-May-22
|
|
|
|
22,000
|
|
|
|
-
|
|
Livingston Asset Management, LLC
|
|
|
1-Jun-21
|
|
|
|
10
|
%
|
|
|
31-Mar-22
|
|
|
|
25,000
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible notes payable-Gross
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,116,107
|
|
|
$
|
1,468,436
|
|
Less: discount
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(70,788
|
)
|
|
|
(77,004
|
)
|
Convertible notes payable-net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,045,319
|
|
|
$
|
1,391,432
|
|
As of June 30, 2021, if fully converted, the convertible
debt would be convertible into 1,817,485,550 shares of common stock
(1) GW Holdings Group
|
|
|
|
|
|
|
|
Balance after settlement
|
|
$
|
348,548
|
|
Conversions
|
|
|
(75,548
|
)
|
|
|
|
|
|
Remaining balance at 6/30/21
|
|
$
|
273,000
|
|
(2) Oasis Capital, LLC
|
|
|
|
|
|
|
|
Balance at 12/31/20
|
|
$
|
1,020,086
|
|
Conversions
|
|
|
(503,579
|
)
|
Total sold to Trillium Partners LP
|
|
|
(250,000
|
)
|
|
|
|
|
|
Remaining balance at 6/30/21
|
|
$
|
266,507
|
|
(3) Trillium Partners, LP
|
|
|
|
|
|
|
|
Debt purchased from Oasis Capital, LLC
|
|
$
|
250,000
|
|
Conversions
|
|
|
(250,000
|
)
|
|
|
|
|
|
Remaining balance at 6/30/21
|
|
$
|
-
|
|
NOTE 5 – CONTINGENCY ARISING INDEBTEDNESS OWED TO OASIS
CAPITAL, LLC
A contingency arises when there is a situation for which the
outcome is uncertain, and which should be resolved in the future, Generally Accepted Accounting Principles require recognition of
only those losses that are probable and for which a loss amount can be reasonably estimated.
The following details the nature of the contingency with Oasis Capital
LLC (“Oasis”). In the normal course of its business, Oasis files notices to convert (“conversion notices”) a
portion of its outstanding ownership of the Company’s indebtedness into shares of common stock. As a customary procedure for the
annual audit for the period ended December 31, 2020, the Company’s auditors confirmed its outstanding balance of the indebtedness
and related accrued interest. During the quarter ended June 30, 2021, Oasis submitted one such conversion which stated that the outstanding
indebtedness was far greater than that which was on the Company’s books. The total amount of the increased indebtedness was approximately
$1.3 million. After investigation, the Company determined that the difference related to liquidated damages that the Company does not
believe that it owes.
Since the Company believes that the loss is not probable and no litigation
has been pursued at this time, there has been no recognition of this liability on the books and records of the Company.
NOTE 6 – PUT PREMIUM ON STOCK SETTLED DEBT
At the end of the quarter ended June 30, 2021, the Company decided
to adopt ASC 480- “ Distinguishing Liabilities from Equity.” When the enter into convertible notes, some of which contain,
predominantly, fixed rate conversion features, whereby the outstanding principal and accrued interest may be converted by the holder,
into common shares at a fixed discount to the market price of the common stock at the time of conversion. This results in a fair value
of the convertible note being equal to a fixed monetary amount. The Company records the convertible note liability at its fixed monetary
amount by measuring and recording a premium, as applicable, on the note date with a charge to interest expense.
In previous quarters, the Company had recorded such
items as derivative liabilities (See Note seven). Thusly, there was a charge to put premium on stock settled debt and a decrease to derivative
liability. On a going-forward basis, all put premiums will be charged to interest expense.
Put premium at June 30, 2021 was as follows:
Put premium on stock settled debt
|
|
|
|
Transfer from derivative liability
|
|
$
|
1,634,278
|
|
Gain on new methodology for accounting for debt conversion features
|
|
|
(1,251,700
|
)
|
Balance, June 30, 2021
|
|
$
|
382,578
|
|
Put premium on stock settled debt by individual note is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Put premium on
|
|
|
|
Date
|
|
|
Maturity
|
|
|
|
|
|
Discount
|
|
|
stock settled
|
|
Creditor
|
|
Issued
|
|
|
Date
|
|
|
30-Jun-21
|
|
|
Percentage
|
|
|
debt
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Travel Data Solutions, Inc.
|
|
|
18-Nov-17
|
|
|
|
30-Nov-19
|
|
|
$
|
100,000
|
|
|
|
-
|
|
|
$
|
-
|
|
GW Holdings Group
|
|
|
Various
|
|
|
|
Various
|
|
|
|
273,000
|
|
|
|
45
|
%
|
|
|
223,364
|
|
Travel Data Solutions, Inc.
|
|
|
18-Jan-19
|
|
|
|
31-Jan-20
|
|
|
|
25,000
|
|
|
|
-
|
|
|
|
-
|
|
Oasis Capital, LLC
|
|
|
Various
|
|
|
|
Various
|
|
|
|
266,507
|
|
|
|
45
|
%
|
|
|
218,052
|
|
Livingston Asset Management, LLC
|
|
|
1-Apr-20
|
|
|
|
31-Dec-20
|
|
|
|
25,000
|
|
|
|
30
|
%
|
|
|
10,714
|
|
Livingston Asset Management, LLC
|
|
|
1-May-20
|
|
|
|
31-Jan-21
|
|
|
|
25,000
|
|
|
|
30
|
%
|
|
|
10,714
|
|
Livingston Asset Management, LLC
|
|
|
20-May-20
|
|
|
|
20-Feb-21
|
|
|
|
10,000
|
|
|
|
50
|
%
|
|
|
10,000
|
|
Livingston Asset Management, LLC
|
|
|
1-Jun-20
|
|
|
|
10-Mar-21
|
|
|
|
25,000
|
|
|
|
30
|
%
|
|
|
10,714
|
|
Livingston Asset Management, LLC
|
|
|
11-Jun-20
|
|
|
|
01-Feb-21
|
|
|
|
1,100
|
|
|
|
50
|
%
|
|
|
1,100
|
|
Livingston Asset Management, LLC
|
|
|
1-Jul-20
|
|
|
|
31-Mar-21
|
|
|
|
25,000
|
|
|
|
30
|
%
|
|
|
10,714
|
|
Livingston Asset Management, LLC
|
|
|
20-Jul-20
|
|
|
|
20-Apr-21
|
|
|
|
4,500
|
|
|
|
50
|
%
|
|
|
4,500
|
|
Livingston Asset Management, LLC
|
|
|
1-Aug-20
|
|
|
|
30-Apr-21
|
|
|
|
25,000
|
|
|
|
30
|
%
|
|
|
10,714
|
|
Livingston Asset Management, LLC
|
|
|
14-Aug-20
|
|
|
|
14-May-21
|
|
|
|
9,500
|
|
|
|
50
|
%
|
|
|
9,500
|
|
Livingston Asset Management, LLC
|
|
|
24-Aug-20
|
|
|
|
24-May-21
|
|
|
|
12,500
|
|
|
|
50
|
%
|
|
|
12,500
|
|
Livingston Asset Management, LLC
|
|
|
1-Sep-20
|
|
|
|
30-Jun-21
|
|
|
|
25,000
|
|
|
|
30
|
%
|
|
|
10,714
|
|
Livingston Asset Management, LLC
|
|
|
1-Oct-20
|
|
|
|
31-Jul-21
|
|
|
|
25,000
|
|
|
|
30
|
%
|
|
|
10,714
|
|
Livingston Asset Management, LLC
|
|
|
1-Nov-20
|
|
|
|
30-Aug-21
|
|
|
|
25,000
|
|
|
|
30
|
%
|
|
|
10,714
|
|
Livingston Asset Management, LLC
|
|
|
1-Dec-20
|
|
|
|
30-Sep-21
|
|
|
|
25,000
|
|
|
|
30
|
%
|
|
|
10,714
|
|
Livingston Asset Management, LLC
|
|
|
1-Jan-21
|
|
|
|
31-Oct-21
|
|
|
|
25,000
|
|
|
|
30
|
%
|
|
|
10,714
|
|
Livingston Asset Management, LLC
|
|
|
1-Feb-21
|
|
|
|
30-Nov-21
|
|
|
|
25,000
|
|
|
|
30
|
%
|
|
|
10,714
|
|
Livingston Asset Management, LLC
|
|
|
1-Mar-21
|
|
|
|
31-Dec-21
|
|
|
|
25,000
|
|
|
|
30
|
%
|
|
|
10,714
|
|
Trillium Partners, LP
|
|
|
24-Mar-21
|
|
|
|
31-Dec-21
|
|
|
|
17,000
|
|
|
|
50
|
%
|
|
|
17,000
|
|
Livingston Asset Management, LLC
|
|
|
1-Apr-21
|
|
|
|
31-Jan-22
|
|
|
|
25,000
|
|
|
|
30
|
%
|
|
|
10,714
|
|
Livingston Asset Management, LLC
|
|
|
1-May-21
|
|
|
|
28-Feb-22
|
|
|
|
25,000
|
|
|
|
30
|
%
|
|
|
10,714
|
|
Trillium Partners, LP
|
|
|
25-May-21
|
|
|
|
25-May-22
|
|
|
|
22,000
|
|
|
|
0
|
%
|
|
|
-
|
|
Livingston Asset Management, LLC
|
|
|
1-Jun-21
|
|
|
|
31-Mar-22
|
|
|
|
25,000
|
|
|
|
30
|
%
|
|
|
10,714
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Put premium on stock settled debt
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
656,730
|
|
NOTE 7 – 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 table below sets forth a summary of changes
in the fair value of the Company’s Level 3 financial liabilities:
Derivative liability at March 31, 2021
|
|
$
|
2,246,072
|
|
Less; conversions
|
|
|
(642,794
|
)
|
Add: new debt issuances
|
|
|
49,143
|
|
Transfer to put premium
|
|
|
(1,652,421
|
)
|
Derivative liability at June 30, 2021
|
|
$
|
-
|
|
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 of its derivatives:
|
|
Expected
Volatility
|
|
|
Risk-free
Interest Rate
|
|
|
Expected
Dividend Yield
|
|
|
Expected Life
(in years)
|
|
At December 31, 2020
|
|
|
251.93
|
%
|
|
|
.62
|
%
|
|
|
0
|
%
|
|
|
0.25 – 0.75
|
|
NOTE 8 – COMMON STOCK
Reincorporation in State of Wyoming
On June 21, 2021, the Company received approval
from the State of Wyoming to reincorporate in that state and increase its authorized share count to 10,000,000,000.
During the six months ended June 30, 2021, the
Company issued 2,273,444,675 shares of common stock for the extinguishment of convertible debt 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
|
|
02-Mar-21
|
|
|
20,203,797
|
|
|
|
10,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
10,000
|
|
Oasis Capital, LLC
|
|
08-Mar-21
|
|
|
175,494,746
|
|
|
|
71,075
|
|
|
|
-
|
|
|
|
-
|
|
|
|
71,075
|
|
GW Holdings Group LLC
|
|
09-Mar-21
|
|
|
3,818,181
|
|
|
|
2,520
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,520
|
|
Trillium Partners LLC
|
|
10-Mar-21
|
|
|
86,508,841
|
|
|
|
-
|
|
|
|
37,039
|
|
|
|
1,025
|
|
|
|
38,064
|
|
Trillium Partners LLC
|
|
12-Mar-21
|
|
|
86,900,826
|
|
|
|
42,000
|
|
|
|
9,550
|
|
|
|
1,025
|
|
|
|
52,575
|
|
Trillium Partners LLC
|
|
19-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
|
|
06-Apr-21
|
|
|
203,298,776
|
|
|
|
91,484
|
|
|
|
-
|
|
|
|
-
|
|
|
|
91,484
|
|
Trillium Partners, LP
|
|
12-Apr-21
|
|
|
92,267,673
|
|
|
|
25,000
|
|
|
|
24,722
|
|
|
|
1,025
|
|
|
|
50,747
|
|
Oasis Capital LLC
|
|
26-Apr-21
|
|
|
50,000,000
|
|
|
|
20,250
|
|
|
|
-
|
|
|
|
-
|
|
|
|
20,250
|
|
Oasis Capital LLC
|
|
04-May-21
|
|
|
50,000,000
|
|
|
|
20,250
|
|
|
|
-
|
|
|
|
-
|
|
|
|
20,250
|
|
Trillium Partners, LP
|
|
29-Apr-21
|
|
|
53,055,556
|
|
|
|
25,000
|
|
|
|
238
|
|
|
|
1,025
|
|
|
|
26,263
|
|
Trillium Partners, LP
|
|
05-May-21
|
|
|
80,857,455
|
|
|
|
-
|
|
|
|
38,994
|
|
|
|
1,030
|
|
|
|
40,024
|
|
Oasis Capital LLC
|
|
22-Jun-21
|
|
|
296,999,838
|
|
|
|
106,919
|
|
|
|
-
|
|
|
|
-
|
|
|
|
106,919
|
|
Trillium Partners, LP
|
|
22-Jun-21
|
|
|
229,656,566
|
|
|
|
100,000
|
|
|
|
12,650
|
|
|
|
1,030
|
|
|
|
113,680
|
|
GW Holdings Group Inc
|
|
30-Jun-21
|
|
|
175,077,777
|
|
|
|
63,028
|
|
|
|
-
|
|
|
|
-
|
|
|
|
63,028
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
2,273,444,675
|
|
|
$
|
825,127
|
|
|
$
|
123,467
|
|
|
$
|
7,185
|
|
|
$
|
955,779
|
|
The Company issued shares for the extinguishment
of Series E Preferred stock as follows:
|
|
|
|
|
|
|
Preferred
|
|
|
Accrued
|
|
|
|
|
|
|
|
Recipient of shares
|
|
Date
|
|
Shares
|
|
|
stock
|
|
|
Dividend
|
|
|
Fees
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trillium Partners LLC
|
|
25-Mar-21
|
|
|
49,871,795
|
|
|
$
|
20,370
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
20,370
|
|
Trillium Partners LLC
|
|
6-Apr-21
|
|
|
39,371,795
|
|
|
|
14,330
|
|
|
|
-
|
|
|
|
-
|
|
|
|
14,330
|
|
|
|
|
|
|
89,243,590
|
|
|
$
|
34,700
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
34,700
|
|
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 June 30, 2021, and December 31,
2020, 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 June 30, 2021, and December
31, 2020, 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 June 30, 2021, and December 31, 2020, 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 June 30, 2021, and December 31, 2020, 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.
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.
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.During th4e first quarter of Fiscal 2021, Geneva sold their position to Trillium Partners, LP (“Trillium”)
On March 25, 2021, Trillium converted 20,370 shares of Series E preferred stock into 49,871,795 shares of common stock. As of June 30,
2021, and December 31, 2020, there are -0-and 34,985 shares of Series E preferred stock outstanding, respectively.
As of June 30, 2021, all classes of convertible
preferred stock were convertible into 2,137,148,533 shares of common stock.
NOTE 10 – RELATED PARTY TRANSACTIONS
On July
8, 2019, the Company executed an employment agreement with Conrad Huss, the new CEO. The agreement provides for a salary of $10,000 per
month. As of June 30, 2021, $352,000 has been credited to accrued compensation.
NOTE 11 – LOSS ON DEBT LITIGATION
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 incurred a loss on the settlement as follows:
|
|
|
|
|
Accrued
|
|
|
|
|
Date of Note
|
|
Note
|
|
|
Interest
|
|
|
Total
|
|
17-May-16
|
|
$
|
24,000
|
|
|
$
|
11,106
|
|
|
$
|
35,106
|
|
16-Mar-18
|
|
|
36,750
|
|
|
|
10,280
|
|
|
|
47,030
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
60,750
|
|
|
$
|
21,386
|
|
|
$
|
82,136
|
|
Total settlement amount
|
|
$
|
348,548
|
|
Balance
|
|
$
|
82,136
|
|
|
|
$
|
266,412
|
|
NOTE 12 – GAIN ON NEW METHODOLOGY FOR
ACCOUNTING FOR DEBT CONVERSION FEATURES
The Company changed its accounting for the methodology
for debt conversion features as stated in Note 6- Put premium on stock settled debt. An one-time gain of $955,692 was recorded in regards
to the transition.
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. contingent liabilities that should be reflected in the financial statements.
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 June 30, 2021 and December 31, 2020.
NOTE 14 – COVID-19
The Company, like all enterprises, is currently
dealing with the impact of COVID-19 on future prospects. Recent events such as the vaccinations mitigate, but do not eliminate, the possible
adverse consequences to the domestic and international economies. Recent increases in the Delta Variant of COVID-19 have resulted in greater
infections and its ultimate impact cannot be ascertained
NOTE 15 – IMPACT OF CLIMATE CHANGE
The Financial Stability Board created the Task
Force on Climate-related Financial Disclosures (TCFD) to improve and increase reporting of climate-related financial information. The
TCFD requires that the impact of climate change upon risk assessment, capital allocation and strategic planning be discussed.
At this time, the impact cannot be determined.
NOTE 16 – SUBSEQUENT EVENTS
Issuance of shares of common stock
Subsequent to June 30, 2021, the Company issued
1,017,789,094 shares for the extinguishment of $353,000 of principal interest on debt, 104,877 of accrued interest, and $2,060 in fees
as follows below:
Creditor
|
|
Date
|
|
Shares
|
|
|
Principal
|
|
|
Accrued interest
|
|
|
Fees
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GW Holdings Group Inc
|
|
2-Jul-21
|
|
|
61,666,666
|
|
|
$
|
22,200
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
22,200
|
|
Trillium Partners LP
|
|
6-Jul-21
|
|
|
348,195,964
|
|
|
|
86,000
|
|
|
|
104,478
|
|
|
|
1,030
|
|
|
|
191,508
|
|
Trillium Partners LP
|
|
13-Jul-21
|
|
|
209,870,909
|
|
|
|
114,000
|
|
|
|
399
|
|
|
|
1,030
|
|
|
|
115,429
|
|
GW Holdings Group Inc
|
|
14-Jul-21
|
|
|
85,555,555
|
|
|
|
30,800
|
|
|
|
-
|
|
|
|
-
|
|
|
|
30,800
|
|
GW Holdings Group Inc
|
|
19-Jul-21
|
|
|
187,500,000
|
|
|
|
60,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
60,000
|
|
GW Holdings Group Inc
|
|
27-Jul-21
|
|
|
125,000,000
|
|
|
|
40,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
40,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
1,017,789,094
|
|
|
$
|
353,000
|
|
|
$
|
104,877
|
|
|
$
|
2,060
|
|
|
$
|
459,937
|
|
Issuance of Convertible debt
Subsequent to June 30, 2021, the Company
issued $50,000 in notes for consulting services.
Item 2. Management’s Discussion and Analysis of Financial
Condition and Results of Operations.
Forward Looking Statements
This Quarterly Report on Form 10-Q contains forward-looking
statements. For this purpose, any statements contained in this Report that are not statements of historical fact may be deemed to be forward-looking
statements. Forward-looking information includes statements relating to future actions, prospective products, future performance or results
of current or anticipated products, sales and marketing efforts, costs and expenses, interest rates, outcome of contingencies, financial
condition, results of operations, liquidity, business strategies, cost savings, objectives of management, and other matters. You can identify
forward-looking statements by those that are not historical in nature, particularly those that use terminology such as “may,”
“will,” “should,” “expects,” “anticipates,” “contemplates,” “estimates,”
“believes,” “plans,” “projected,” “predicts,” “potential,” or “continue”
and similar expressions or the negative of these similar terms. The Private Securities Litigation Reform Act of 1995 provides a “safe
harbor” for forward-looking information to encourage companies to provide prospective information about themselves without fear
of litigation so long as that information is identified as forward-looking and is accompanied by meaningful cautionary statements identifying
important factors that could cause actual results to differ materially from those projected in the information.
These forward-looking statements are not guarantees
of future performance and involve risks, uncertainties and assumptions that we cannot predict. In evaluating these forward-looking statements,
you should consider various factors, including the following: (a) those risks and uncertainties related to general economic conditions,
(b) whether we are able to manage our planned growth efficiently and operate profitable operations, (c) whether we are able to generate
sufficient revenues or obtain financing to sustain and grow our operations, (d) whether we are able to successfully fulfill our primary
requirements for cash, which are explained below under “Liquidity and Capital Resources”. We assume no obligation to update
forward-looking statements, except as otherwise required under the applicable federal securities laws. Unless stated otherwise, terms
such as the “Company,” “Cruzani,” “we,” “us,” “our,” and similar terms shall
refer to Cruzani, Inc., a Nevada corporation, and its subsidiaries.
Plan of Operations
Cruzani is currently evaluating various enterprises
for its new business model.
Results of Operations
Three Months Ended June 30, 2021 Compared
to the Three Months Ended June 30, 2021
Compensation Expense
Compensation expense for the three months ended
June 30, 2021 and June 30, 2020 was $30,000 due to Chief Executive Officer compensation.
Consulting Expense
Consulting expense for the three months ended
June 30, 2021 and June 30, 2020 was $75,000 and $75,000. A consulting contract was signed effective April 1, 2020. For a fee of $25,000
per month, payable in a note, the consultant shall provide accounting and financial statement services, evaluate business acquisition
opportunities and help in securing financing.
General and administrative expenses
General and administrative expenses for the three
months ended June 30, 2021 were $5,135 compared to $4,000 for the three months ended June 30, 2020. Expenses incurred were associated
with the conversion of debt and preferred stock
Professional fees
Professional fees for the three months ended June
30, 2021 were $39,000 compared to $11,100 for the three months ended June 30, 2020. The increase in expenses were due to greater accounting,
and legal expenses and expenses paid to reincorporate in the State of Wyoming.
Other Income (Expense)
Total other income (expense)
of $871,621 for the three months ended June 30, 2021 consists of gain on new methodology
for accounting for debt conversion features of $995,692 offset by interest expense of ($124,070), which includes $47,747 of debt discount
amortization. Total expense of $(212,348) for the three months ended June 30, 2020, was comprised
of interest expense of $97,240, which includes $35,547 of debt discount amortization and a loss on fair value of derivatives of ($115,108).
Net Income (Loss)
The Company had net income of $722,486 for the
three months ended June 30, 2021, as compared to a net loss of ($332,448) for the three months ended June 30, 2020.
Six Months Ended June 30, 2021 Compared
to the Three Months Ended June 30, 2021
Compensation Expense
Compensation expense for the six months ended
June 30, 2021 and June 30, 2020 was $60,000 due to Chief Executive Officer compensation.
Consulting Expense
Consulting expense for the six months ended June
30, 2021 and June 30, 2020 was $150,000 and $75,000. A consulting contract was signed effective April 1, 2020. For a fee of $25,000 per
month, payable in a note, the consultant shall provide accounting and financial statement services, evaluate business acquisition opportunities
and help in securing financing.
General and administrative expenses
General and administrative expenses for the six
months ended June 30, 2021 were $8,210 compared to $4,000 for the six months ended June 30, 2020. Expenses incurred were associated with
the conversion of debt and preferred stock.
Professional fees
Professional fees for the six months ended June
30, 2021 were $39,000 compared to $11,100 for the six months ended June 30, 2020. The increase in expenses were due to greater accounting,
and legal expenses and expenses paid to reincorporate in the State of Wyoming.
Other Income (Expense)
Total other income (expense) of ($216,140) for the six months ended
June 30, 2021 consists of gain on new methodology for accounting for debt conversion features of $995,692 offset by a) interest expense
of ($204,392), which includes $100,358 of debt discount amortization; b) change in fair values of derivatives of $741,027, and c) loss
on debt litigation of $266,412. (See Note 10 above for more detail) . Total expense of $(312,356) for the six months ended June 30, 2020,
was comprised of interest expense of $(217,367), which includes $46,864 of debt discount amortization and a loss on fair value of derivatives
of ($95,169).
Net Loss
The Company had a net loss of $(473,350) for the
six months ended June 30, 2021, as compared to a net loss of ($462,636) for the six months ended June 30, 2020.
Quarterly Developments
None.
Significant Developments
None
Going Concern
The accompanying unaudited interim consolidated condensed
financial statements have been prepared in conformity with generally accepted accounting principles which contemplate continuation of
the Company on 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
operations and has an accumulated deficit of $(82,233,041). 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.
Critical Accounting Estimates and Policies
The preparation of financial statements in conformity
with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities of the date of the financial
statements and the reported amounts of revenues and expenses during the reporting period. Note 1 to the Financial Statements describes
the significant accounting policies and methods used in the preparation of the Financial Statements. Estimates are used for, but not limited
to, contingencies and taxes. Actual results could differ materially from those estimates. The following critical accounting policies are
impacted significantly by judgments, assumptions, and estimates used in the preparation of the Financial Statements.
We are subject to various loss contingencies arising
in the ordinary course of business. We consider the likelihood of loss or impairment of an asset or the incurrence of a liability, as
well as our ability to reasonably estimate the amount of loss in determining loss contingencies. An estimated loss contingency is accrued
when management concludes that it is probable that an asset has been impaired or a liability has been incurred and the amount of the loss
can be reasonably estimated. We regularly evaluate current information available to us to determine whether such accruals should be adjusted.
We recognize deferred tax assets (future tax benefits)
and liabilities for the expected future tax consequences of temporary differences between the book carrying amounts and the tax basis
of assets and liabilities. The deferred tax assets and liabilities represent the expected future tax return consequences of those differences,
which are expected to be either deductible or taxable when the assets and liabilities are recovered or settled. Future tax benefits have
been fully offset by a 100% valuation allowance as management is unable to determine that it is more likely than not that this deferred
tax asset will be realized.
Recent Accounting Pronouncements
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.
Off Balance Sheet Arrangements
We have not entered into any off-balance sheet
arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition,
revenues or expenses, results of operations, liquidity, capital expenditures or capital resources and would be considered material to
investors.
Item 3. Quantitative and Qualitative Disclosures
about Market Risk.
Not applicable to smaller reporting companies.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures
(as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) that
are designed to be effective in providing reasonable assurance that information required to be disclosed in our reports under the Exchange
Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange
Commission (the “SEC”), and that such information is accumulated and communicated to our management to allow timely decisions
regarding required disclosure. Our Chief Executive Officer and Chief Financial Officer evaluated the effectiveness of our disclosure controls
and procedures as of the end of the period covered by this report. Based on that evaluation, they concluded that our disclosure controls
and procedures were not effective for the quarterly period ended June 30, 2021.
The following aspects of the Company were noted
as potential material weaknesses:
1.
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We do not have written documentation of our internal control policies and procedures. Written documentation of key internal controls over financial reporting is a requirement of Section 404 of the Sarbanes-Oxley Act which is applicable to us for the period ended June 30, 2021. Management evaluated the impact of our failure to have written documentation of our internal controls and procedures on our assessment of our disclosure controls and procedures and has concluded that the control deficiency that resulted represented a material weakness.
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2.
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We do not have sufficient resources in our accounting function, which restricts the Company’s ability to gather, analyze and properly review information related to financial reporting in a timely manner. As a result, as of the date of filing, we have not completed our ASC 606 implementation process and, thus, cannot disclose the quantitative impact of adoption on our financial statements. In addition, due to our size and nature, segregation of all conflicting duties may not always be possible and may not be economically feasible. However, to the extent possible, the initiation of transactions, the custody of assets and the recording of transactions should be performed by separate individuals. Management evaluated the impact of our failure to have segregation of duties on our assessment of our disclosure controls and procedures and has concluded that the control deficiency that resulted represented a material weakness.
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3.
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We have inadequate controls to ensure that information necessary to properly record transactions is adequately communicated on a timely basis from non-financial personnel to those responsible for financial reporting. Management evaluated the impact of the lack of timely communication between non–financial personnel and financial personnel on our assessment of our reporting controls and procedures and has concluded that the control deficiency represented a material weakness.
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4.
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Certain control procedures were unable to be verified due to performance not being sufficiently documented. As an example, some procedures requiring review of certain reports could not be verified due to there being no written documentation of such review. Management evaluated the impact of its failure to maintain proper documentation of the review process on its assessment of its reporting controls and procedures and has concluded deficiencies represented a material weakness.
|
In designing and evaluating disclosure controls
and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable,
not absolute assurance of achieving the desired objectives. Also, the design of a control system must reflect the fact that there are
resource constraints and the benefits of controls must be considered relative to their costs.
Changes in Internal Controls
Based on that evaluation, our Chief Executive
Officer and our Chief Financial Officer concluded that no change occurred in the Company’s internal controls over financial reporting
during the quarter ended June 30, 2021, that has materially affected, or is reasonably likely to materially affect, the Company’s
internal controls over financial reporting.
PART II – OTHER INFORMATION
Item. 1. Legal Proceedings.
From time to time, we may become involved in various
lawsuits and legal proceedings which arise in the ordinary course of business. Litigation is subject to inherent uncertainties, and an
adverse result in these or other matters may arise from time to time that may harm our business.
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 June 30, 2021 and December 31, 2018. The management is having
discussions with respect to the timing and structure of the settlement.
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.
Item 1A. Risk Factors.
We are a smaller reporting company as defined
by Rule 12b-2 of the Securities Exchange Act of 1934 and, as such, are not required to provide the information under this Item.
Item 2. Unregistered Sales of Equity Securities
and Use of Proceeds.
See Note Eight above for all unregistered sales of
equity during the six months ended June 30, 2021.
Recipient of shares
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Date
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Shares
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Item 3. Defaults Upon Senior Securities.
None
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
None.
Item 6. Exhibits
SIGNATURES
In accordance with the requirements of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
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CRUZANI, INC.
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Date: August 16, 2021
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By:
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Conrad Huss
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Name:
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Conrad Huss
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Title:
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Chief Executive Officer and
Interim Chief Financial Officer
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(Principal Executive Officer)
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(Principal Financial and Accounting Officer)
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22
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