Notes to Consolidated Financial Statements
Years Ended December 31, 2020 and 2019
1. ORGANIZATION AND BASIS OF PRESENTATION
Organization
Digital Locations, Inc. (the “Company”) was incorporated in the State of Nevada on August 25, 2006 as Zingerang, Inc. On April 2, 2007, the Company changed its name to Carbon Sciences, Inc. and on September 14, 2017, the Company changed its name to Digital Locations, Inc.
On January 7, 2021, the Company, SmallCellSite.com LLC, a Virginia limited liability company (“SCS”) and SmallCellSite, Inc., a newly formed Nevada corporation and wholly owned subsidiary of the Company (the “Subsidiary”) entered into an asset purchase agreement (“APA”) to acquire substantially all of the assets of SCS’s wireless communications marketing and database services business. ACS is a source of more than 80,000 cell sites offered by property owners for use by wireless network operators. See Note 13.
Effective February 14, 2020, the Company effected a reverse split of its common stock at a ratio of one for two hundred twenty-five shares (1:225) (the “Stock Split”) with the filing of a Certificate of Amendment to its Articles of Incorporation with the Secretary of State of Nevada. The Company has given retroactive effect for the Stock Split in its financial statements and notes thereto for all periods presented.
On November 30, 2018, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) pursuant to which EllisLab, Inc., an S Corporation owned 100% by Rick Ellis, merged with and into EllisLab Corp., a newly formed subsidiary of the Company (the “Merger”). On September 30, 2019, the Company, entered into an Agreement for the Purchase and Sale of Capital Stock of EllisLab Corp. (the “EllisLab Corp. Sale Agreement”) with Rick Ellis to sell to Rick Ellis all of the issued and outstanding shares of EllisLab Corp. for $10,000 and the 36,000 shares of the Company’s Series C preferred stock acquired by Rick Ellis in the Merger, which represents all of the issued and outstanding shares of the Company’s Series C preferred stock. Pursuant to the Ellis Lab Corp. Sale Agreement, the Company effectively divested itself of the Ellis Lab business and discontinued it. Consequently, the revenues and expenses for EllisLab Corp. are reported as “Loss from discontinued operations, net of income taxes” in our condensed statements of operations for all periods presented. The EllisLab Corp. assets and liabilities have been retroactively reclassified as assets and liabilities of discontinued operations. See Note 3. All significant intercompany accounts and transactions have been eliminated.
Going Concern
The accompanying financial statements are prepared using accounting principles generally accepted in the United States of America applicable to a going concern, which contemplate the realization of assets and liquidation of liabilities in the normal course of business. As of December 31, 2020, our current liabilities exceeded our current and total assets by $14,936,491 and we had an accumulated deficit of $38,013,037. The Company currently does not have the cash resources to meet its operating commitments for the next twelve months and expects to have ongoing requirements for capital investment to implement its business plan. These factors, among others, raise substantial doubt that the Company will be able to continue as a going concern for a reasonable period of time.
The ability of the Company to continue as a going concern is dependent upon, among other things, raising additional capital. The Company has obtained operating funds primarily from the issuance of convertible debt. Management believes this funding will continue and will provide the additional cash needed to meet the Company’s obligations as they become due. There can be no assurance, however, that the Company will be successful in accomplishing its objectives. Without such additional capital we may be required to cease operations. The accompanying financial statements do not include any adjustments that might result should the Company be unable to continue as a going concern.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
This summary of significant accounting policies is presented to assist in understanding the Company’s financial statements. The financial statements and notes are representations of the Company’s management, which is responsible for their integrity and objectivity. These accounting policies conform to accounting principles generally accepted in the United States of America and have been consistently applied in the preparation of the financial statements.
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 amounts reported in the accompanying financial statements. Significant estimates made in preparing these financial statements include the estimate of useful lives of property and equipment and intangible assets, operating lease obligations, impairment of assets, the deferred tax valuation allowance, the fair value of stock options and derivative liabilities. Actual results could differ from those estimates.
Consolidation
The accompanying consolidated financial statements include the accounts of the Company and, effective December 1, 2018 through September 30, 2019, the accounts of EllisLab Corp., its wholly owned subsidiary. All significant intercompany accounts and transactions have been eliminated in consolidation.
Cash and Cash Equivalents
For purposes of the Statement of Cash Flows, the Company considers liquid investments with an original maturity of three months or less to be cash equivalents. The Company places its cash and cash equivalents with large commercial banks. The Federal Deposit Insurance Corporation (“FDIC”) insures these balances, up to $250,000. All of the Company’s cash balances at December 31, 2020 and 2019 were insured. At December 31, 2020 and 2019, there were no cash equivalents.
Prepaid Expenses
Insurance premiums paid in advance of the policy coverage period are recorded as prepaid expenses and expensed over the policy coverage period.
Property and Equipment
The Company’s property and equipment is stated at cost, and is depreciated using the straight-line method over the estimated useful life of the related asset as follows:
Computer equipment
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3-5 years
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Office furniture and equipment
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7 years
|
Maintenance and repairs are charged to expense as incurred. Significant renewals and betterments will be capitalized. At the time of retirement or other disposition of equipment, the cost and accumulated depreciation will be removed from the accounts and the resulting gain or loss, if any, will be reflected in operations.
The Company assesses the recoverability of property and equipment by determining whether the depreciation and amortization of these assets over their remaining life can be recovered through projected undiscounted future cash flows. The amount of equipment impairment, if any, will be measured based on fair value and is charged to operations in the period in which such impairment is determined by management.
Derivative Liabilities
We have identified the conversion features of our convertible notes payable, Series B preferred stock and certain stock options as derivatives. Where the number of common shares to be issued under these agreements is indeterminate, the Company has concluded that the equity environment is tainted, and all additional options, convertible debt and equity are included in the value of the derivatives. We estimate the fair value of the derivatives using the Black-Scholes pricing model and a multinomial lattice model based on projections of various potential future outcomes. We estimate the fair value of the derivative liabilities at the inception of the financial instruments, at the date of conversions to equity and at each reporting date, recording a derivative liability, debt discount, additional paid-in capital and a gain or loss on change in derivative liabilities as applicable. These estimates are based on multiple inputs, including the market price of our stock, interest rates, our stock price volatility, variable conversion prices based on market prices as defined in the respective agreements and probabilities of certain outcomes based on management projections. These inputs are subject to significant changes from period to period and to management’s judgment; therefore, the estimated fair value of the derivative liabilities will fluctuate from period to period, and the fluctuation may be material.
Fair Value of Financial Instruments
Disclosures about fair value of financial instruments require disclosure of the fair value information, whether or not recognized in the balance sheet, where it is practicable to estimate that value. As of December 31, 2020 and 2019, we believe the amounts reported for cash, prepaid expenses, accounts payable, accounts payable – related party, accrued expenses and other current liabilities, accrued interest, notes payable and convertible note payable approximate fair value because of their short maturities.
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC Topic 820 established a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1measurements) and the lowest priority to unobservable inputs (level 3 measurements). These tiers include:
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·
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Level 1, defined as observable inputs such as quoted prices for identical instruments in active markets;
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·
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Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active; and
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·
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Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.
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We measure certain financial instruments at fair value on a recurring basis. Liabilities measured at fair value on a recurring basis are as follows at December 31, 2020 and 2019:
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Total
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Level 1
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Level 2
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Level 3
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December 31, 2020:
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|
|
|
|
|
|
|
|
|
|
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Derivative liabilities
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$
|
11,282,091
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|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
11,282,091
|
|
|
|
|
|
|
|
|
|
|
|
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|
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Total liabilities measured at fair value
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$
|
11,282,091
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|
|
$
|
-
|
|
|
$
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-
|
|
|
$
|
11,282,091
|
|
|
|
|
|
|
|
|
|
|
|
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December 31, 2019:
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|
|
|
|
|
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|
|
|
|
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Derivative liabilities
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|
$
|
6,160,895
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|
|
$
|
-
|
|
|
$
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-
|
|
|
$
|
6,160,895
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|
|
|
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|
|
|
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|
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|
|
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Total liabilities measured at fair value
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$
|
6,160,895
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|
|
$
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-
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|
|
$
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-
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|
|
$
|
6,160,895
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During the years ended December 31, 2020 and 2019, the Company had the following activity in its derivative liabilities account:
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Convertible
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Series B
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Notes Payable
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Preferred Stock
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Stock Options
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Total
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Derivative liabilities at December 31, 2018
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$
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7,809,054
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$
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2,339,898
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$
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214,153
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$
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10,363,105
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Addition to liability for new issuances
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617,000
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-
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-
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617,000
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Elimination of liability on conversion to common shares
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(195,042
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)
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-
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-
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(195,042
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)
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Change in fair value
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(4,624,818
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)
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195,461
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(194,811
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)
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(4,624,168
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)
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Derivative liabilities at December 31, 2019
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3,606,194
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2,535,359
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19,342
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6,160,895
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Addition to liability for new issuances
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197,266
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-
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3,726,549
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3,923,815
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Elimination of liability on conversion to common shares
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(226,853
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)
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(234,855
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)
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-
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|
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(461,708
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)
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Change in fair value
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(207,988
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)
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1,836,909
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30,168
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1,659,089
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Derivative liabilities at December 31, 2020
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$
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3,368,619
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|
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$
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4,137,413
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|
|
$
|
3,776,059
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$
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11,282,091
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Revenue Recognition
We account for revenues in accordance with Accounting Standards Update No. 2014-09, “Revenue from Contracts with Customers” (Topic 606). Elli Lab Corp. operating revenues included in loss from discontinued operations for the year ended December 31, 2019 were derived primarily from the sale of monthly and annual tech support subscriptions and partnership fees, and from software applications that customers purchase via EllisLab Corp.’s online store. Sales were processed using a real-time payment processing company. Revenue from product sales was recorded net of processing costs. Amounts collected from customers for support subscriptions and partnership fees with a contract life of one month or greater were recorded as deferred revenue and recognized over the life of the contract.
During the year ended December 31, 2020, the Company had no operating revenues.
Under Topic 606, revenue is recognized when control of the promised goods or services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services.
We determine revenue recognition through the following steps:
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identification of the contract, or contracts, with a customer;
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·
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identification of the performance obligations in the contract;
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·
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determination of the transaction price;
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·
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allocation of the transaction price to the performance obligations in the contract; and
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·
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recognition of revenue when, or as, we satisfy a performance obligation.
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Concentrations of Credit Risk and Major Customers
EllisLab Corp. customers were the end-consumers that purchased its products from EllisLab Corp.’s online store. Therefore, the Company does not have any individual customers that represent any more than a fraction of its revenue.
Income (Loss) per Share
Basic net income or loss per common share is computed by dividing net income or loss by the weighted average number of common shares outstanding. Diluted net income or loss per common share is computed by dividing net income or loss by the sum of the weighted average number of common shares outstanding and the dilutive potential common share equivalents then outstanding. Potential dilutive common share equivalents consist of shares issuable upon the exercise of outstanding stock options to acquire common stock, using the treasury stock method and the average market price per share during the period, and shares issuable upon exercise of convertible notes payable and convertible preferred stock.
Basic weighted average number common shares outstanding are reconciled to diluted weighted average number of common shares outstanding as follows:
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Years Ended
December 31,
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2020
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2019
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Basic weighted average number of shares
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63,539,624
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409,956
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Dilutive effect of:
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Series B preferred stock
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-
|
|
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23,933,334
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|
Convertible notes payable
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|
-
|
|
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|
140,194,454
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|
|
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Diluted weighted average number of shares
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63,539,624
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|
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164,537,744
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Operating Lease
On September 5, 2017, we entered into an operating sublease for office space. The base rent for the sublease is $1,000 per month for a period of one year and month-to-month thereafter.
On January 1, 2019, we adopted FASB ASC 842, “Leases.” ASC 842 requires recognition of assets and liabilities for the rights and obligations created by leases and new disclosures about leases. We adopted ASC 842 using the optional modified retrospective transition method. Under this transition method, we did not recast the prior period financial statements presented.
The adoption of ASC 842 resulted in the measurement and recognition of an operating lease liability and corresponding right-of use asset (included in other assets) in the amount of $18,352 as of January 1, 2019. The operating lease liability was measured as the present value of assumed remaining lease payments using an estimated incremental borrowing rate. We amortized the right-of-use asset over the assumed term of the lease, with the right-of-use asset fully amortized at December 31, 2020.
Income Taxes
We account for income taxes using the asset and liability method. Under the asset and liability method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.
Research and Development
Research and development costs are expensed as incurred. We incurred no research and development costs for the years ended December 31, 2020 and 2019.
Advertising Costs
We expense the cost of advertising and promotional materials when incurred. We incurred no material advertising costs for the years ended December 31, 2020 and 2019.
Stock-Based Compensation
Stock-based compensation is measured at the grant date based on the value of the award granted using either the Black-Scholes option pricing model or a multinomial lattice model based on projections of various potential future outcomes and recognized over the period in which the award vests. For stock awards no longer expected to vest, any previously recognized stock compensation expense is reversed in the period of termination. The stock-based compensation expense is included in general and administrative expenses.
Comprehensive Loss
Comprehensive loss is the same as net loss for all years presented.
Reclassifications
Certain amounts in the prior years have been reclassified to conform to the current year presentation.
Recently Issued Accounting Pronouncements
Although there are several new accounting pronouncements issued or proposed by the FASB, which the Company has adopted or will adopt, as applicable, the Company does not believe any of these accounting pronouncements has had or will have a material impact on its financial position or results of operations.
NOTE 3 – DISCONTINUED OPERATIONS
On November 30, 2018, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with the EllisLab, Inc., Rick Ellis (“Ellis”), and EllisLab Corp., a newly formed Nevada corporation and wholly owned subsidiary of the Company, pursuant to which EllisLab, Inc. merged with and into EllisLab Corp. (the “Merger”). Pursuant to the terms of the Merger Agreement, Ellis received 36,000 shares of the Company’s newly designated Series C Convertible Preferred Stock, with a stated value of $100 per share, in exchange for the cancellation of all common shares of EllisLab, Inc. owned by Ellis, which shares represented 100% of the issued and outstanding capital stock of EllisLab, Inc. The separate legal existence of EllisLab, Inc. ceased, and EllisLab Corp. became the surviving company. The acquisition of EllisLab, Inc. in the Merger has been accounted for as a purchase, and the accounts of EllisLab Corp. were consolidated with those of the Company as of December 1, 2018.
On September 30, 2019, the Company, entered into an Agreement for the Purchase and Sale of Capital Stock of EllisLab Corp. (the “EllisLab Corp. Sale Agreement”) with Ellis to sell to Ellis all of the issued and outstanding shares of EllisLab Corp. for $10,000 and the 36,000 shares of the Company’s Series C Convertible Preferred Stock owned by him, which represents all of the issued and outstanding shares of the Series C Convertible Preferred Stock. Pursuant to the Ellis Lab Corp. Sale Agreement, the Company effectively divested itself of the Ellis Lab business and discontinued it. Consequently, the revenues and expenses for EllisLab Corp. are reported as “Loss from discontinued operations, net of income taxes” in our statement of operations for the year ended December 31, 2019.
From December 1, 2018 through September 30, 2019, we provided operating advances to EllisLab Corp. totaling $356,851. Pursuant to the sale of EllisLab Corp. on September 30, 2019, we agreed to forgive these operating advances and $356,851 was recorded as a bad debt expense in our statement of operations for the year ended December 31, 2019.
NOTE 4 – PROPERTY AND EQUIPMENT
Property and equipment consisted of the following at December 31:
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2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
Computer equipment
|
|
$
|
12,303
|
|
|
$
|
12,303
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|
Office furniture and equipment
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|
1,459
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|
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1,459
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Total
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13,762
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|
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13,762
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Less accumulated depreciation
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(13,762
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)
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(13,167
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)
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|
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|
|
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Net
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$
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-
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$
|
595
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|
Depreciation expense was $595 and $522 for the years ended December 31, 2020 and 2019, respectively.
5. CONVERTIBLE NOTES PAYABLE
Convertible Promissory Note of $29,500 in Default
On March 14, 2013, we entered into an agreement to issue a 5% convertible promissory note in the principal amount of $29,500, which is convertible into shares of our common stock at a conversion price equal to the lesser of $1.50 per share or the closing price per share of common stock recorded on the trading day immediately preceding the date of conversion. The note, with a principal balance of $29,500 at December 31, 2020 and 2019, matured on March 14, 2015, and is currently in default.
Convertible Promissory Notes – Related Parties of $58,600
On December 31, 2012, we issued 5% convertible promissory notes to two employees in exchange for services rendered in the aggregate amount of $58,600. The notes are convertible into shares of our common stock at a conversion price equal to the lesser of $2.00 per share or the closing price per share of common stock recorded on the trading day immediately preceding the date of conversion. We recorded a total debt discount of $57,050 related to the conversion feature of the notes, which has been fully amortized to interest expense, along with a derivative liability at inception. One of the notes with a principal balance of $25,980 at December 31, 2020 and 2019, matured on December 31, 2014 and is currently in default. The maturity date of a second note with a principal balance of $32,620 at December 31, 2020 and 2019 has been extended to December 31, 2021.
March 2016 Convertible Promissory Note – $1,000,000
On March 4, 2016, we entered into an agreement to issue a 10% convertible promissory note in the aggregate principal amount of up to $1,000,000 (the “March 2016 $1,000,000 CPN”). The lender may advance the Company consideration for the note in such amounts as the lender may choose in its sole discretion. The note is convertible into shares of our common stock at a price per share equal to the lesser of: $0.03; 50% of the lowest trade price of our common stock subsequent to the effective date of the note; or the lowest effective price per share granted to any person or entity (exclusive of our officers and directors) to acquire common stock subsequent to the effective date of the note. The note initially matured, with respect to each advance, one year from the effective date of each advance. Subsequently, the lender extended the maturity date to February 10, 2026.
On March 14, 2016, we received proceeds of $27,000 pursuant to the March 2016 $1,000,000 CPN. We recorded a debt discount of $27,000 related to the conversion feature of the note, along with a derivative liability at inception. The debt discount has been fully amortized to interest expense. During the year ended December 31, 2019, we issued the lender a total of 94,313 shares of our common stock in consideration for the conversion of principal of $14,225 and accrued interest of $4,684. During the year ended December 31, 2019, we issued the lender a total of 4,389,590 shares of our common stock in consideration for the conversion of principal of $5,445 and accrued interest of $2,213, extinguishing the debt in full.
On March 17, 2016, we received proceeds of $33,000 pursuant to the March 2016 $1,000,000 CPN. We recorded a debt discount of $33,000 related to the conversion feature of the note, along with a derivative liability at inception. The debt discount has been fully amortized to interest expense. During the year ended December 31, 2019, we issued the lender a total of 15,413,432 shares of our common stock in consideration for the conversion of principal of $18,549 and accrued interest of $8,341, resulting in a principal balance of $14,451 as of December 31, 2020.
On April 11, 2016, we received proceeds of $90,000 pursuant to the March 2016 $1,000,000 CPN. We recorded a debt discount of $90,000 related to the conversion feature of the note, along with a derivative liability at inception. The debt discount has been fully amortized to interest expense.
On May 20, 2016, we received proceeds of $60,000 pursuant to the March 2016 $1,000,000 CPN. We recorded a debt discount of $60,000 related to the conversion feature of the note, along with a derivative liability at inception. The debt discount has been fully amortized to interest expense.
On June 22, 2016, we received proceeds of $50,000 pursuant to the March 2016 $1,000,000 CPN. We recorded a debt discount of $50,000 related to the conversion feature of the note, along with a derivative liability at inception. The debt discount has been fully amortized to interest expense.
On July 6, 2016, we received proceeds of $87,000 pursuant to the March 2016 $1,000,000 CPN. We recorded a debt discount of $87,000 related to the conversion feature of the note, along with a derivative liability at inception. The debt discount has been fully amortized to interest expense.
On August 8, 2016, we received proceeds of $60,000 pursuant to the March 2016 $1,000,000 CPN. We recorded a debt discount of $60,000 related to the conversion feature of the note, along with a derivative liability at inception. The debt discount has been fully amortized to interest expense.
On September 13, 2016, we received proceeds of $55,000 pursuant to the March 2016 $1,000,000 CPN. We recorded a debt discount of $55,000 related to the conversion feature of the note, along with a derivative liability at inception. The debt discount has been fully amortized to interest expense.
On October 17, 2016, we received proceeds of $55,000 pursuant to the March 2016 $1,000,000 CPN. We recorded a debt discount of $55,000 related to the conversion feature of the note, along with a derivative liability at inception. The debt discount has been fully amortized to interest expense.
On November 8, 2016, we received proceeds of $55,000 pursuant to the March 2016 $1,000,000 CPN. We recorded a debt discount of $55,000 related to the conversion feature of the note, along with a derivative liability at inception. The debt discount has been fully amortized to interest expense.
On December 6, 2016, we received proceeds of $60,000 pursuant to the March 2016 $1,000,000 CPN. We recorded a debt discount of $60,000 related to the conversion feature of the note, along with a derivative liability at inception. The debt discount has been fully amortized to interest expense.
On January 10, 2017, we received proceeds of $60,000 pursuant to the March 2016 $1,000,000 CPN. We recorded a debt discount of $60,000 related to the conversion feature of the note, along with a derivative liability at inception. The debt discount has been fully amortized to interest expense.
On February 13, 2017, we received proceeds of $60,000 pursuant to the March 2016 $1,000,000 CPN. We recorded a debt discount of $60,000 related to the conversion feature of the note, along with a derivative liability at inception. The debt discount has been fully amortized to interest expense.
On March 9, 2017, we received proceeds of $60,000 pursuant to the March 2016 $1,000,000 CPN. We recorded a debt discount of $60,000 related to the conversion feature of the note, along with a derivative liability at inception. The debt discount has been fully amortized to interest expense.
On April 12, 2017, we received proceeds of $95,000 pursuant to the March 2016 $1,000,000 CPN. We recorded a debt discount of $95,000 related to the conversion feature of the note, along with a derivative liability at inception. The debt discount has been fully amortized to interest expense.
On May 8, 2017, we received proceeds of $60,000 pursuant to the March 2016 $1,000,000 CPN. We recorded a debt discount of $60,000 related to the conversion feature of the note, along with a derivative liability at inception. The debt discount has been fully amortized to interest expense.
June 2017 Convertible Promissory Note – $500,000
On June 2, 2017, we entered into an agreement to issue a 10% convertible promissory note in the aggregate principal amount of up to $500,000 (the “June 2017 $500,000 CPN”). The lender may advance the Company consideration for the note in such amounts as the lender may choose in its sole discretion. The note is convertible into shares of our common stock at a price per share equal to the lesser of: $0.03; 50% of the lowest trade price of our common stock subsequent to the effective date of the note; or the lowest effective price per share granted to any person or entity (exclusive of our officers and directors) to acquire common stock subsequent to the effective date of the note. The note initially matured, with respect to each advance, one year from the effective date of each advance. Subsequently, the lender extended the maturity date to February 9, 2026.
On June 2, 2017, we received proceeds of $60,000 pursuant to the June 2017 $500,000 CPN. We recorded a debt discount of $60,000 related to the conversion feature of the note, along with a derivative liability at inception. The debt discount has been fully amortized to interest expense.
On July 10, 2017, we received proceeds of $80,000 pursuant to the June 2017 $500,000 CPN. We recorded a debt discount of $80,000 related to the conversion feature of the note, along with a derivative liability at inception. The debt discount has been fully amortized to interest expense.
On August 11, 2017, we received proceeds of $80,000 pursuant to the June 2017 $500,000 CPN. We recorded a debt discount of $80,000 related to the conversion feature of the note, along with a derivative liability at inception. The debt discount has been fully amortized to interest expense.
On September 12, 2017, we received proceeds of $85,000 pursuant to the June 2017 $500,000 CPN. We recorded a debt discount of $85,000 related to the conversion feature of the note, along with a derivative liability at inception. The debt discount has been fully amortized to interest expense.
On October 13, 2017, we received proceeds of $80,000 pursuant to the June 2017 $500,000 CPN. We recorded a debt discount of $80,000 related to the conversion feature of the note, along with a derivative liability at inception. The debt discount has been fully amortized to interest expense.
On November 8, 2017, we received proceeds of $75,000 pursuant to the June 2017 $500,000 CPN. We recorded a debt discount of $75,000 related to the conversion feature of the note, along with a derivative liability at inception. The debt discount has been fully amortized to interest expense.
December 2017 Convertible Promissory Note – $500,000
On December 14, 2017, we entered into an agreement to issue a 10% convertible promissory note in the aggregate principal amount of up to $500,000 (the “December 2017 $500,000 CPN”). The lender may advance the Company consideration for the note in such amounts as the lender may choose in its sole discretion. The note is convertible into shares of our common stock at a price per share equal to the lesser of: $0.03; 50% of the lowest trade price of our common stock subsequent to the effective date of the note; or the lowest effective price per share granted to any person or entity (exclusive of our officers and directors) to acquire common stock subsequent to the effective date of the note. The note initially matured, with respect to each advance, one year from the effective date of each advance. Subsequently, the lender extended the maturity date to February 9, 2026.
On December 14, 2017, we received proceeds of $60,000 pursuant to the December 2017 $500,000 CPN. We recorded a debt discount of $60,000 related to the conversion feature of the note, along with a derivative liability at inception. The debt discount has been fully amortized to interest expense.
On January 11, 2018, we received proceeds of $70,000 pursuant to the December 2017 $500,000 CPN. We recorded a debt discount of $70,000 related to the conversion feature of the note, along with a derivative liability at inception. During the year ended December 31, 2019, amortization of debt discount was recorded to interest expense in the amount of $2,110 and the debt discount has been fully amortized.
On February 7, 2018, we received proceeds of $60,000 pursuant to the December 2017 $500,000 CPN. We recorded a debt discount of $60,000 related to the conversion feature of the note, along with a derivative liability at inception. During the year ended December 31, 2019, amortization of debt discount was recorded to interest expense in the amount of $6,247 and the debt discount has been fully amortized.
On March 8, 2018, we received proceeds of $55,000 pursuant to the December 2017 $500,000 CPN. We recorded a debt discount of $55,000 related to the conversion feature of the note, along with a derivative liability at inception. During the year ended December 31, 2019, amortization of debt discount was recorded to interest expense in the amount of $10,096 and the debt discount has been fully amortized.
On March 14, 2018, we received proceeds of $6,500 pursuant to the December 2017 $500,000 CPN. We recorded a debt discount of $6,500 related to the conversion feature of the note, along with a derivative liability at inception. During the year ended December 31, 2019, amortization of debt discount was recorded to interest expense in the amount of $1,300 and the debt discount has been fully amortized.
On April 9, 2018, we received proceeds of $77,000 pursuant to the December 2017 $500,000 CPN. We recorded a debt discount of $77,000 related to the conversion feature of the note, along with a derivative liability at inception. During the year ended December 31, 2019, amortization of debt discount was recorded to interest expense in the amount of $20,885 and the debt discount has been fully amortized.
On May 7, 2018, we received proceeds of $60,000 pursuant to the December 2017 $500,000 CPN. We recorded a debt discount of $60,000 related to the conversion feature of the note, along with a derivative liability at inception. During the year ended December 31, 2019, amortization of debt discount was recorded to interest expense in the amount of $20,877 and the debt discount has been fully amortized.
On June 7, 2018, we received proceeds of $52,000 pursuant to the December 2017 $500,000 CPN. We recorded a debt discount of $52,000 related to the conversion feature of the note, along with a derivative liability at inception. During the year ended December 31, 2019, amortization of debt discount was recorded to interest expense in the amount of $22,510 and the debt discount has been fully amortized.
On July 10, 2018, we received proceeds of $35,000 pursuant to the December 2017 $500,000 CPN. We recorded a debt discount of $35,000 related to the conversion feature of the note, along with a derivative liability at inception. During the year ended December 31, 2019, amortization of debt discount was recorded to interest expense in the amount of $18,315 and the debt discount has been fully amortized.
On August 16, 2018, we received proceeds of $24,500 pursuant to the December 2017 $500,000 CPN. We recorded a debt discount of $24,500 related to the conversion feature of the note, along with a derivative liability at inception. During the year ended December 31, 2019, amortization of debt discount was recorded to interest expense in the amount of $15,304 and the debt discount has been fully amortized.
August 2018 Convertible Promissory Note – $500,000
On August 17, 2018, we entered into an agreement to issue a 10% convertible promissory note in the aggregate principal amount of up to $500,000 (the "August 2018 $500,000 CPN"). The lender may advance the Company consideration for the note in such amounts as the lender may choose in its sole discretion. The note is convertible into shares of our common stock at a price per share equal to the lesser of: $0.01; 50% of the lowest trade price of our common stock subsequent to the effective date of the note; or the lowest effective price per share granted to any person or entity (exclusive of our officers and directors) to acquire common stock subsequent to the effective date of the note. The note initially matured, with respect to each advance, one year from the effective date of each advance. Subsequently, the lender extended the maturity date to February 9, 2026.
On August 17, 2018, we received proceeds of $10,500 pursuant to the August 2018 $500,000 CPN. We recorded a debt discount of $10,500 related to the conversion feature of the note, along with a derivative liability at inception. During the year ended December 31, 2019, amortization of debt discount was recorded to interest expense in the amount of $6,588 and the debt discount has been fully amortized.
On September 13, 2018, we received proceeds of $30,000 pursuant to the August 2018 $500,000 CPN. We recorded a debt discount of $30,000 related to the conversion feature of the note, along with a derivative liability at inception. During the year ended December 31, 2019, amortization of debt discount was recorded to interest expense in the amount of $21,041 and the debt discount has been fully amortized.
On October 8, 2018, we received proceeds of $25,000 pursuant to the August 2018 $500,000 CPN. We recorded a debt discount of $25,000 related to the conversion feature of the note, along with a derivative liability at inception. During the years ended December 31, 2019 and 2018, amortization of debt discount was recorded to interest expense in the amount of $19,247 and $5,753, respectively and the debt discount has been fully amortized.
On October 26, 2018, we received proceeds of $12,000 pursuant to the August 2018 $500,000 CPN. We recorded a debt discount of $12,000 related to the conversion feature of the note, along with a derivative liability at inception. During the year ended December 31, 2019, amortization of debt discount was recorded to interest expense in the amount of $9,830 and the debt discount has been fully amortized.
On November 5, 2018, we received proceeds of $25,000 pursuant to the August 2018 $500,000 CPN. We recorded a debt discount of $25,000 related to the conversion feature of the note, along with a derivative liability at inception. During the years ended December 31, 2019 and 2018, amortization of debt discount was recorded to interest expense in the amount of $21,164 and $3,836, respectively and the debt discount has been fully amortized.
On November 28, 2018, we received proceeds of $30,000 pursuant to the August 2018 $500,000 CPN. We recorded a debt discount of $30,000 related to the conversion feature of the note, along with a derivative liability at inception. During the year ended December 31, 2019, amortization of debt discount was recorded to interest expense in the amount of $27,288 and the debt discount has been fully amortized.
On November 30, 2018, we received proceeds of $10,000 pursuant to the August 2018 $500,000 CPN. We recorded a debt discount of $10,000 related to the conversion feature of the note, along with a derivative liability at inception. During the year ended December 31, 2019, amortization of debt discount was recorded to interest expense in the amount of $9,151 and the debt discount has been fully amortized.
On December 24, 2018, we received proceeds of $50,000 pursuant to the August 2018 $500,000 CPN. We recorded a debt discount of $50,000 related to the conversion feature of the note, along with a derivative liability at inception. During the year ended December 31, 2019, amortization of debt discount was recorded to interest expense in the amount of $49,041 and the debt discount has been fully amortized.
On January 17, 2019, we received proceeds of $25,000 pursuant to the August 2018 $500,000 CPN. We recorded a debt discount of $25,000 related to the conversion feature of the note, along with a derivative liability at inception. During the year ended December 31, 2020 and 2019, amortization of debt discount was recorded to interest expense in the amount of $23,836 and $1,164, respectively, and the debt discount has been fully amortized.
On February 25, 2019, we received proceeds of $25,000 pursuant to the August 2018 $500,000 CPN. We recorded a debt discount of $25,000 related to the conversion feature of the note, along with a derivative liability at inception. During the years ended December 31, 2020 and 2019, amortization of debt discount was recorded to interest expense in the amount of $21,164 and $3,836, respectively, and the debt discount has been fully amortized.
On March 22, 2019, we received proceeds of $25,000 pursuant to the August 2018 $500,000 CPN. We recorded a debt discount of $25,000 related to the conversion feature of the note, along with a derivative liability at inception. During the years ended December 31, 2020 and 2019, amortization of debt discount was recorded to interest expense in the amount of $19,399 and 5,601, respectively, and the debt discount has been fully amortized.
On March 26, 2019, we received proceeds of $15,000 pursuant to the August 2018 $500,000 CPN. We recorded a debt discount of $15,000 related to the conversion feature of the note, along with a derivative liability at inception. During the years ended December 31, 2020 and 2019, amortization of debt discount was recorded to interest expense in the amount of $11,475 and 3,525, respectively, and the debt discount has been fully amortized.
On April 11, 2019, we received proceeds of $15,000 pursuant to the August 2018 $500,000 CPN. We recorded a debt discount of $15,000 related to the conversion feature of the note, along with a derivative liability at inception. During the years ended December 31, 2020 and 2019, amortization of debt discount was recorded to interest expense in the amount of $10,820 and $4,180, respectively, and the debt discount has been fully amortized.
On April 19, 2019, we received proceeds of $65,000 pursuant to the August 2018 $500,000 CPN. We recorded a debt discount of $65,000 related to the conversion feature of the note, along with a derivative liability at inception. During the years ended December 31, 2020 and 2019, amortization of debt discount was recorded to interest expense in the amount of $45,464 and $19,536, respectively, and the debt discount has been fully amortized.
On June 28, 2019, we received proceeds of $30,000 pursuant to the August 2018 $500,000 CPN. We recorded a debt discount of $30,000 related to the conversion feature of the note, along with a derivative liability at inception. During the years ended December 31, 2020 and 2019, amortization of debt discount was recorded to interest expense in the amount of $15,246 and $14,754, respectively, and the debt discount has been fully amortized.
On July 29, 2019, we received proceeds of $40,000 pursuant to the August 2018 $500,000 CPN. We recorded a debt discount of $40,000 related to the conversion feature of the note, along with a derivative liability at inception. During the years ended December 31, 2020 and 2019, amortization of debt discount was recorded to interest expense in the amount of $16,940 and $23,060, respectively, and the debt discount has been fully amortized.
On September 27, 2019, we received proceeds of $33,000 pursuant to the August 2018 $500,000 CPN. We recorded a debt discount of $33,000 related to the conversion feature of the note, along with a derivative liability at inception. During the years ended December 31, 2020 and 2019, amortization of debt discount was recorded to interest expense in the amount of $8,566 and $24,434, respectively, and the debt discount has been fully amortized.
On October 8, 2019, we received proceeds of $25,000 pursuant to the August 2018 $500,000 CPN. We recorded a debt discount of $25,000 related to the conversion feature of the note, along with a derivative liability at inception. During the years ended December 31, 2020 and 2019, amortization of debt discount was recorded to interest expense in the amount of $5,738 and $19,262, respectively, and the debt discount has been fully amortized.
October 2019 Convertible Promissory Note – $500,000
On October 31, 2019, we entered into an agreement to issue a 10% convertible promissory note in the aggregate principal amount of up to $500,000 (the “October 2019 $500,000 CPN”). The lender may advance the Company consideration for the note in such amounts as the lender may choose in its sole discretion. The note is convertible into shares of our common stock at a price per share equal to the lesser of: $0.01; 50% of the lowest trade price of our common stock subsequent to the effective date of the note; or the lowest effective price per share granted to any person or entity (exclusive of our officers and directors) to acquire common stock subsequent to the effective date of the note. The note initially matured, with respect to each advance, one year from the effective date of each advance. Subsequently, the lender extended the maturity date to February 9, 2026.
On October 31, 2019, we received proceeds of $25,000 pursuant to the October 2019 $500,000 CPN. We recorded a debt discount of $25,000 related to the conversion feature of the note, along with a derivative liability at inception. During the years ended December 31, 2020 and 2019, amortization of debt discount was recorded to interest expense in the amount of $4,167 and $20,833, respectively, and the debt discount has been fully amortized.
On November 12, 2019, we received proceeds of $25,000 pursuant to the October 2019 $500,000 CPN. We recorded a debt discount of $25,000 related to the conversion feature of the note, along with a derivative liability at inception. During the years ended December 31, 2020 and 2019, amortization of debt discount was recorded to interest expense in the amount of $3,347 and $21,653, respectively, and the debt discount has been fully amortized..
On December 19, 2019, we received proceeds of $25,000 pursuant to the October 2019 $500,000 CPN. We recorded a debt discount of $25,000 related to the conversion feature of the note, along with a derivative liability at inception. During the years ended December 31, 2020 and 2019, amortization of debt discount was recorded to interest expense in the amount of $820 and $24,180, respectively, and the debt discount has been fully amortized.
January 25, 2019 Convertible Promissory Note – $38,000
Effective January 25, 2019, the Company entered into an agreement to issue a 10% convertible note with an institutional investor in the principal amount of $38,000 with a maturity date of January 25, 2020. The Company received proceeds of $35,000 after an original issue discount of $1,500 and payment of $1,500 in legal fees. The lender, at its option, may convert the unpaid principal balance of, and accrued interest on, the note into shares of the Company’s common stock at a 39% discount from the lowest trading price during the 15 days prior to conversion. The Company may prepay the note during the 180 days from the issuance of the note at redemption premiums ranging from 25% to 45%. After the expiration of 180 days after issuance, the Company has no right of prepayment. We recorded a debt discount of $38,000 related to the conversion feature of the note, along with a derivative liability at inception. During the years ended December 31, 2020 and 2019, amortization of debt discount was recorded to interest expense in the amount of $36,585 and $1,415, respectively, and the debt discount has been fully amortized. During the year ended December 31, 2019, we issued the lender a total of 115,556 shares of our common stock in consideration for the conversion of principal of $15,622 and fees of $1,000. During the year ended December 31, 2020, we issued the lender a total of 12,855,132 shares of our common stock in consideration for the conversion of principal of $22,378, accrued interest of $3,800 and fees of $2,000, extinguishing the debt in full.
May 23, 2019 Convertible Promissory Note – $33,000
Effective May 23, 2019, the Company entered into an agreement to issue a 10% convertible note with an institutional investor in the principal amount of $33,000 with a maturity date of May 23, 2020. The Company received proceeds of $30,000 after an original issue discount of $1,750 and payment of $1,250 in legal fees. The lender, at its option, may convert the unpaid principal balance of, and accrued interest on, the note into shares of the Company’s common stock at a 39% discount from the lowest trading price during the 15 days prior to conversion. The Company may prepay the note during the 180 days from the issuance of the note at redemption premiums ranging from 25% to 45%. After the expiration of 180 days after issuance, the Company has no right of prepayment. We recorded a debt discount of $33,000 related to the conversion feature of the note, along with a derivative liability at inception. During the years ended December 31, 2020 and 2019, amortization of debt discount was recorded to interest expense in the amount of $20,016 and $12,984, respectively, and the debt discount has been fully amortized. During the year ended December 31, 2020, we issued the lender a total of 22,057,971 shares of our common stock in consideration for the conversion of principal of $33,000, accrued interest of $3,300 and fees of $1,750, extinguishing the debt in full.
May 24, 2019 Convertible Promissory Note – $33,000
Effective May 24, 2019, the Company entered into an agreement to issue a 10% convertible note with an institutional investor in the principal amount of $33,000 with a maturity date of May 24, 2020. The Company received proceeds of $30,000 after payment of $3,000 of the fees and expenses of the lender and its counsel. The lender, at its option after 180 days from the issuance of the note, may convert the unpaid principal balance of, and accrued interest on, the note into shares of the Company’s common stock at a 39% discount from the lowest trading price during the 15 days prior to conversion. The Company may prepay the note during the 180 days from the issuance of the note at redemption premiums ranging from 20% to 45%. After the expiration of 180 days after issuance, the Company has no right of prepayment. We recorded a debt discount of $33,000 related to the conversion feature of the note, along with a derivative liability at inception. During the years ended December 31, 2020 and 2019, amortization of debt discount was recorded to interest expense in the amount of $26,236 and 7,764, respectively, and the debt discount has been fully amortized. During the year ended December 31, 2019, we issued the lender a total of 209,718 shares of our common stock in consideration for the conversion of principal of $13,400. During the year ended December 31, 2020, we issued the lender a total of 6,720,530 shares of our common stock in consideration for the conversion of principal of $19,600 and accrued interest of $1,650, extinguishing the debt in full.
June 27, 2019 Convertible Promissory Note – $33,000
Effective June 27, 2019, the Company entered into an agreement to issue a 10% convertible note with an institutional investor in the principal amount of $33,000 with a maturity date of June 27, 2020. The Company received proceeds of $30,000 after payment of $3,000 of the fees and expenses of the lender and its counsel. The lender, at its option after 180 days from the issuance of the note, may convert the unpaid principal balance of, and accrued interest on, the note into shares of the Company’s common stock at a 39% discount from the lowest trading price during the 15 days prior to conversion. The Company may prepay the note during the 180 days from the issuance of the note at redemption premiums ranging from 20% to 45%. After the expiration of 180 days after issuance, the Company has no right of prepayment. We recorded a debt discount of $33,000 related to the conversion feature of the note, along with a derivative liability at inception. During the years ended December 31, 2020 and 2019, amortization of debt discount was recorded to interest expense in the amount of $16,861 and $16,139, and the debt discount has been fully amortized. During the year ended December 31, 2020, we issued the lender a total of 16,207,380 shares of our common stock in consideration for the conversion of principal of $33,000 and accrued interest of $1,650, extinguishing the debt in full.
August 13, 2019 Convertible Promissory Note – $33,000
Effective August 13, 2019, the Company entered into an agreement to issue a 10% convertible note with an institutional investor in the principal amount of $33,000 with a maturity date of August 13, 2020. The Company received proceeds of $30,000 after payment of $3,000 of the fees and expenses of the lender and its counsel. The lender, at its option after 180 days from the issuance of the note, may convert the unpaid principal balance of, and accrued interest on, the note into shares of the Company’s common stock at a 39% discount from the lowest trading price during the 15 days prior to conversion. The Company may prepay the note during the 180 days from the issuance of the note at redemption premiums ranging from 20% to 45%. After the expiration of 180 days after issuance, the Company has no right of prepayment. We recorded a debt discount of $33,000 related to the conversion feature of the note, along with a derivative liability at inception. During the years ended December 31, 2020 and 2019, amortization of debt discount was recorded to interest expense in the amount of $12,623 and $20,377, respectively, and the debt discount has been fully amortized. During the year ended December 31, 2020, we issued the lender a total of 16,747,584 shares of our common stock in consideration for the conversion of principal of $33,000 and accrued interest of $2,932, extinguishing the debt in full.
August 29, 2019 Convertible Promissory Note – $33,000
Effective August 29, 2019, the Company entered into an agreement to issue a 10% convertible note with an institutional investor in the principal amount of $25,000 with a maturity date of August 29, 2020. The Company received proceeds of $22,000 after an original issue discount of $1,500 and payment of $1,500 in legal fees. The lender, at its option, may convert the unpaid principal balance of, and accrued interest on, the note into shares of the Company’s common stock at a 39% discount from the lowest trading price during the 15 days prior to conversion. The Company may prepay the note during the 180 days from the issuance of the note at redemption premiums ranging from 25% to 45%. After the expiration of 180 days after issuance, the Company has no right of prepayment. We recorded a debt discount of $25,000 related to the conversion feature of the note, along with a derivative liability at inception. During the years ended December 31, 2020 and 2019, amortization of debt discount was recorded to interest expense in the amount of $11,180 and $13,820, respectively, During the year ended December 31, 2020, we issued the lender a total of 17,022,000 shares of our common stock in consideration for the conversion of principal of $24,605 and conversion fees of $7,000, resulting in a principal balance of $395 as of December 31, 2020.
March 16, 2020 Convertible Promissory Note – $38,000
Effective March 16, 2020, the Company entered into a 12% convertible note with an institutional investor in the principal amount of $38,000 with a maturity date of March 16, 2021. The Company received net proceeds of $35,000 after payment of $3,000 in legal fees and fees to the lender. The lender, at its option after 180 days from the issuance of the note, may convert the unpaid principal balance of, and accrued interest on, the note into shares of the Company’s common stock at a 45% discount from the lowest trading price during the 20 trading days prior to conversion. The Company may prepay the note during the 180 days from the issuance of the note at a redemption premium of 150%. After the expiration of 180 days after issuance, the Company has no right of prepayment. We recorded a debt discount of $18,766 related to the conversion feature of the note, along with a derivative liability at inception. During the year ended December 31, 2020, amortization of debt discount was recorded to interest expense in the amount of $18,766 and the debt discount has been fully amortized. During the year ended December 31, 2020, we issued the lender a total of 6,383,068 shares of our common stock in consideration for the conversion of principal of $38,000 and accrued interest of $2,280, extinguishing the debt in full.
June 22, 2020 Convertible Promissory Note – $28,000
Effective June 22, 2020, the Company entered into a 12% convertible note with an institutional investor in the principal amount of $28,000 with a maturity date of June 22, 2021. The Company received net proceeds of $25,000 after payment of $3,000 in legal fees and fees to the lender. The lender, at its option after 180 days from the issuance of the note, may convert the unpaid principal balance of, and accrued interest on, the note into shares of the Company’s common stock at a 45% discount from the lowest trading price during the 20 trading days prior to conversion. The Company may prepay the note during the 180 days from the issuance of the note at a redemption premium of 150%. After the expiration of 180 days after issuance, the Company has no right of prepayment. We recorded a debt discount of $28,000 related to the conversion feature of the note, along with a derivative liability at inception. During the year ended December 31, 2020, amortization of debt discount was recorded to interest expense in the amount of $28,000 and the debt discount has been fully amortized. During the year ended December 31, 2020, we issued the lender a total of 4,711,111 shares of our common stock in consideration for the conversion of principal of $28,000 and accrued interest of $1,680, extinguishing the debt in full.
July 7, 2020 Convertible Promissory Note – $33,000
Effective July 7, 2020, the Company entered into a 12% convertible note with an institutional investor in the principal amount of $33,000 with a maturity date of July 7, 2021. The Company received net proceeds of $30,000 after payment of $3,000 in legal fees and fees to the lender. The lender, at its option after 180 days from the issuance of the note, may convert the unpaid principal balance of, and accrued interest on, the note into shares of the Company’s common stock at a 45% discount from the lowest trading price during the 20 trading days prior to conversion. The Company may prepay the note during the 180 days from the issuance of the note at a redemption premium of 150%. After the expiration of 180 days after issuance, the Company has no right of prepayment. We recorded a debt discount of $33,000 related to the conversion feature of the note, along with a derivative liability at inception. During the year ended December 31, 2020, amortization of debt discount was recorded to interest expense in the amount of $13,578, resulting in a remaining debt discount of $19,422 as of December 31, 2020. The note had a principal balance of $33,000 as of December 31, 2020.
July 8, 2020 Convertible Promissory Note – $40,000
Effective July 8, 2020, the Company entered into an agreement to issue a 10% convertible note with an institutional investor in the principal amount of $40,000 with a maturity date of July 8, 2021 and the Company has no right of prepayment. The Company received proceeds of $35,000 after an original issue discount of $2,200 and payment of $2,800 in legal fees. The lender, at its option, may convert the unpaid principal balance of, and accrued interest on, the note into shares of the Company’s common stock at a 50% discount from the lowest trading price during the 25 days prior to conversion. After the expiration of 180 days after issuance, the Company has no right of prepayment. We recorded a debt discount of $40,000 related to the conversion feature of the note, along with a derivative liability at inception. During the year ended December 31, 2020, amortization of debt discount was recorded to interest expense in the amount of $15,869, resulting in a remaining debt discount of $24,131 as of December 31, 2020. The note had a principal balance of $40,000 as of December 31, 2020.
August 18, 2020 Convertible Promissory Note – $33,000
Effective August 18, 2020, the Company entered into a 12% convertible note with an institutional investor in the principal amount of $33,000 with a maturity date of August 18, 2021. The Company received net proceeds of $30,000 after payment of $3,000 in legal fees and fees to the lender. The lender, at its option after 180 days from the issuance of the note, may convert the unpaid principal balance of, and accrued interest on, the note into shares of the Company’s common stock at a 45% discount from the lowest trading price during the 20 trading days prior to conversion. The Company may prepay the note during the 180 days from the issuance of the note at a redemption premium of 150%. After the expiration of 180 days after issuance, the Company has no right of prepayment. We recorded a debt discount of $33,000 related to the conversion feature of the note, along with a derivative liability at inception. During the year ended December 31, 2020, amortization of debt discount was recorded to interest expense in the amount of $12,205, resulting in a remaining debt discount of $20,795 as of December 31, 2020. The note had a principal balance of $33,000 as of December 31, 2020.
October 1, 2020 Convertible Promissory Note – $33,000
Effective October 1, 2020, the Company entered into a 12% convertible note with an institutional investor in the principal amount of $33,000 with a maturity date of October 1, 2021. The Company received net proceeds of $30,000 after payment of $3,000 in legal fees and fees to the lender. The lender, at its option after 180 days from the issuance of the note, may convert the unpaid principal balance of, and accrued interest on, the note into shares of the Company’s common stock at a 45% discount from the lowest trading price during the 20 trading days prior to conversion. The Company may prepay the note during the 180 days from the issuance of the note at a redemption premium of 150%. After the expiration of 180 days after issuance, the Company has no right of prepayment. We recorded a debt discount of $33,000 related to the conversion feature of the note, along with a derivative liability at inception. During the year ended December 31, 2020, amortization of debt discount was recorded to interest expense in the amount of $8,227, resulting in a remaining debt discount of $24,773 as of December 31, 2020. The note had a principal balance of $33,000 as of December 31, 2020.
November 9, 2020 Convertible Promissory Note – $33,000
Effective November 9, 2020, the Company entered into a 12% convertible note with an institutional investor in the principal amount of $35,000 with a maturity date of October 1, 2021. The Company received net proceeds of $31,500 after payment of $3,500 in legal fees and fees to the lender. The lender, at its option after 180 days from the issuance of the note, may convert the unpaid principal balance of, and accrued interest on, the note into shares of the Company’s common stock at a 45% discount from the lowest trading price during the 20 trading days prior to conversion. The Company may prepay the note during the 180 days from the issuance of the note at a redemption premium of 150%. After the expiration of 180 days after issuance, the Company has no right of prepayment. We recorded a debt discount of $35,000 related to the conversion feature of the note, along with a derivative liability at inception. During the year ended December 31, 2020, amortization of debt discount was recorded to interest expense in the amount of $4,701, resulting in a remaining debt discount of $30,299 as of December 31, 2020. The note had a principal balance of $35,000 as of December 31, 2020.
November 23, 2018 Convertible Promissory Note – $33,000
Effective November 23, 2018, the Company entered into an agreement to issue a 10% convertible note with an institutional investor in the principal amount of $33,000 with a maturity date of November 23, 2019. The Company received proceeds of $30,000 after payment of $3,000 of the fees and expenses of the lender and its counsel. The lender, at its option after 180 days from the issuance of the note, had the option to convert the unpaid principal balance of, and accrued interest on, the note into shares of the Company’s common stock at a 39% discount from the lowest trading price during the 15 days prior to conversion. The Company had the option to prepay the note during the 180 days from the issuance of the note at redemption premiums ranging from 20% to 45%. After the expiration of 180 days after issuance, the Company had no right of prepayment. We recorded a debt discount of $33,000 related to the conversion feature of the note, along with a derivative liability at inception. During the years ended December 31, 2019 and 2018, amortization of debt discount was recorded to interest expense in the amount of $29,564 and $3,436, respectively and the debt discount has been fully amortized. During the year ended December 31, 2019, we issued the lender a total of 47,512 shares of our common stock in consideration for the conversion of principal of $33,000 and accrued interest of $1,650, extinguishing the note in full.
December 5, 2018 Convertible Promissory Note – $33,000
Effective December 5, 2018, the Company entered into an agreement to issue a 10% convertible note with an institutional investor in the principal amount of $33,000 with a maturity date of December 5, 2019. The Company received proceeds of $30,000 after payment of $3,000 of the fees and expenses of the lender and its counsel. The lender, at its option after 180 days from the issuance of the note, had the option to convert the unpaid principal balance of, and accrued interest on, the note into shares of the Company’s common stock at a 39% discount from the lowest trading price during the 15 days prior to conversion. The Company had the option to prepay the note during the 180 days from the issuance of the note at redemption premiums ranging from 20% to 45%. After the expiration of 180 days after issuance, the Company had no right of prepayment. We recorded a debt discount of $33,000 related to the conversion feature of the note, along with a derivative liability at inception. During the years ended December 31, 2019 and 2018, amortization of debt discount was recorded to interest expense in the amount of $30,649 and $2,351, respectively, and the debt discount has been fully amortized. During the year ended December 31, 2019, we issued the lender a total of 76,090 shares of our common stock in consideration for the conversion of principal of $33,000 and accrued interest of $1,650, extinguishing the note in full.
February 13, 2019 Convertible Promissory Note – $38,000
Effective February 13, 2019, the Company entered into an agreement to issue a 10% convertible note with an institutional investor in the principal amount of $38,000 with a maturity date of February 13, 2020. The Company received proceeds of $35,000 after payment of $3,000 of the fees and expenses of the lender and its counsel. The lender, at its option after 180 days from the issuance of the note, had the option to convert the unpaid principal balance of, and accrued interest on, the note into shares of the Company’s common stock at a 39% discount from the lowest trading price during the 15 days prior to conversion. The Company had the option to prepay the note during the 180 days from the issuance of the note at redemption premiums ranging from 20% to 45%. After the expiration of 180 days after issuance, the Company had no right of prepayment. We recorded a debt discount of $38,000 related to the conversion feature of the note, along with a derivative liability at inception. During the year ended December 31, 2019, amortization of debt discount was recorded to interest expense in the amount of $38,000, and the debt discount has been fully amortized. During the year ended December 31, 2019, we issued the lender a total of 120,318 shares of our common stock in consideration for the conversion of principal of $38,000 and accrued interest of $1,900, extinguishing the note in full.
March 25, 2019 Convertible Promissory Note – $35,000
Effective March 25, 2019, the Company entered into an agreement to issue a 10% convertible note with an institutional investor in the principal amount of $35,000 with a maturity date of March 25, 2020. The Company received proceeds of $32,000 after payment of $3,000 of the fees and expenses of the lender and its counsel. The lender, at its option after 180 days from the issuance of the note, had the option to convert the unpaid principal balance of, and accrued interest on, the note into shares of the Company’s common stock at a 39% discount from the lowest trading price during the 15 days prior to conversion. The Company had the option to prepay the note during the 180 days from the issuance of the note at redemption premiums ranging from 20% to 45%. After the expiration of 180 days after issuance, the Company had no right of prepayment. We recorded a debt discount of $35,000 related to the conversion feature of the note, along with a derivative liability at inception. During the year ended December 31, 2019, amortization of debt discount was recorded to interest expense in the amount of $35,000, and the debt discount has been fully amortized. During the year ended December 31, 2019, we issued the lender a total of 204,763 shares of our common stock in consideration for the conversion of principal of $38,000 and accrued interest of $1,900, extinguishing the note in full.
Total accrued interest payable on notes payable was $820,584 and $581,610 as of December 31, 2020 and December 31, 2019, respectively.
For the conversions of debt to common stock described above, there was no gain or loss on settlement of debt due to the conversions occurring within the terms of the convertible notes.
6. PPP LOAN PAYABLE
A loan to the Company in the principal amount of $9,501 was approved under the terms and conditions of the Paycheck Protection Program of the United States Small Business Administration (“SBA”) and the CARES Act (2020) (H.R. 748) (15 U.S.C. 636 et seq.) (the “Act”) and was funded in May 2020. The loan may be forgiven pursuant to the provisions of the Act.
7. CAPITAL STOCK
At December 31, 2020, the Company’s authorized stock consisted of 2,000,000,000 shares of common stock, with a par value of $0.001 per share. The Company is also authorized to issue 20,000,000 shares of preferred stock, with a par value of $0.001 per share. The rights, preferences and privileges of the holders of the preferred stock will be determined by the Board of Directors prior to issuance of such shares.
Series B Preferred Stock
On March 2, 2016, the Company filed a Certificate of Designation for its Series B Preferred Stock (the “Series B Certificate”) with the Secretary of State of Nevada designating 30,000 shares of its authorized preferred stock as Series B Preferred Stock. The shares of Series B Preferred Stock have a par value of $0.001 per share.
The total face value of this entire series is three million dollars ($3,000,000). Each share of Series B Preferred Stock has a stated face value of One Hundred Dollars ($100) (“Share Value”) and is convertible into shares of fully paid and non-assessable shares of common stock of the Company.
As of December 31, 2020 and 2019, the Company had 15,055 and 16,155 shares of Series B Preferred Stock outstanding, respectively, with a face value of $1,505,500 and $1,615,500, respectively. These shares were issued in March 2016 for the redemption and cancellation of $1,615,362 of convertible promissory notes and $264,530 of accrued interest payable. Effective February 26, 2020, William Beifuss, Jr., the Company’s President, converted 1,100 shares of Series B Preferred Stock into 9,777,778 shares of the Company’s common stock. Mr. Beifuss previously acquired the Series B Preferred Stock from a lender in a private transaction.
The holders of outstanding shares of the Series B Preferred Stock (the “Series B Holders”) are entitled to receive dividends pari passu with the holders of common stock, except upon a liquidation, dissolution and winding up of the Company, in which case the Series B Preferred Stock has a preference. Such dividends will be paid equally to all outstanding shares of Series B Preferred Stock and common stock, on an as-if-converted basis with respect to the Series B Preferred Stock. The Series B Holders may elect to use the most favorable conversion price for the purpose of determining the as-if-converted number of shares.
In the event of any liquidation, dissolution or winding up of the Company, either voluntary or involuntary, the Series B Holder shall be entitled to receive, out of the assets of the Company available for distribution to its shareholders upon such liquidation, whether such assets are capital or surplus of any nature, an amount equal to one hundred dollars ($100) for each such share of the Series B Preferred Stock (as adjusted for any combinations, consolidations, stock distributions, stock splits or stock dividends with respect to such shares), plus all dividends, if any, declared and unpaid thereon as of the date of such distribution, before any payment is made or any assets distributed to the holders of common stock. After such payment, the remaining assets of the Company will be distributed to the holders of common stock.
If the assets to be distributed to the Series B Holders are insufficient to permit the receipt by such Holders of the full preferential amounts, then all of such assets will be distributed among such Holders ratably in accordance with the number of such shares then held by each such Holder.
The sale of all or substantially all of the Company’s assets, any consolidation or merger of the Company with or into any other entity or person, or any other corporate reorganization, in which the stockholders of the Company immediately prior to such consolidation, merger or reorganization, own less than fifty percent (50%) of the Company’s voting power immediately after such consolidation, merger or reorganization, or any transaction or series of related transactions to which the Company is a party in which in excess of fifty percent (50%) of the Company’s voting power is transferred, excluding any consolidation or merger effected exclusively to change the domicile of the Company, is deemed to be a liquidation, dissolution or winding up.
The Series B Preferred Stock is convertible into shares of common stock.
The Series B Holder has the right, at any time, at its election, to convert all or part of the Share Value into shares of common stock. The conversion price is the lesser of (1) Fifty Percent (50%) of the lowest trade price of common stock recorded on any trade day after December 12, 2012 or (2) the lowest effective price per share granted to any person or entity, including the Series B Holder but excluding officers and directors of the Company, to acquire common stock, or adjusted, whether by operation of purchase price adjustment, settlement agreements, exchange agreements, reset provision, floating conversion or otherwise, any outstanding warrant, option or other right to acquire common stock or outstanding common stock equivalents (the “Conversion Price”).
The conversion formula is as follows: The number of shares receivable upon conversion equals the Share Value divided by the Conversion Price. A conversion notice (the “Conversion Notice”) may be delivered to Company by any method of the Series B Holder’s choice (including but not limited to email, facsimile, mail, overnight courier, or personal delivery), and all conversions will be cashless and not require further payment from the Holder. If no objection is delivered from the Company to the Series B Holder, with respect to any variable or calculation reflected in the Conversion Notice, within 24 hours of delivery of the Conversion Notice, the Company will thereafter be deemed to have irrevocably confirmed and ratified such notice of conversion and waived any objection. The Company will deliver the shares of common stock from any conversion to the Series B Holder (in any name directed by the Series B Holder) within three (3) business days of Conversion Notice delivery. If the Company is participating in the Depository Trust Company (“DTC”) Fast Automated Securities Transfer (“FAST”) program, then upon request of the Holder and provided that the shares to be issued are eligible for transfer under Rule 144 of the Securities Act of 1933, as amended (the “Securities Act”), or are effectively registered under the Securities Act, the Company will cause its transfer agent to electronically issue the Common Stock issuable upon conversion to the Holder through the DTC Direct Registration System (“DRS”). If the Company is not participating in the DTC FAST program, then the Company agrees in good faith to apply and cause the approval for participation in the DTC FAST program.
The Conversion Price is subject to equitable adjustments for stock splits, stock dividends or rights offerings by the Company relating to the Company’s securities or the securities of any subsidiary of the Company, combinations, recapitalization, reclassifications, extraordinary distributions and similar events. No fractional shares of common stock shall be issuable upon the conversion of shares of the Series B Preferred Stock and the Company shall pay the cash equivalent of any fractional share upon such conversion.
If the Company fails to deliver shares in accordance with the required time frame, then for each conversion, a penalty of $1,500 per day will be assessed for each day after the third business day (inclusive of the day of the conversion) until share delivery is made. Such penalty may be converted into common stock at the Conversion Price or payable in cash, at the sole option of the Series B Holder (under the Holder’s and the Company’s expectations that any penalty amounts shall tack back to the original date of the issuance of Series B Preferred Stock, consistent with applicable securities laws).
In no event will the Series B Holder be entitled to convert any Series B Preferred Stock, such that upon conversion the sum of (1) the number of shares of common stock beneficially owned by the Holder and its affiliates (other than shares of Common Stock which may be deemed beneficially owned through the ownership of the unconverted portion of this Series B Preferred Stock or the unexercised or unconverted portion of any other security of the Company subject to a limitation on conversion or exercise analogous to these limitations), and (2) the number of shares of Common Stock issuable upon the conversion of Series B Preferred Stock, would result in beneficial ownership by the Holder and its affiliates of more than 4.99% of the outstanding shares of common stock. The limitations on conversion may be waived by the Holder upon, at the election of the Series B Holder, not less than 61 days prior notice to the Company, and the provisions of the conversion limitation shall continue to apply until such 61st day (or such later date, as determined by the Series B Holder, as may be specified in such notice of waiver).
Except as required by law, the Series B Holders are not entitled to vote, as a separate class or otherwise, on any matter presented to the stockholders of the Company for their action or consideration at any meeting of stockholders of the Company (or by written consent of stockholders in lieu of meeting). Each Holder of outstanding shares of Series B Preferred Stock will be entitled, on the same basis as holders of common stock, to receive notice of such action or meeting.
So long as any shares of the Series B Preferred Stock remain outstanding, the Company will not, without first obtaining the approval (by vote or written consent, as provided by law) of the holders of at least a majority of the then outstanding shares of Series B Preferred Stock voting together as one class: (a) alter or change the rights, preferences or privileges of the shares of the Series B Preferred Stock so as to affect materially and adversely such shares; or (b) create any new class of shares having preference over the Series B Preferred Stock.
The Series B Holder has the right, at its sole discretion, to elect a fixed conversion price for the Series B Preferred Stock. The Fixed Conversion Price may not be lower than the Conversion Price. The Company will not, by amendment of its Articles of Incorporation, bylaws or through any reorganization, transfer of assets, consolidation, merger, scheme of arrangement, dissolution, issue or sale of securities, or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of the Series B Certificate, and will at all times carry out all the provisions of the Series B Certificate.
Series C Preferred Stock
In November 2018, the Company filed a Certificate of Designation for its Series C Preferred Stock (the “Series C Certificate”) with the Secretary of State of Nevada designating 36,000 shares of its authorized preferred stock as Series C Preferred Stock. The shares of Series C Preferred Stock have a par value of $0.001 per share. The total face value of this entire series is three million six hundred thousand dollars ($3,600,000). Each share of Series C Preferred Stock has a stated face value of One Hundred Dollars ($100) (“Share Value”) and is convertible into shares of fully paid and non-assessable shares of common stock of the Company.
On November 30, 2018, the Company issued 36,000 shares of Series C Preferred Stock to the owner of the common stock of EllisLab, Inc. pursuant to an Agreement and Plan of Merger, which shares were surrendered and cancelled on September 30, 2019 pursuant to an Agreement for the Purchase and Sale of Capital Stock of EllisLab Corp. See Note 3.
The holders of outstanding shares of the Series C Preferred Stock (the “Series C Holders”) shall be entitled to receive dividends pari passu (on a pro rata basis) with the holders of Series B Preferred Stock and Common Stock, except upon a liquidation, dissolution and winding up of the Company. Such dividends shall be paid equally to all outstanding shares of Series C Preferred Stock, Series B Preferred Stock and common stock, on an as-if-converted basis with respect to the Series C Preferred Stock and Series B Preferred Stock.
In the event of any liquidation, dissolution or winding up of the Company, either voluntary or involuntary, the Holder of each outstanding share of the Series C Preferred Stock shall be entitled to receive, on a pro rata basis with the outstanding Series B Preferred Stock, out of the assets of the Company available for distribution to its shareholders upon such liquidation, whether such assets are capital or surplus of any nature, an amount equal to one hundred dollars ($100.00) for each such share of the Series C Preferred Stock (as adjusted for any combinations. consolidations, stock distributions, stock splits or stock dividends with respect to such shares), plus all dividends, if any, declared and unpaid thereon as of the date of such distribution, before any payment shall be made or any assets distributed to the holders of common stock, and, after such payment, the remaining assets of the Company shall be distributed to the holders of common stock.
Each share of Series C Preferred Stock is convertible into twenty thousand (20,000) shares of the Company’s fully paid and nonassessable shares of common stock, as adjusted. The Series C Preferred Stock have the respective rights, privileges and designations as are set forth in the Certificate of Designations, Preferences, Rights and Limitations of Series C Preferred Stock appended hereto as Exhibit 4.1. The Series C Preferred Stock contains a blocker that prevents the Holder from converting the Series C Preferred Stock if such exercise would result in beneficial ownership of more than 4.99% of the outstanding shares of the Company’s stock, without at least 61 days of prior notice. Under the Series C Preferred Stock, the Holder is also subject to the Rule 144 restrictions of an affiliate.
Except as required by law or as specifically provided in the Certificate of Designation, the Series C Holders shall not be entitled to vote, as a separate class or otherwise, on any matter presented to the stockholders of the Company for their action or consideration at any meeting of stockholders of the Company (or by written consent of stockholders in lieu of meeting); provided, however, that each Series C Holder shall be entitled, on the same basis as holders of Common Stock, to receive notice of such action or meeting.
Series D Preferred Stock
On November 27, 2019, the Company filed a Certificate of Designation for its Series D Preferred Stock (the “Series D Certificate”) with the Secretary of State of Nevada which designates 1,000 shares of the Company’s preferred stock par value $0.001 per share as Series D Preferred Stock. William E. Beifuss, Jr., the Company’s President and Chief Executive Officer, was issued 1,000 shares of Series D Preferred Stock valued at $15,000 by an independent valuation firm, which shares were outstanding as of December 31, 2019. The 1,000 shares of Series D preferred stock were automatically redeemed on January 11, 2020, 45 days after the effective date of the Series D Certificate.
Pursuant to the terms of the Designation, holders of Series D Preferred Stock shall not be entitled to dividends or a liquidation preference and shall have no conversion rights. For so long as any shares of the Series D Preferred Stock remain issued and outstanding, the holders thereof, voting separately as a class, shall have the right to vote in an amount equal to fifty-one percent (51%) of the total voting power of the Company’s shareholders. Such vote shall be determined by the holder(s) of a majority of the then issued and outstanding shares of Series D Preferred Stock.
The shares of the Series D Preferred Stock shall be automatically, and without any required action by the Company or the holders thereof, redeemed by the Company at their par value on the first to occur of the following triggering events: (i) a date forty-five (45) days as after the Effective Date, (ii) on the date that Mr. Beifuss. ceases, for any reason, to serve as officer, director or consultant of the Company, it being understood that if Mr. Beifuss continues without interruption to serve thereafter in one or more capacities as officer, director or consultant of the Company this shall not be considered a cessation of service, or (iii) on the date that the Company’s shares of common stock first trade on any national securities exchange and such listing is conditioned upon the elimination of the preferential voting rights of the Series D Preferred Stock set forth in the Certificate of Designation.
Common Stock
Effective February 14, 2020, the Company effected a reverse split of its common stock at a ratio of one for two hundred twenty-five shares (1:225) with the filing of a Certificate of Amendment to its Articles of Incorporation with the Secretary of State of Nevada. The Company has given retroactive effect for the reverse stock split in its financial statements and notes thereto for all periods presented.
As of December 31, 2020 and December 31, 2019, the Company had 133,337,561 and 1,049,380 shares of common stock issued and outstanding, respectively.
During the year ended December 31, 2020, the Company issued a total of 132,288,181 shares of common stock: 122,507,798 shares for the conversion of $255,577 of principal of convertible notes payable, accrued interest payable of $27,846 and fees of $10,750; 9,777,778 shares for the conversion of 1,100 shares of Series B Preferred Stock recorded at par value; and 2,605 shares for the rounding of shares in the February 2020 reverse stock split recorded at par value of $3. In connection with the convertible debt and Series B Preferred Stock conversions, the Company reduced derivative liabilities by $461,708. There was no gain or loss on settlement of debt due to the conversions occurring within the terms of the convertible notes and preferred shares.
During the year ended December 31, 2019, the Company issued a total of 868,268 shares of common stock at fair value in consideration for the conversion of $182,247 of convertible promissory notes, accrued interest payable of $11,634 and fees of $1,000. In connection with the debt conversions, the Company reduced derivative liabilities by $195,042. There was no gain or loss on settlement of debt due to the conversions occurring within the terms of the convertible note.
8. STOCK OPTIONS
As of December 31, 2020, the Board of Directors of the Company had granted non-qualified stock options exercisable for a total of 210,177,778 shares of common stock to its officers, directors and consultants.
On October 19, 2020 and December 22, 2020, the Company issued a total of 210,000,000 non-qualified stock options to five officers, directors and consultants exercisable for a period of five years from the date of issuance at exercise prices ranging from $0.0108 to $0.017 per share. Of these non-qualified options, 5,000,000 vest 1/24th per month over twenty- four months and 205,000,000 vest 1/36th per month over thirty-six months. The non-qualified stock options were valued by an independent valuation firm at $3,726,549 using a modified Black Scholes early exercise model. A derivative liability and a decrease to additional paid-in capital were recorded for this amount.
On November 30, 2018, the Company issued a ten-year option to purchase 444,445 shares of common stock of the Company, at an exercise price of $1.13 per share in connection with an Agreement and Plan of Merger. The option vested upon grant but could not be exercised for two years. This option was surrendered and cancelled on September 30, 2019 pursuant to an Agreement for the Purchase and Sale of Capital Stock of EllisLab Corp. See Note 3.
A summary of the Company’s stock options as of December 31, 2020, and changes during the two years then ended is as follows:
|
|
Shares
|
|
|
Weighted
Average
Exercise Price
|
|
|
Weighted Average
Remaining
Contract Term
(Years)
|
|
|
Aggregate
Intrinsic
Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at December 31, 2018
|
|
|
628,475
|
|
|
$
|
1.36
|
|
|
|
|
|
|
|
Granted
|
|
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
Exercised
|
|
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
Forfeited or expired
|
|
|
(444,474
|
)
|
|
$
|
1.13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at December 31, 2019
|
|
|
184,001
|
|
|
$
|
1.544
|
|
|
|
|
|
|
|
Granted
|
|
|
210,000,000
|
|
|
$
|
0.017
|
|
|
|
|
|
|
|
Exercised
|
|
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
Forfeited or expired
|
|
|
(6,223
|
)
|
|
$
|
13.500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at December 31, 2020
|
|
|
210,177,778
|
|
|
$
|
0.018
|
|
|
|
4.98
|
|
|
$
|
241,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at December 31, 2020
|
|
|
6,497,222
|
|
|
$
|
0.047
|
|
|
|
5.04
|
|
|
$
|
10,194
|
|
The aggregate intrinsic value in the preceding table represents the total pretax intrinsic value, based on the closing price of our common stock of $0.018 as of December 31, 2020, which would have been received by the holders of in-the-money options had the holders exercised their options as of that date.
The significant assumptions used in the valuation of the derivative liability recorded upon issuance of the October and December stock options are as follows:
Expected life
|
|
2.3 to 3.9 years
|
|
Risk free interest rates
|
|
0.151% to 2.840%
|
|
Expected volatility
|
|
232% – 364%
|
|
Stock-based compensation recorded for the years ended December 31, 2020 and 2019 was $108,514 and $0, respectively. Unrecognized stock-based compensation was $3,618,035 at December 31, 2020.
9. DERIVATIVE LIABILITIES
The fair value of the Company’s derivative liabilities is estimated at the issuance date and is revalued at each subsequent reporting date. We estimate the fair value of derivative liabilities associated with our convertible notes payable, Series B preferred stock and stock options using a multinomial lattice model based on projections of various potential future outcomes. Where the number of stock options or common shares to be issued under these agreements is indeterminate, the Company has concluded that the equity environment is tainted, and all additional stock options, convertible debt and equity are included in the value of the derivatives.
The significant assumptions used in the valuation of the derivative liabilities at December 31, 2019 are as follows:
Conversion to stock
|
|
Monthly
|
|
Stock price on the valuation date
|
|
$0.0180
|
|
Risk free interest rates
|
|
0.61% - .193%
|
|
Expected volatility
|
|
289% – 354
|
%
|
The value of our derivative liabilities was estimated as follows at December 31:
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
Convertible notes payable
|
|
$
|
3,368,619
|
|
|
$
|
3,606,194
|
|
Series B preferred stock
|
|
|
4,137,413
|
|
|
|
2,535,359
|
|
Stock options
|
|
|
3,776,059
|
|
|
|
19,342
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
11,282,091
|
|
|
$
|
6,160,895
|
|
The calculation input assumptions are subject to significant changes from period to period and to management’s judgment; therefore, the estimated fair value of the derivative liability will fluctuate from period to period, and the fluctuation may be material.
10. INCOME TAXES
A reconciliation of the income tax provision (benefit) that would result from applying a combined U.S. federal and state rate of 29% to loss before income taxes with the provision (benefit) for income taxes presented in the financial statements is as follows:
|
|
Years Ended December 31,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
Income tax provision (benefit) at statutory rate
|
|
$
|
(796,800
|
)
|
|
$
|
761,100
|
|
State income taxes, net of federal benefit
|
|
|
(200
|
)
|
|
|
(200
|
)
|
Non-deductible expenses
|
|
|
617,000
|
|
|
|
209,900
|
|
Non-taxable gains
|
|
|
(33,600
|
)
|
|
|
(1,464,700
|
)
|
Other
|
|
|
1,000
|
|
|
|
1,000
|
|
Valuation allowance
|
|
|
212,600
|
|
|
|
492,900
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Deferred tax assets (liabilities) are comprised of the following:
|
|
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
Deferred tax assets:
|
|
|
|
|
|
|
Net operating loss carryforward
|
|
$
|
3,809,800
|
|
|
$
|
3,597,300
|
|
Research and development credit carryforward
|
|
|
125,300
|
|
|
|
125,300
|
|
Accrued compensated absences
|
|
|
1,000
|
|
|
|
1,000
|
|
|
|
|
|
|
|
|
|
|
Valuation allowance
|
|
|
(3,936,100
|
)
|
|
|
(3,723,600
|
)
|
|
|
|
|
|
|
|
|
|
|
|
$
|
-
|
|
|
$
|
-
|
|
The ultimate realization of our deferred tax assets is dependent, in part, upon the tax laws in effect, our future earnings, and other events. As of December 31, 2020, we recorded a valuation allowance of $3,936,100 against net current deferred tax. In recording the valuation allowance, we were unable to conclude that it is more likely than not that our deferred tax assets will be realized.
As of December 31, 2020, we had a net operating loss carryforward available to offset future taxable income of approximately $13,137,000 which begins to expire at dates that have not been determined. If substantial changes in the Company’s ownership should occur, there would be an annual limitation of the amount of the net operating loss carryforward that could be utilized.
We perform a review of our material tax positions in accordance with recognition and measurement standards established by authoritative accounting literature, which requires a company to determine whether it is more likely than not that a tax position will be sustained upon examination based upon the technical merits of the position. If the more-likely-than-not threshold is met, a company must measure the tax position to determine the amount to recognize in the financial statements. Based upon our review and evaluation, during the years ended December 31, 2020 and 2019, we concluded the Company had no unrecognized tax benefit that would affect its effective tax rate if recognized.
We file income tax returns in the U.S. federal jurisdiction and in the state of California. With few exceptions, we are no longer subject to U.S. federal, state or local income tax examinations by tax authorities for years before 2011.
We classify any interest and penalties arising from the underpayment of income taxes in our statements of operations and comprehensive loss in other income (expense). As of December 31, 2020 and 2019, we had no accrued interest or penalties related to uncertain tax positions.
11. RELATED PARTY TRANSACTIONS
Pursuant to a written consulting agreement, dated May 31, 2013 and amended effective November 1, 2016, William E. Beifuss, Jr., our current President, Chief Executive Officer and Acting Chief Financial Officer is to receive fees of $10,000 per month. The Company accrued compensation expense to Mr. Beifuss of $120,000 for each of the years ended December 31, 2020 and 2019. Fees payable to Mr. Beifuss of $80,000 and $10,000 are included in accounts payable – related party as of December 31, 2020 and 2019, respectively.
On December 22, 2020, the Company issued non-qualified stock options to purchase up to a total of 205,000,000 shares of our common stock to four officers, directors and consultants of the Company. The options vest 1/36th per month and are exercisable on a cash or cashless basis for a period of five years from the date of grant at an exercise price of $0.017 per share. Of these non-qualified stock options, Mr. Beifuss received 25,000,000 and Byron Elton, Chairman of the Board of Directors, received 5,000,000.
Effective December 1, 2018, Rick Ellis, the former Chief Executive Officer of the Company and Chief Executive Officer of EllisLab Corp., was to receive a monthly salary of $10,000. Effective with the EllisLab Corp. Sale Agreement which closed on September 30, 2019, Mr. Ellis resigned as the Company’s Chief Executive Officer and the monthly salary was terminated. Mr. Ellis received fees totaling $90,000 for the year ended December 31, 2019.
The Company issued 36,000 shares of Series C Preferred Stock to Rick Ellis, in the EllisLab Corp. Merger, which shares were surrendered and cancelled on September 30, 2019 pursuant to the EllisLab Corp. Sale Agreement. See Note 3.
As discussed in Note 7, effective February 26, 2020, Mr. Beifuss, converted 1,100 shares of Series B Preferred Stock into 9,777,778 shares of the Company’s common stock. Mr. Beifuss previously acquired the Series B Preferred Stock from a lender in a private transaction.
As discussed in Note 7, in November 2019, the Company issued to Mr. Beifuss 1,000 shares of Series D Preferred Stock for services valued at $15,000 by an independent valuation firm. The 1,000 shares of Series D Preferred Stock were automatically redeemed on January 11, 2020, 45 days after the effective date of the Series D Certificate
See Note 5 for discussion of convertible notes payable with related parties.
12. COMMITMENTS AND CONTINGENCIES
Operating Lease
On September 5, 2017, we entered into an operating sublease for office space. The base rent for the sublease is $1,000 per month for a period of one year and month-to-month thereafter. Management has assumed a three-year life for the sublease arrangement. On January 1, 2019, we adopted ASC 842, “Leases,” which resulted in the recognition of an operating lease liability and corresponding right-of use asset (“ROU”) in the amount of $18,352.
As of December 31, 2020, the ROU asset was fully amortized, and the operating lease liability was eliminated. As of December 31, 2019, and ROU asset and operating lease liability had a balance of $7,708.
For the years ended December 31, 2020 and 2019, the Company recognized operating lease cost of $12,000,
Consulting Agreement
We have a written consulting agreement, dated May 31, 2013 and amended effective November 1, 2016, with William E. Beifuss, Jr., our President, Chief Executive Officer, and Acting Chief Financial Officer, for the payment of monthly compensation of $10,000 per month. The agreement may be cancelled by either party with 30 days’ notice.
13. SUBSEQUENT EVENTS
Management has evaluated subsequent events according to the requirements of ASC TOPIC 855, and has reported the following:
Asset Purchase Agreement
On January 7, 2021, the Company, SmallCellSite.com LLC, a Virginia limited liability company (“SCS” or “Seller”), and SmallCellSite, Inc., a newly formed Nevada corporation and wholly owned subsidiary of the Company (the “Subsidiary”) entered into an asset purchase agreement (“APA”) to acquire substantially all of the assets of SCS’s wireless communications marketing and database services business in consideration for a total purchase price of $10,000 in cash and a 5-year convertible promissory note in the amount of $1,000,000 made in favor of SCS or its assignees (the “Note”). SCS is a source of more than 80,000 cell sites offered by property owners for use by wireless network operators.
Pursuant to the APA, SCS instructed the Company to assign $500,000 principal amount of the Note to each of SCS’s two members (the “Assigned Notes”).
Patent
On or about January 11, 2021, the United States Patent and Trademark Office notified the Company that the patent application filed by SCS on or about May 31, 2017 for “System and Method for Identifying Wireless Communication Assets” has been prosecuted on the merits and a patent will be issued.
Convertible Note Conversions
Subsequent to December 31, 2020, two lenders converted a total of $95,261 principal and $18,140 accrued interest payable into 34,276,001 shares of the Company’s common stock.
Subsequent Borrowings
Effective January 8, 2021, the Company entered into a 12% convertible note with an institutional investor in the principal amount of $33,500 with a maturity date of January 8, 2022. The Company received net proceeds of $30,000 after payment of $3,000 in legal fees and $500 in due diligence fees to the lender. The lender, at its option after 180 days from the issuance of the note, may convert the unpaid principal balance of, and accrued interest on, the note into shares of the Company’s common stock at a 45% discount from the lowest trading price during the 20 consecutive trading days immediately prior to conversion. The Company may prepay the note at any time beginning on the date of the issuance of the note until 180 days after the date of issuance of the note at a prepayment premium of 150%, after which the Company has no right of prepayment.
Effective March 18, 2021, the Company entered into a 12% convertible note with an institutional investor in the principal amount of $45,500 with a maturity date of March 18, 2022. The Company received net proceeds of $42,000 after payment of $3,000 in legal fees and $500 in due diligence fees to the lender. The lender, at its option after 180 days from the issuance of the note, may convert the unpaid principal balance of, and accrued interest on, the note into shares of the Company’s common stock at a 45% discount from the lowest trading price during the 20 consecutive trading days immediately prior to conversion. The Company may prepay the note at any time beginning on the date of the issuance of the note until 180 days after the date of issuance of the note at a prepayment premium of 150%, after which the Company has no right of prepayment.
A lender advanced additional funds under the October 2019 Convertible Promissory Note of $50,000 on January 5, 2021, $60,000 on January 28, 2021 and $90,000 on February 26, 2021.
Extension of Maturity Dates of Convertible Promissory Notes
On February 9, 2021, a lender extended the maturity dates of the March 16, 2016 Convertible Promissory Note, the June 2017 Convertible Promissory Note, the December 14, 2017 Convertible Promissory Note, the August 2018 Convertible Promissory Note and the October 2019 Convertible Promissory Note to February 9, 2026.
The maturity date of a note payable to a related party with a principal balance of $32,620 as of December 31, 2020 was extended to December 31, 2021.
Stock Options
On January 28, 2021, the Company issued non-qualified stock options to an employee and a consultant to purchase a total of 20,000,000 shares of the Company’s common stock exercisable for a period of five years from the date of issuance at an exercise price of $0.05 per share. The stock options vest 1/36th per month over thirty-six months.