Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion should be read in conjunction with our audited financial statements and the related notes that appear elsewhere in this Annual Report. The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to such differences include,but are not limited to those discussed below and elsewhere in this Annual Report. Our audited financial statements are stated in United States Dollars and are prepared in accordance with United States Generally Accepted Accounting Principles.
Plan of Operation
We are focused on providing renewable energy solutions and energy-efficient applications to drive better health and living. We currently have core subsidiaries including solar and air purification. We built our portfolio through synergistic acquisitions, products, and partnerships to provide a rich, diversified holding base. The Company’s initial focus is on solar energy and we are committed to building a foundation for future expansion opportunities and building brands based on technology solutions we believe will increase efficiencies across various markets. We strive to create long-term value for our shareholders by helping our partner companies to increase their market penetration, grow revenue and improve cash flow and that complement our desire to build a comprehensive national renewable energy network. The Company is actively looking for and executing on strategic initiatives to sell, partner with or spin-off other non renewable energy related assets.
Results from Operations – For the year ended December 31, 2020 as compared to December 31, 2019.
Net Revenue
For the years ended December 31, 2020 and 2019, the Company had total sales of $2,878,161 and $3,343,833, respectively. The decrease of $465,672 in revenues was due primarily to the pandemic which shut down the traditional door to door sales model of Singlepoint Direct Solar, LLC. Additionally, the Company experienced delays in permitting, and site visits which continued throughout the year and into 2021. Social distancing guidelines, stay-at-home orders and similar government measures associated with the COVID-19 pandemic, as well as actions by individuals to reduce their potential exposure to the virus, contributed to a decline in origination, with new contract origination. This decline reflected an inability by our dealers to perform in-person sales calls based on the stay-at-home orders in some locations. In the third quarter 2020 the Company also took a one-time adjustment for the proportional sales related to residential solar revenue derived from Direct Solar America of $276,382.68 for cancelled projects.
Cost of Revenue
Cost of revenue decreased from $2,353,056 for the year ending December 31, 2019 to $2,204,391 for the year ended December 31, 2020, a decrease of $148,665. This decrease was due primarily to the decreased revenues from our subsidiary Direct Solar America.
Gross Profit
As a result of the foregoing, our gross profit was $673,770 for the year ended December 31, 2020, compared with $990,777, for the year ended December 31, 2019. The decrease in our overall gross profit was primarily a result of the subsidiary Direct Solar America.
Operating Expenses
Total operating expenses decreased from $6,455,236 in 2019 to $3,972,882 in 2020, a decrease of $2,482,354. The decrease was primarily due to a decrease in general and administrative expense of $3,111,304 as a result of additional costs related to our newly acquired subsidiaries, our new office, marketing, insurance and travel. We had a decrease in consulting fees of $219,649 in the year ended December 31, 2020 from the year ending December 31, 2019. Professional and legal fees increased $22,970 for the year ending December 31, 2020, as compared to year ending December 31, 2019, primarily due to increased audit and legal expenses as a result of the Company complying with 1934 Act reporting obligations of the SEC. Investor relations expense increased from $168,117 for the year ending December 31, 2019, as compared to $181,637 for the year ending December 31, 2020, an increase of $13,460.
Other Expense
Other expense decreased from $2,604,274 in 2019 to $1,145,393 in 2020 due primarily to the decrease in interest expense and amortization of debt discounts as a result of our decrease in convertible notes payable during the year ended December 31, 2020.
Net Loss
For the year ended December 31, 2019 the Company had a net loss of approximately $8,068,733 compared to a net loss of approximately $4,444,505 for the year ended December 31, 2020, a decrease in net loss of $3,624,228. The decrease in net loss is primarily a result of the change in fair value of derivative liabilities as well as a decrease in overall operating expenses during the year ended December 31, 2020.
Liquidity and Capital Resources
As of December 31, 2020 the Company had $2,915,680 in total assets, including $198,473 in cash, $3,368 of accounts receivable, $4,834 in prepaid expenses, $63,456 in inventory, and non-current assets of $2,645,549 related to property, investments and goodwill. The Company had negative working capital of $5,646,208 as of December 31, 2020.
As of December 31, 2020, the Company has yet to achieve profitable operations, and while the Company hopes to achieve profitable operations in the future, if not it may need to raise capital from stockholders or other sources to sustain operations and to ultimately achieve viable operations. These factors raise substantial doubt about the Company's ability to continue as a going concern. The Company’s principal sources of liquidity have been cash provided by operating activities, as well as its ability to raise capital. The Company’s operating results for future periods are subject to numerous uncertainties and it is uncertain if the Company will be able to become profitable and continue growth for the foreseeable future. If management is not able to increase revenue and/or manage operating expenses, the Company may not be able to achieve profitability. The Company’s ability to continue in existence is dependent on the Company’s ability to achieve profitable operations.
To continue operations for the next 12 months we will have a cash need of approximately $2.0 million. Should we not be able to fulfill our cash needs through the increase of revenue we will need to raise money through outside investors through convertible notes, debt or similar instrument(s). The Company plans to pay off current liabilities through sales and increasing revenue through sales of Company services and or products, or through financing activities as mentioned above, although there is no guarantee that the Company will ultimately do so.
Advances from Officer
The Company’s CEO advanced the Company funds during 2020 and 2019, with a balance due of $911,826 and $735,000 respectfully, plus accrued interest of $216,807 and $96,273 as of December 31, 2020 and 2019, respectively. These balances accrue interest at 12% beginning October 1, 2018, are unsecured and due on demand.
In November 2020 the Company effectuated the sale of 1,075,527 shares of Common Stock of Jacksam Corporation in exchange for the extinguishment of $218,874 of bona fide debt owed by the Company to its CEO.
Our cash flows for the year ended December 31, 2020 and 2019 are summarized below:
|
|
Year Ending December 31,
2020
|
|
|
Year Ending December 31,
2019
|
|
Net cash used in operating activities
|
|
$
|
(1,955,379
|
)
|
|
$
|
(1,787,690
|
)
|
Net cash used in investing activities
|
|
$
|
25,000
|
|
|
$
|
-
|
|
Net cash provided by financing activities
|
|
$
|
2,018,724
|
|
|
$
|
1,829,037
|
|
Net Change in Cash
|
|
$
|
88,345
|
|
|
$
|
41,347
|
|
Cash at beginning of year
|
|
$
|
110,128
|
|
|
$
|
68,781
|
|
Cash at end of year
|
|
$
|
198,473
|
|
|
$
|
110,128
|
|
Net Cash Used in Operating Activities
For the year ended December 31, 2020, $1,955,379 net cash was used in operating activities due primarily from our net loss of $4,033,717 partially offset by non-cash charges, including preferred stock issued for services, common stock issued for services and amortization of loan costs.
Net Cash Provided in Investing Activities
We had $25,000 net cash provided in investing activities from a return of investment in the year ended December 31, 2020 as compared to $0 for the year ended December 31, 2019.
Net Cash Provided by Financing Activities
For the year ended December 31, 2020, net cash provided by financing activities was $2,018,724 as compared to $1,829,037 for the year ended December 31, 2019.
Critical Accounting Policies
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Notes to the Consolidated Financial Statements describes the significant accounting policies and methods used in the preparation of the Consolidated Financial Statements. Estimates are used for, but not limited to, contingencies and taxes. Actual results could differ materially from those estimates. The following critical accounting policies are impacted significantly by judgments, assumptions, and estimates used in the preparation of the Consolidated Financial Statements.
Loss Contingencies
The Company is subject to various loss contingencies arising in the ordinary course of business. The Company considers the likelihood of loss or impairment of an asset or the incurrence of a liability, as well as its ability to reasonably estimate the amount of loss in determining loss contingencies. An estimated loss contingency is accrued when management concludes that it is probable that an asset has been impaired or a liability has been incurred and the amount of the loss can be reasonably estimated. The Company regularly evaluates current information available to us to determine whether such accruals should be adjusted.
Income Taxes
The Company recognizes deferred tax assets (future tax benefits) and liabilities for the expected future tax consequences of temporary differences between the book carrying amounts and the tax basis of assets and liabilities. The deferred tax assets and liabilities represent the expected future tax return benefits or consequences of those differences, which are expected to be either deductible or taxable when the assets and liabilities are recovered or settled.
Recent Accounting Pronouncements
See Note 2 of the consolidated financial statements for discussion of Recent Accounting Pronouncements.
Off-Balance Sheet Arrangements
We are not currently a party to, or otherwise involved with, any off-balance sheet arrangements that have or are reasonably likely to have a current or future material effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.
Recently Adopted Accounting Standards
In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606). This standard provides a single set of guidelines for revenue recognition to be used across all industries and requires additional disclosures. It is effective for annual and interim reporting periods beginning after December 15, 2017. We adopted this standard on January 1, 2018 and it did not have a material impact on our financial position or results of operations.
Purchase of Significant Equipment
We have not previously, nor do we intend to purchase any significant equipment during the next twelve months.
Business
We are a company focused on providing renewable energy solutions and energy-efficient applications to drive better health and living. We currently have core subsidiaries including solar and air purification. We built our portfolio through synergistic acquisitions, products, and partnerships to provide a rich, diversified holding base. The Company’s initial focus is on solar energy and we are committed to building a foundation for future expansion opportunities and building brands based on technology solutions we believe will increase efficiencies across various markets. We strive to create long-term value for our shareholders by helping our partner companies to increase their market penetration, grow revenue and improve cash flow. As of December 31, 2020 we currently have three subsidiaries, Direct Solar America, 51% interest, Discount Indoor Garden Supply, Inc. (“DIGS”, 90% interest), and ShieldSaver, LLC (“ShieldSaver”, 51% interest). Our principal offices are located at 2999 North 44th Street Suite 530, Phoenix, AZ 85018, telephone: (888) 682-7464. We have formalized, announced and are in the process of spinning out our 1606 Corp. We may decide to due future spin-off additional assets or subsidiaries
Going Concern
The financial statements have been prepared assuming that the Company will continue as a going concern. As of December 31, 2020, the Company has yet to achieve profitable operations and is dependent on its ability to raise capital from stockholders or other sources to sustain operations and to ultimately achieve viable operations. The financial statements do not include any adjustments that might result from the outcome of these uncertainties. These factors raise substantial doubt about the Company’s ability to continue as a going concern.
The Company’s ability to continue in existence is dependent on the Company’s ability to develop the Company’s businesses and to achieve profitable operations. Since the Company does not anticipate achieving profitable operations and/or adequate cash flows in the near term, management will continue to pursue additional equity financing through private placements of the Company’s common stock.
NOTE 2 - BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”).
Principles of Consolidation
The consolidated financial statements include the accounts of Singlepoint, DIGS, Direct Solar America and ShieldSaver as of December 31, 2020 and December 31, 2019, (with the accounts of Jiffy Auto Glass (“JAG”), a former subsidiary dissolved July 26, 2019). All significant intercompany transactions have been eliminated in consolidation.
Revenues
The Company records revenue under the adoption of ASC 606 by analyzing exchanges with its customers using a five-step analysis:
|
(1)
|
identifies the contract(s) with a customer;
|
|
|
|
|
(2)
|
identifies the performance obligations in the contract(s);
|
|
|
|
|
(3)
|
determines the transaction price;
|
|
|
|
|
(4)
|
allocates the transaction price to the performance obligations in the contract(s); and
|
|
|
|
|
(5)
|
recognizes revenue when (or as) the entity satisfies a performance obligation.
|
The Company incurs costs associated with product distribution, such as freight and handling costs. The Company has elected to treat these costs as fulfillment activities and recognizes these costs at the same time that it recognizes the underlying product revenue. In accordance with ASC 606, the Company recognizes revenue at an amount that reflects the consideration that the Company expects to be entitled to receive in exchange for transferring goods or services to its customers. The Company’s policy is to record revenue when control of the goods transfers to the customer.
The Company uses three categories for disaggregated revenue classification:
|
(1)
|
Retail Sales (DIGS, Singleseed),
|
|
|
|
|
(2)
|
Distribution (1606 and related products) and,
|
|
|
|
|
(3)
|
Services Revenue (Direct Solar, Mobile Web Credit Card Gateway, Shieldsaver).
|
Additionally, the Company also disaggregates revenue by subsidiary:
|
(1)
|
Singlepoint (parent company)
|
|
|
|
|
(2)
|
Direct Solar America
|
|
|
|
|
(3)
|
DIGS
|
There were no revenues from Shield Saver or JAG (dissolved in 2019) during the year ended December 31, 2020.
Retail Sales. Our retail sales include our products sold directly to consumers, with sales recognized upon delivery of the product to the customer, with the customer taking risk of ownership and assuming risk of loss. Payment is due upon delivery. DIGS operates an online store and sells nutrients, lights, HVAC systems and other products to consumers. Singleseed provides products through its online portal.
Distribution Revenue. Our distribution revenue includes Singlepoint’s 1606 and related product sales to third-party resellers with revenue recognized upon delivery of the product to the reseller, with the reseller taking risk of ownership and assuming risk of loss. Payment is due upon delivery or within 30 days of invoicing. Except for when sold direct to consumer upon which payment is due immediately.
Services Revenue. Our services revenue includes services provided by Direct Solar America, which earns commission revenue for solar services placed with third-party contractors and recognizes revenue upon date of completion of installation. Cash received in advance of contract completion is recognized as deferred revenue until contracts are complete. Singlepoint’s merchant services provides payment services to businesses with revenue recognized upon the close and remittance of commissions each month. ShieldSaver offers business-to business services related to windshield repair and replacement for consumers. Service revenue is recognized as the performance obligations are fulfilled, with the customer taking risk of ownership and assuming risk of loss. Payment for service revenue is generally due upon completion.
Returns and other adjustments
The Company records an estimate for provisions of discounts, returns, allowances, customer rebates and other adjustments for each shipment, and are netted with gross sales. The Company’s discounts and customer rebates are known at the time of sale and the Company appropriately debits net product revenues for these transactions based on the known discount and customer rebates. The Company estimates for customer returns and allowances based on estimates of historical transactions and accounts for such provisions during the same period in which the related revenues are earned. Customer discounts, returns and rebates on product revenues during the year ended December 31, 2020 and 2019 are not material.
Cash and Cash Equivalents
The Company considers all highly liquid investments with the original maturities of ninety days or less at the time of purchase to be cash equivalents. The Company maintains deposits in financial institutions which are insured by the Federal Deposit Insurance Corporation (“FDIC”). The Company had no deposits in excess of amounts insured by the FDIC as of December 31, 2020.
Convertible Instruments
The Company evaluates and accounts for conversion options embedded in its convertible instruments in accordance with the Accounting Standards Committee (“ASC”) 815 “Derivatives and Hedging”. It provides three criteria that, if met, require companies to bifurcate conversion options from their host instruments and account for them as free standing derivative financial instruments. These three criteria include circumstances in which (a) the economic characteristics and risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics and risks of the host contract, (b) the hybrid instrument that embodies both the embedded derivative instrument and the host contract is not re-measured at fair value under otherwise applicable generally accepted accounting principles with changes in fair value reported in earnings as they occur and (c) a separate instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument. The result of this accounting treatment could be that the fair value of a financial instrument is classified as a derivative financial instrument and is marked-to-market at each balance sheet date and recorded as a liability. In the event that the fair value is recorded as a liability, the change in fair value is recorded in the consolidated statement of operations as other income or other expense. Upon conversion or exercise of a derivative financial instrument, the instrument is marked to fair value at the conversion date and is reclassified to equity. The Company records, when necessary, discounts to convertible notes for the intrinsic value of conversion options embedded in debt instruments based upon the differences between the fair value of the underlying common stock at the commitment date of the note transaction and the effective conversion price embedded in the note. Debt discounts under these arrangements are amortized over the term of the related debt to their earliest date of notes redemption
Income Taxes
The Company accounts for its income taxes in accordance with ASC 740 “Income Taxes”, which requires recognition of deferred tax assets and liabilities for future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and tax credit carry forwards. 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 operations in the period that includes the enactment date. The Company has a net operating loss carryforward, however, due to the uncertainty of realization, the Company has provided a full valuation allowance for deferred tax assets resulting from this net operating loss carryforward.
Earnings (loss) Per Common Share
Basic loss per common share has been calculated based upon the weighted average number of common shares outstanding during the period in accordance with the ASC 260-10, “Earnings per Share”. Common stock equivalents are not used in the computation of loss per share, as their effect would be antidilutive. Diluted EPS includes the effect from potential issuance of common stock, including stock issuable pursuant to the assumed exercise of warrants and conversion of convertible notes and Class A Preferred Stock. Dilutive EPS is computed by dividing net income (loss) by the sum of the weighted average number of common stock outstanding, and the dilutive shares.
The following table summarizes the number of shares of common stock issuable pursuant to our convertible securities that were excluded from the diluted per share calculation because the effect of including these potential shares was antidilutive even though the exercise price could be less than the average market price of the common shares:
|
|
Year
Ended
|
|
|
Year
Ended
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
Series A Preferred Stock
|
|
|
1,500,000,000
|
|
|
|
1,355,000,000
|
|
Series B Preferred Stock
|
|
|
200,655,733
|
|
|
|
-
|
|
Convertible notes
|
|
|
1,500,000
|
|
|
|
603,436,155
|
|
Warrants
|
|
|
10,000,000
|
|
|
|
10,000,000
|
|
Potentially dilutive securities
|
|
|
1,712,155,733
|
|
|
|
1,968,436,155
|
|
Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates and assumptions.
Fair Value Measurements
On January 1, 2011, the Company adopted guidance which defines fair value, establishes a framework for using fair value to measure financial assets and liabilities on a recurring basis, and expands disclosures about fair value measurements. Beginning on January 1, 2011, the Company also applied the guidance to non-financial assets and liabilities measured at fair value on a non-recurring basis, which includes goodwill and intangible assets. The guidance establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs that market participants would use in pricing the asset or liability developed based on market data obtained from independent sources. Unobservable inputs are inputs that reflect the Company’s assumptions of what market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. The hierarchy is broken down into three levels based on the reliability of the inputs as follows:
Level 1 - Valuation is based upon unadjusted quoted market prices for identical assets or liabilities in accessible active markets.
Level 2 - Valuation is based upon quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in inactive markets; or valuations based on models where the significant inputs are observable in the market.
Level 3 - Valuation is based on models where significant inputs are not observable. The unobservable inputs reflect a company’s own assumptions about the inputs that market participants would use.
The Company’s financial instruments consist of cash, accounts receivable, investments, accounts payable, convertible notes payable, advances from related parties, and derivative liabilities. The estimated fair value of cash, accounts receivable, accounts payable, convertible notes payable and advances from related parties approximate their carrying amounts due to the short-term nature of these instruments.
Certain non-financial assets are measured at fair value on a nonrecurring basis. Accordingly, these assets are not measured and adjusted to fair value on an ongoing basis but are subject to periodic impairment tests.
The Company’s derivative liabilities have been valued as Level 3 instruments.
As of December 31, 2019, the Company had an investment in equity securities that did not have a readily determinable fair value, or “RDFV”. This investment was assessed and measured at fair value that was determined to be zero. As of December 31, 2020, this investment in equity securities did meet the standards for a RDFV and has been valued as Level 1 instruments. For the year ended December 31, 2020, a net gain of $807,511 was recognized related to the fair value measurement of these equity securities.
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of convertible notes derivative liability and equity securities – December 31, 2020
|
|
$
|
588,637
|
|
|
$
|
–
|
|
|
$
|
–
|
|
|
$
|
588,637
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of convertible notes derivative liability and equity securities – December 31, 2019
|
|
$
|
–
|
|
|
$
|
–
|
|
|
$
|
2,813,150
|
|
|
$
|
2,813,150
|
|
The following table provides a summary of changes in fair value of the Company’s Level 3 financial liabilities as of December 31, 2019 and December 31, 2020:
|
|
Derivative
Liability
|
|
|
|
|
|
|
Balance, December 31, 2019
|
|
|
2,813,150
|
|
Additions recognized as debt discount
|
|
|
984,801
|
|
Derivative liability settlements
|
|
|
(3,053,213
|
)
|
Mark-to-market at December 31, 2020
|
|
|
(744,738
|
)
|
Balance, December 31, 2020
|
|
$
|
-
|
|
|
|
|
|
|
Net income for the year included in earnings relating to the liabilities held at December 31, 2020
|
|
$
|
744,738
|
|
Recently Issued Accounting Pronouncements
Leases
In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). This standard requires all leases that have a term of over 12 months to be recognized on the balance sheet with the liability for lease payments and the corresponding right-of-use asset initially measured at the present value of amounts expected to be paid over the term. Recognition of the costs of these leases on the income statement are dependent upon their classification as either an operating or a financing lease. Costs of an operating lease will continue to be recognized as a single operating expense on a straight-line basis over the lease term. Costs for a financing lease are disaggregated and recognized as both an operating expense (for the amortization of the right-of-use asset) and interest expense (for interest on the lease liability). This standard was effective for our interim and annual periods beginning January 1, 2019 and was applied on a modified retrospective basis to leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. We adopted this standard on January 1, 2019. The adoption of this standard resulted in a charge of approximately $14,000 to general and administrative expense for the year ended December 31, 2019.
There were various other accounting standards and interpretations issued recently, none of which are expected to have a material impact on the Company’s financial position, operations or cash flows. Management has evaluated these new pronouncements through December 31, 2020.
Subsequent Events
Other than the events described in Note 12, there were no subsequent events that required recognition or disclosure. The Company evaluated subsequent events through the date the financial statements were issued and filed with the Securities and Exchange Commission.
NOTE 3 – INVESTMENTS, ACQUISITIONS, GOODWILL AND INTANGIBLE ASSETS
Investments
The Company records certain investments using the cost method. If cost exceeds fair value, an impairment loss is recognized unless the impairment is considered temporary. The Company records investments in equity securities using the fair value method. In certain cases, the equity securities may not meet the criteria for RDFV, then the Company determines the fair value using the market price of the equity securities on the given remeasurement date less the applicable discount calculated using a put option pricing model with the applicable assumptions and inputs.
The Company had investments recorded using the cash method of $35,000 and $60,000 as of December 31, 2020 and 2019, respectively.
The Company had investments in equity securities using the fair value method of $588,637 and $0 as of December 31, 2020 and 2019, respectively.
2019 Asset Acquisition – Direct Solar LLC and AI Live Transfers LLC
On May 14, 2019, the Company, via the formation of Direct Solar America, completed the acquisition of certain assets of Direct Solar LLC and AI Live Transfers LLC (the “Acquired Assets”). The Company owns 51% of the membership interests of Direct Solar America. In connection with the acquisition of these assets the Company issued an aggregate of 156,058,751 shares of common stock. The Company agreed that it shall reinvest into Direct Solar America its portion of distributions of Net Cash Flow (as defined in the Operating Agreement of Direct Solar America), if any, up to $250,000 per quarter, up to a total of $750,000. Direct Solar America has not made any distributions and no amounts have been reinvested as of December 31, 2020.
The total value of common stock issued for the purchase of the Acquired Assets was $1,966,340 on the issuance date and was allocated to goodwill based on the workforce acquired and to intangible assets based on trademarks and tradenames acquired. The total purchase price for the Acquired Assets was allocated as follows:
Intangible assets
|
|
$
|
72,600
|
|
Goodwill
|
|
|
1,893,740
|
|
Current assets
|
|
|
-
|
|
Current liabilities
|
|
|
-
|
|
Total net assets acquired
|
|
$
|
1,966,340
|
|
The purchase price consists of the following:
|
|
|
|
|
Cash
|
|
|
-
|
|
Common Stock
|
|
|
1,966,340
|
|
Total purchase price
|
|
$
|
1,966,340
|
|
Total revenue of $2,653,924, net loss of $848,351, and contributed net loss of $410,788 after non-controlling interest related to Direct Solar America for the year ended December 31 , 2020 are included in the Company’s accompanying consolidated statement of operations.
Goodwill and Intangible Assets
The following table presents details of the Company’s goodwill as of December 31, 2020 and December 31, 2019:
|
|
Direct Solar America
|
|
Balances at December 31, 2019:
|
|
|
1,966,340
|
|
Aggregate goodwill acquired
|
|
|
-
|
|
Impairment losses
|
|
|
-
|
|
Goodwill adjustment
|
|
|
(72,600
|
)
|
Balances at December 31, 2020:
|
|
$
|
1,893,740
|
|
The Company periodically reviews the carrying value of intangible assets not subject to amortization, including goodwill, to determine whether impairment may exist. Goodwill and certain intangible assets are assessed annually, or when certain triggering events occur, for impairment using fair value measurement techniques. These events could include a significant change in the business climate, legal factors, a decline in operating performance, competition, sale or disposition of a significant portion of the business, or other factors. Specifically, a goodwill impairment test is used to identify potential impairment by comparing the fair value of a reporting unit with its carrying amount, including goodwill. The Company uses level 3 inputs and a discounted cash flow methodology. A discounted cash flow analysis requires one to make various judgmental assumptions including assumptions about future cash flows, growth rates, and discount rates. The assumptions about future cash flows and growth rates are based on the Company’s budget and long-term plans. Discount rate assumptions are based on an assessment of the risk inherent in the respective reporting units.
The Company used the discounted cash flow method for the impairment testing as of December 31, 2020. The Company performed discounted cash flow analysis projected over four years to estimate the fair value of the reporting unit, using management’s best judgement as to revenue growth rates and expense projections. This analysis indicated cash flows (and discounted cash flows) greater than the book value of goodwill. The Company determined there were no indicators of impairment in goodwill during the year ended December 31, 2020.
During the year ended December 31, 2020, the Company adjusted its goodwill to reflect its final valuation of its goodwill and intangible assets. The adjustment decreased goodwill and increased intangible assets by $72,600, with no effect on total purchase price. The gross intangible assets of $72,600 have an estimated useful life of three years, a net book value of $49,005 as of December 31, 2020, and amortization expense of $23,595 for the year ended December 31, 2020.
Proforma Information (unaudited)
Singlepoint Direct Solar LLC
The following unaudited pro forma information presents the consolidated results of the Company’s operations and the results of the acquisition of the Acquired Assets as if the May 14, 2019 acquisition had been consummated on January 1, 2019. Such unaudited pro forma information is based on historical unaudited financial information with respect to the Acquired Assets acquisition and does not include operational or other charges which might have been affected by the Company. The unaudited pro forma information for the year ended December 31, 2019 presented below is for illustrative purposes only and is not necessarily indicative of the results which would have been achieved or results which may be achieved in the future:
|
|
Year
Ended
December 31,
|
|
|
|
2019
|
|
Net revenue
|
|
$
|
4,098,382
|
|
Net loss
|
|
$
|
(8,125,411
|
)
|
NOTE 4 - CONVERTIBLE NOTES PAYABLE AND NOTES PAYABLE
Convertible notes payable consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
2020
|
|
|
December 31,
2019
|
|
|
|
|
|
|
|
|
Convertible note payable to investor (the “CVP Note”) dated October 10, 2017, with interest at 10%, an Original Issue Discount (“OID”) of $70,000, due October 6, 2019, convertible into shares of the Company’s common stock at a discount of 60% of the average of the three lowest closing bid prices of the Company’s common stock during the 20 trading days prior to conversion. The CVP Note provides for additional tranches of a maximum of $3,970,000, which includes OID of 10%. The note includes a warrant to purchase 5,000,000 shares of the Company’s common stock at a price of $0.10 per share. The CVP Note is secured by substantially all assets of the Company. The investor converted a total of $444,500 of principal and accrued interest of this note into 105,875,646 shares of the Company’s common stock and was repaid $40,000 by the Company during the year ended December 31, 2019. Additionally, the investor converted a total of $78,420 of principal and accrued interest of this note into 32,034,513 shares of the Company’s common stock and was repaid $25,000 by the Company in 2020, resulting in repayment in full in March 2020.
|
|
|
-
|
|
|
|
100,235
|
|
|
|
|
|
|
|
|
|
|
Convertible note payable to investor (the “UAHC Note”) dated October 10, 2017, with interest at 10%, an OID of $70,000, due October 6, 2019, convertible into shares of the Company’s common stock at a discount of 60% of the average of the three lowest closing bid prices of the Company’s common stock during the 20 trading days prior to conversion. The UAHC Note includes a warrant to purchase 5,000,000 shares of the Company’s common stock at a price of $0.10 per share. The UAHC Note is secured by substantially all assets of the Company. The investor converted a total of $37,767 of principal and accrued interest of this note into 37,767,405 shares of the Company’s common stock. This note was amended on October 12, 2020 whereby the maturity due date was extended to December 31, 2022 with monthly payments required commencing October 1, 2020. A final note settlement agreement was executed on January 27, 2021 (see Note 12).
|
|
|
581,723
|
|
|
|
619,490
|
|
|
|
|
|
|
|
|
|
|
Convertible note payable to investor (the “Iliad Note”) dated November 5, 2018 totaling $500,000, plus OID of $225,000 and legal fees of $20,000. The Iliad Note bears interest at 10% and matures on November 5, 2020. Total available under note is $5,520,000, including $500,000 OID (and $20,000 in legal fees applied to the first $500,000 tranche). The Iliad Note is convertible into shares of the Company’s common stock after 180 days at a discount of 35% of the average of the three lowest closing bid prices of the Company’s common stock during the 20 trading days prior to conversion. The Company borrowed $1,925,000 (including OID of $175,000) under this note during the year ended December 31, 2019. The investor converted a total of $458,360 of principal and accrued interest of this note into 214,880,617 shares of the Company’s common stock and was repaid $194,637 by the Company during the year ended December 31, 2020. The Iliad Note is secured by substantially all assets of the Company. This note was amended on October 12, 2020 whereby the maturity due date was extended to December 31, 2022 with monthly payments required commencing October 1, 2020. A final note settlement agreement was executed on January 27, 2021 (see Note 12).
|
|
|
1,842,003
|
|
|
|
2,495,000
|
|
|
|
|
|
|
|
|
|
|
Convertible note payable to investor (the “GSC Note”) dated March 11, 2020 totaling $320,500, plus OID of $30,000 and legal fees of $9,500. The GSC Note bears interest at 10% and matures on March 6, 2021. Total available under note is $1,440,000, including $120,000 OID (and $9,500 in legal fees taken on first $320,500 tranche). The GSC Note is convertible into shares of the Company’s common stock at any time at a discount of 25% of the lowest closing bid price of the Company’s common stock during the 10 trading days prior to conversion. The investor converted a total of $201,959 of principal and accrued interest of this note into 107,014,457 shares of the Company’s common stock and the full outstanding balance of $170,000 was repaid during the year ended December 31, 2020.
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Convertible note payable with an accredited investor dated October 31, 2016, with interest at 0%, due October 31, 2017, convertible at $0.007 per share. This note is currently in default.
|
|
$
|
10,500
|
|
|
$
|
10,500
|
|
|
|
|
|
|
|
|
|
|
Total convertible notes payable
|
|
|
2,434,226
|
|
|
|
3,225,225
|
|
Less debt discounts
|
|
|
|
|
|
|
(1,154,327
|
)
|
Convertible notes payable, net
|
|
|
2,434,226
|
|
|
|
2,070,898
|
|
Less current portion of convertible notes, net
|
|
|
(2,434,226
|
)
|
|
|
(2,070,898
|
)
|
Long-term convertible notes payable, net
|
|
$
|
-
|
|
|
$
|
-
|
|
Accrued interest on the above notes payable totaled $518,366 and $227,352 as of December 31, 2020 and 2019, respectively. Interest expense for the above notes payable for the years ended December 31, 2020 and 2019 was $306,158 and $300,168, respectively. Total amortization of debt discounts was $2,174,273 and $1,662,068 for the years ended December 31, 2020 and 2019, respectively.
Short-term Notes Payable
In May 2020, the Company received total loan proceeds of $332,737 under the SBA’s Paycheck Protection Program (“PPP”) and is included in short-term notes payable as of December 31, 2020. The two PPP loans include a promissory note with Direct Solar America with principal of $312,300, due May 7, 2022, and a promissory note with Singlepoint with principal of $20,437, due in 18 monthly installments beginning December 12, 2020. Both PPP loans bear interest at 1%. Under the PPP loan terms, the Company may apply (and plans to apply) for forgiveness of the PPP loans.
Long-term Note Payable
In May 2020, the Company received loan proceeds of $150,000 under the SBA’s Economic Injury Disaster Loan program (“EIDL”). The EIDL dated May 22, 2020, bears interest at 3.75%, has a 30-year term, is secured by substantially all assets of the Company, and is due in monthly installments of $731 beginning May 1, 2021.
NOTE 5 – OBLIGATIONS UNDER CAPITAL LEASE
The Company leases approximately 1,400 square feet of office space at 2999 North 44th Street, Phoenix, Arizona 85018 through January 31, 2023 at a monthly base rent of $3,270 through January 2020, increasing to $3,618, $3,688 and to $3,758 per month beginning February 2020, February 2021 and February 2022, respectively.
On July 2, 2019, the Company executed a lease agreement for an industrial building space in California for 24 months at base rent of $2,400 per month through June 30, 2021, upon which the lease expires.
The above leases are classified as capital leases under ASC 842 which the Company adopted in 2019. The following is a summary of property held under these capital leases at December 31, 2020 and 2019:
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
Office and warehouse facilities
|
|
$
|
224,037
|
|
|
$
|
224,037
|
|
Accumulated amortization
|
|
|
(144,870
|
)
|
|
|
(87,106
|
)
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
79,167
|
|
|
$
|
136,931
|
|
Future maturities of obligations under capital leases are as follows:
Twelve months ending December 31,
|
|
|
|
2021
|
|
$
|
58,585
|
|
2022
|
|
|
45,020
|
|
2023
|
|
|
3,758
|
|
|
|
|
|
|
Total minimum lease payments
|
|
|
107,363
|
|
Amounts representing interest
|
|
|
(8,481
|
)
|
|
|
$
|
98,882
|
|
NOTE 6 - DERIVATIVE LIABILITY
Derivative Liability- Debt
The fair value of the described embedded derivative on all convertible debt was valued at $0 due to the note amendment executed on October 12, 2020, and $2,813,150 at December 31, 2020 and December 31, 2019, respectively, which was determined using the Black Scholes Pricing Model with the following assumptions:
|
|
December 31, 2020
|
|
|
December 31, 2019
|
|
Dividend yields
|
|
|
0
|
%
|
|
|
0
|
%
|
Term
|
|
0-1.0 year
|
|
|
0-2.0 year
|
|
Volatility
|
|
79.54% - 107.2
|
%
|
|
107.0% - 133.0
|
%
|
Risk free rate
|
|
0.10 - 1.59
|
%
|
|
1.54 - 2.60
|
%
|
The Company adjusted the recorded fair value of the derivative liability on debt to market resulting in non-cash, non-operating gain of $744,738 and $604,289 for the years ended December 31, 2020 and 2019, respectively.
Note 2 contains a summary of changes in fair value of the Company’s Level 3 financial liabilities as of December 31, 2020.
NOTE 7 - STOCKHOLDERS’ DEFICIT
On January 30, 2020, the Company amended its Articles of Incorporation and authorized 5,000,000,000 shares of common stock (previously 2,000,000,000 shares) and 100,000,000 shares of preferred stock (previously 60,000,000 shares), of which 60,000,000 shares are designated as Class A Convertible Preferred Stock. The Company has retroactively reflected this amendment as of December 31, 2019.
On December 18, 2020, the Company amended its Articles of Incorporation to designate 1,500 shares of undesignated preferred stock as Class B Preferred Stock.
Class A Convertible Preferred Shares
As of December 31, 2020 and, 2019, the Company had authorized 100,000,000 shares of preferred stock, $0.0001 par value per share, of which 60,000,000 shares are designated as Series A Convertible Preferred Stock (“Class A Stock”) with $0.0001 par value per share, of which 60,000,000 and 54,200,000 shares were issued and outstanding as of December 31, 2020 and 2019, respectively.
Each share of Class A Stock is convertible at any time into 25 shares of common stock, totaling 1,500,000,000 and 1,355,000,000 shares of common stock assuming full conversion of all outstanding shares as of December 31, 2020 and 2019, respectively. No dividends are payable unless declared by the Board of Directors. Each share of Class A Stock votes with the shares of Common Stock and is entitled to 50 votes per share and ranks senior to all other classes of stock in liquidation in the amount of $1 per share.
Class B Convertible Preferred Shares
As of December 31, 2020, the Company authorized 1,500 shares of preferred stock, $.0001 par value per share, of which 408 shares were issued and outstanding.
As of December 31, 2020 and 2019, a total of 39,998,500 and 40,000,000 shares of preferred stock remain undesignated and unissued, respectively.
Common Stock
As of December 31, 2020 and 2019, the Company’s authorized common stock was 5,000,000,000 shares, at $0.0001 par value per share, with 2,479,976,812 and 1,698,279,820 shares issued and outstanding as of December 31, 2020 and 2019, respectively.
Equity Financing Agreement
On April 21, 2020, the Company entered an Equity Financing Agreement (the “Equity Financing Agreement”) and Registration Rights Agreement (the “Registration Rights Agreement”) with GHS Investments LLC (“GHS”). Pursuant to the Equity Financing Agreement GHS agreed to purchase up to $7,000,000 in shares of the Company’s common stock, from time to time over the course of twenty-four (24) months after effectiveness of a registration statement on Form S-1 (the “Registration Statement”) of the underlying shares of Common Stock (the “Contract Period”). The Registration Statement was declared effective on July 29, 2020 at which time the Company was authorized to direct GHS to purchase shares of Common Stock of the Company.
The Equity Financing Agreement grants the Company the right, from time to time at its sole discretion (subject to certain conditions) during the Contract Period, to direct GHS to purchase shares of Common Stock on any business day (a “Put”), provided that at least ten trading days has passed since the most recent Put. The purchase price of the shares of Common Stock contained in a Put shall be 80% percent of the lowest volume weighted average price (VWAP) of the Company’s Common Stock for ten (10) consecutive trading days preceding the Put. No Put will be made in an amount less than $25,000 or greater than $500,000. In no event is the Company entitled to make a Put or is Investor be entitled to purchase that number of shares of Common Stock of the Company, which when added to the sum of the number of shares of Common Stock beneficially owned, by GHS, would exceed 4.99% of the number of shares of Common Stock outstanding on such date.
The Equity Financing Agreement terminates upon any of the following events: when GHS has purchased an aggregate of $7,000,000 in the Common Stock of the Company pursuant to the Equity Financing Agreement; on the Date that is twenty-four (24) calendar months from the date the Registration Statement is declared "Effective"; at such time that the Registration Statement is no longer in effect; by the Company at any time, after ninety (90) calendar days notice following the closing of any Put; or upon thirty (30) calendar days after written notice by the Company if no Put Notices have been delivered. Actual sales of shares of Common Stock to the Investor under the Equity Financing Agreement will depend on a variety of factors to be determined by the Company from time to time, including, among others, market conditions, the trading price of the Common Stock and determinations by the Company as to the appropriate sources of funding for the Company and its operations. The net proceeds under the Equity Financing Agreement to the Company will depend on the frequency and prices at which the Company sells shares of its stock to GHS.
Shares issued during the year ended December 31, 2020
During the year ended December 31, 2020, the Company issued a total of 320,000,000 shares of common stock to GHS at an aggregate price of $812,576 (or $0.0025 per share) under the Put notices issued by the Company under the Equity Financing Agreement.
During the year ended December 31, 2020, the Company issued an aggregate of 391,696,992 shares of common stock to investors for the conversion of a total of $778,657 of convertible debt and accrued interest.
On February 11, 2020, the Company issued 10,000,000 shares of common stock to a consultant for services with a fair value of $87,000, or $0.0087 per share.
On March 12, 2020, the Company issued 5,000,000 shares of common stock to a consultant for services with a fair value of $30,000, or $0.0060 per share.
On October 9, 2020, the Company issued 7,400,000 shares of Class A Preferred Stock to five of the Company’s directors at an aggregate value of $555,000.
On December 8, 2020 the Company issued 15,000,000 shares of common stock to two consultants for services with a fair value of $42,000, or $0.0021 per share.
NOTE 8 - RELATED PARTY TRANSACTIONS
Accrued Officer Compensation
As of December 31, 2020 and December 31, 2019, a total of $1,005,230 and $588,611, respectively, was accrued for unpaid officer wages due the Company’s CEO, CFO and President under their respective employment agreements.
Other
The Company’s CEO has advanced the Company funds since 2017, with a balance due of $911,826 and $735,000, respectively, plus accrued interest of $216,807 and $96,273 as of December 31, 2020 and 2019, respectively. These balances accrue interest at 12% beginning on October 1, 2018, are unsecured and due on demand. Total interest expense on the advances totaled $216,807 and $78,243, for the years ended December 31, 2020 and 2019, respectively. In November 2020, the Company sold the CEO 1,075,527 common shares of equity securities of Jacksam with a fair value measured at $218,874 and was recorded as a reduction of debt related to advances from the related party.
As of December 31, 2020 and December 31, 2019, a total of $13,039 and $15,222, respectively, was due to the founder of DIGS for advances to DIGS.
As of December 31, 2020 and December 31, 2019, a total of $0 and $2,892, respectively, was due the founder of DIGS and is included in accounts payable.
In March 2020, the board of directors authorized the conversion of amounts payable to the Company’s officers to the Company’s common stock. The amounts are convertible at the option of the officer at a conversion price of $0.01 per share. As of the date of this report, no officer has converted any monies owed into shares of the Company’s common stock.
NOTE 9 – COMMITMENTS AND CONTINGENCIES
Employment Agreements
In May 2018 the Company entered into an employment agreement with Mr. Greg Lambrecht. The agreement provided that Mr. Lambrecht would serve as CEO and CFO of the Company for a term of three years at an annual salary of $220,000, and an incentive bonus as determined by the board of directors. The agreement shall automatically be renewed for additional three-year periods unless either party has provided written termination of this Agreement at least 90 days prior to the expiration of such term. Greg Lambrecht resigned as CFO of the Company in January 2020. If employment is terminated as a result of his death or Disability (as defined in the agreement), the Company shall pay, his Base Salary (as defined in the agreement) and any accrued but unpaid Bonus (as defined in the agreement) and expense reimbursement amounts through the date of his Death or Disability and a lump sum payment equal to two years of Base Salary (at the time his Death or Disability occurs) within 30 days of his Death or Disability. In the event the Company does not have the cash flow to pay such amount within 30 days as set forth above, the Company may make such payments over 12 equal monthly installments. If employment is terminated by the Board of Directors of the Company for Cause (as defined in the agreement), then the Company shall pay his Base Salary through the date of his termination and there shall be no further entitlement to any other compensation or benefits from the Company. If employment is terminated by the Company (or its successor) upon the occurrence of a Change of Control (as defined in the agreement) or within six (6) months thereafter, the Company (or its successor, as applicable) shall (i) continue to pay to his Base Salary for a period of thirty six (36) months following such termination, (ii) pay any accrued and any earned but unpaid Bonus, (iv) pay the Executive the Bonus he would have earned had he remained with the Company for six (6) months from the date which such termination occurs, (iv) pay expense reimbursement amounts through the date of termination. While the Company does not currently have a stock option plan, if one is created in the future and options are granted to Mr. Lambrecht, all such Stock Options that have not vested as of the date of such termination shall be accelerated and deemed to have vested as of such termination date and shall remain exercisable for a period as outlined in the Company’s Stock Option program, and (v) Mr. Lambrecht shall be entitled to receive equivalent share issuances as any executive officer, management or director of the Company receives for a period of 36 months thereafter. If employment is terminated by Mr. Lambrecht for Good Reason (as defined in the agreement), or if this Agreement is not renewed, then the Company shall (i) pay a single lump sum cash payment within five business days of such termination equal to 18 times the then monthly Base Salary in effect regardless of when such termination occurs (provided, that in the event the Company does not have the cash flow to pay such amount within five business days as set forth above, the Company may make such payments over 12 equal monthly installments), and (ii) pay Executive the Bonus he would have earned had he remained with the Company for six (6) months from the date which such termination occurs, and (iii) pay Executive any expense reimbursement amounts owed, and payment for any unused vacation days, through the date of termination. All Stock Options that are scheduled to vest in the contract year of the date of such termination shall be accelerated and deemed to have vested as of the termination date. All Stock Options that have not vested (or deemed to have vested pursuant to the preceding sentence) shall be deemed expired, null and void. Any Stock Options that have vested as of the date of termination shall remain exercisable for a period as outlined in the Company’s Stock Option program.
In May 2018 the Company entered into an employment agreement with Mr. Ralston. The agreement provided that Mr. Ralston would serve as President of the Company for a term of three years at an annual salary of $100,000, and an incentive bonus as determined by the board of directors. The agreement shall automatically be renewed for additional three-year periods unless either party has provided written termination of this Agreement at least 90 days prior to the expiration of such term. If employment is terminated as a result of his death or Disability (as defined in the agreement), the Company shall pay, his Base Salary (as defined in the agreement) and any accrued but unpaid Bonus (as defined in the agreement) and expense reimbursement amounts through the date of his Death or Disability and a lump sum payment equal to two years of Base Salary (at the time his Death or Disability occurs) within 30 days of his Death or Disability. In the event the Company does not have the cash flow to pay such amount within 30 days as set forth above, the Company may make such payments over 12 equal monthly installments. If employment is terminated by the Board of Directors of the Company for Cause (as defined in the agreement), then the Company shall pay his Base Salary through the date of his termination and there shall be no further entitlement to any other compensation or benefits from the Company. If employment is terminated by the Company (or its successor) upon the occurrence of a Change of Control (as defined in the agreement) or within six (6) months thereafter, the Company (or its successor, as applicable) shall (i) continue to pay to his Base Salary for a period of thirty six (36) months following such termination, (ii) pay any accrued and any earned but unpaid Bonus, (iv) pay the Executive the Bonus he would have earned had he remained with the Company for six (6) months from the date which such termination occurs, (iv) pay expense reimbursement amounts through the date of termination. While the Company does not currently have a stock option plan, if one is created in the future and granted to Mr. Ralston, all such Stock Options that have not vested as of the date of such termination shall be accelerated and deemed to have vested as of such termination date and shall remain exercisable for a period as outlined in the Company’s Stock Option program, and (v) Mr. Ralston shall be entitled to receive equivalent share issuances as any executive officer, management or director of the Company receives for a period of 36 months thereafter. If employment is terminated by Mr. Ralston for Good Reason (as defined in the agreement), or if this Agreement is not renewed, then the Company shall (i) pay a single lump sum cash payment within five business days of such termination equal to 18 times the then monthly Base Salary in effect regardless of when such termination occurs (provided, that in the event the Company does not have the cash flow to pay such amount within five business days as set forth above, the Company may make such payments over 12 equal monthly installments), and (ii) pay Executive the Bonus he would have earned had he remained with the Company for six (6) months from the date which such termination occurs, and (iii) pay Executive any expense reimbursement amounts owed, and payment for any unused vacation days, through the date of termination. All Stock Options that are scheduled to vest in the contract year of the date of such termination shall be accelerated and deemed to have vested as of the termination date. All Stock Options that have not vested (or deemed to have vested pursuant to the preceding sentence) shall be deemed expired, null and void. Any Stock Options that have vested as of the date of termination shall remain exercisable for a period as outlined in the Company’s Stock Option program.
In January 2020, the Company entered into an employment agreement with Corey Lambrecht to serve as the Chief Financial Officer of the Company effective January 1, 2020. The following is a summary of the material terms of the employment agreement (all capitalized terms not otherwise defined herein are defined in the employment agreement): term is for a period of one year; salary is $80,000 per year; if employment is terminated as a result of his death or Disability, the Company shall pay the Base Salary and any accrued but unpaid Bonus and expense reimbursement amounts through the date of his Death or Disability and a lump sum payment equal to $40,000 (at the time his Death or Disability occurs) within 30 days of his Death or Disability; If employment is terminated by the Board for Cause, then the Company shall pay the Base Salary and Bonus earned through the date of his termination; If employment is terminated upon the occurrence of a Change of Control or within six (6) months thereafter, the Company (or its successor, as applicable) shall (i) continue to pay to the Base Salary for a period of six (6) months following such termination, (ii) pay any accrued and any earned but unpaid Bonus, (iii) pay the Bonus he would have earned had he remained with the Company for six (6) months from the date which such termination occurs, and (iv) pay expense reimbursement amounts through the date of termination.
Equity Incentive Plan
On January 30, 2020, the Company adopted the 2019 Equity Incentive Plan (the “Plan”) to provide additional means through the grant of awards to attract, motivate, retain and reward selected employees and other eligible persons. As of the date of this report the Company has not issued any awards under the Plan.
Standard Eco LLC (“Standard Eco”)
On October 8, 2020 Direct Solar America and the principals of Standard Eco agreed to the following terms and conditions:
|
(i)
|
Direct Solar America and principles of Standard Eco agreed to form new joint venture entities, to assist with the build out of a national solar installation network; ownership of the new joint ventures will be 51% Direct Solar America and 49% Standard Eco; if it is required by a state and/or territory that a certain percentage of ownership of an entity is required to be held by a qualifying third-party, both parties shall agree to proportionally dilute by the respective amount of ownership necessary to fulfill that requirement with the understanding that in no case shall Direct Solar America’s ownership interest be dilutable to less than fifty one (51%) percent. Any ownership granted as a requirement for a Qualifying Party shall not have any profit distribution rights and shall be deemed “non voting” with the voting right proportionally distributed based upon the existing memberships ownership interests. Standard Eco shall be allowed to continue operations in all states and territories and shall not be bound to any non-compete language and/or restriction of services.
|
|
|
|
|
(ii)
|
All business initiated through the efforts of Direct Solar America shall be designated to run through the new solar installation entity.
|
As of December 31, 2020, no new additional joint ventures entities were established pursuant to the agreement and there were no financial obligations owed to Standard Eco based on certain threshold criteria.
NOTE 10 - REVENUE CLASSES AND CONCENTRATIONS
Selected financial information for the Company’s operating revenue for disaggregated revenue purposes are as follows:
|
|
Year
Ended
December 31,
|
|
|
Year
Ended
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
Revenue by product/service lines:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail
|
|
$
|
85,428
|
|
|
$
|
158,903
|
|
Distribution
|
|
|
138,809
|
|
|
|
521,013
|
|
Services
|
|
|
2,653,924
|
|
|
|
2,663,917
|
|
Total
|
|
$
|
2,878,161
|
|
|
$
|
3,343,833
|
|
|
|
|
|
|
|
|
|
|
Revenue by subsidiary:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Singlepoint (parent company)
|
|
$
|
184,561
|
|
|
$
|
576,499
|
|
Direct Solar America
|
|
|
2,653,924
|
|
|
|
2,031,743
|
|
DIGS
|
|
|
39,676
|
|
|
|
151,381
|
|
Shield Saver
|
|
|
-
|
|
|
|
19,339
|
|
JAG
|
|
|
-
|
|
|
|
564,870
|
|
Total
|
|
$
|
2,878,161
|
|
|
$
|
3,343,833
|
|
One customer comprised approximately 13% of the Company’s revenue for year ended December 31, 2019. Two customers comprised approximately 35% and 26%, respectively, of the Company's revenue for the year ended December 31, 2020.
NOTE 11 – INCOME TAXES
The components of income tax expense for the years ended December 31, 2020 and 2019 consist of the following:
|
|
2020
|
|
|
2019
|
|
Federal tax statutory rate
|
|
|
21.0
|
%
|
|
|
21.0
|
%
|
Permanent differences
|
|
|
(0.0
|
)%
|
|
|
(11.6
|
)%
|
Valuation allowance
|
|
|
21.0
|
%
|
|
|
(9.4
|
)%
|
Effective rate
|
|
|
0
|
%
|
|
|
0
|
%
|
Significant components of the Company’s estimated deferred tax assets and liabilities as of December 31, 2020 and 2019 are as follows:
|
|
2020
|
|
|
2019
|
|
Deferred tax assets:
|
|
|
|
|
|
|
Net operating loss carryforwards
|
|
$
|
2,024,000
|
|
|
$
|
1,238,000
|
|
Temporary differences
|
|
|
457,000
|
|
|
|
1,334,000
|
|
|
|
|
|
|
|
|
|
|
Total deferred tax asset
|
|
|
2,481,000
|
|
|
|
2,572,000
|
|
|
|
|
|
|
|
|
|
|
Valuation allowance
|
|
|
(2,481,000
|
)
|
|
|
(2,572,000
|
)
|
|
|
|
-
|
|
|
|
-
|
|
The Company has net operating losses (“NOLs”) as of December 31, 2020 of approximately $9,700,000 for federal tax purposes, which will expire in varying amounts through 2039. The Company may be able to utilize its NOLs to reduce future federal and state income tax liabilities. However, these NOLs are subject to various limitations under Internal Revenue Code ("IRC") Section 382. IRC Section 382 limits the use of NOLs to the extent there has been an ownership change of more than 50 percentage points. In addition, the NOL carry-forwards are subject to examination by the taxing authority and could be adjusted or disallowed due to such exams. Although the Company has not undergone an IRC Section 382 analysis, it is possible that the utilization of the NOLs could be substantially limited. The Company has no tax provision for the years ended December 31,2020 and 2019 due to the net losses and full valuation allowances against net deferred tax assets.
NOTE 12 - SUBSEQUENT EVENTS
On January 26, 2021 the Company entered into a purchase agreement to acquire 100% ownership of EnergyWyze, LLC, a limited liability company. The purchase price consideration consists of the following:
$75,000.00 with $25,000.00 paid at closing and the remaining balance of $50,000.00 to be in the form of a 180 day Seller Note to be retired in conjunction with any capital raise associated with the intended up listing to a national exchange. The Seller Note would be extendable for a period of 90 days at the Buyer’s option, furthermore the note can be converted at any time by the sellers into Common Stock during the initial 180-day period based on the 10 Day Volume Weighted Average Price (VWAP).
$450,000.00 USD in Restricted Common Stock based on the 10 Day VWAP immediately preceding the closing date and each vesting period. Stock awarded will be allocated equally, $150,000.00 USD each, between the principals named in the LOI , and will vest over a three-year period. Each principal member must be employed by the Company on the vesting date to be awarded the equity award. The vesting schedule shall be as follows: $50,000.00 USD shall vest on July 1, 2021. $100,000.00 USD, representing the remaining individual balance, shall be divided into ten equal amounts and will vest on quarterly basis over the next 10 quarters post the initial vesting period of July 1, 2021.
On January 27, 2021, the Company entered into a Note Settlement Agreement (“Settlement Agreement”) related to the UAHC and Iliad Notes. Pursuant to the terms of the Settlement Agreement, the Company issued 100,000,000 and 30,000,000 shares of common stock to repay the Iliad Note and the UAHC Note, respectively.As of January 27, 2021, the outstanding balances of Iliad Note and the UAHC Note plus accrued interest were $2,253,666.82 and $681,170, respectively. The Company recorded losses on the debt settlement of $136,333 and $35,830, for the Iliad Note and the UAHC Note, respectively.
On January 28, 2021, the Company amended its Articles of Incorporation to designate 1,500 shares of undesignated preferred stock as Class C preferred stock.
On January 28, 2021, the Company entered into a purchase agreement with GHS whereby GHS agreed to purchase, in tranches, up to $1,000,000 of Class C preferred stock in exchange for 1,010 shares of Class C preferred stock. GHS purchased the first tranche of 500 shares for $500,000.
On February 12, 2021, the Company entered into an agreement to purchase 51% ownership of Box Pure Air, LLC, a Delaware limited liability company. The consideration consisted of an aggregate number of common stock shares equal to $500,000.
On February 22, 2021, GHS purchased a second tranche of 250 shares of Class C preferred stock for $250,000.
On March 11, 2021, the Company amended its Articles of Incorporation to designate 2,000 shares of undesignated preferred stock as Class D preferred stock.
On March 11, 2021, the Company entered into a purchase agreement with GHS whereby GHS agreed to purchase, in tranches, up to $2,000,000 of Class D preferred stock in exchange for 2,000 shares of Class D preferred stock. GHS purchased the first tranche of 500 shares for $500,000. On March 19, 2021, GHS purchased the second tranche of 500 shares of Class D preferred stock for $500,000. On March 26, 2021 GHS purchased the third tranche of 500 shares of Class D preferred stock for $500,000. On April 1, 2021, GHS purchased the fourth tranche of 500 shares of Class D preferred stock for $500,000.
On March 22, 2021, we filed a Certificate of Amendment (the “Certificate of Amendment”) with the Secretary of State of the State of Nevada to effect a 1 for 75 reverse stock split. At the effective time of the reverse stock split, every 75 shares of issued and outstanding common stock will be converted into one (1) share of issued and outstanding common stock. The number of authorized shares and the par value per share of the common stock and the number of authorized or issued and outstanding shares of the Company’s preferred stock will remain unchanged.
On April 7, 2021 we completed the spin-off of 1606 Corp. whereby each holder of common stock and Class A Preferred Stock of the Company received one share of unregistered and restricted common stock and Class A Preferred Stock of 1606 Corp. for each such share owned of the Company.