Notes
to Condensed Consolidated Financial Statements
March
31, 2021
NOTE
1 - ORGANIZATION
Business
Ozop
Energy Solutions, Inc. (the” Company,” “we,” “us” or “our”) was originally incorporated
as Newmarkt Corp. on July 17, 2015, under the laws of the State of Nevada.
On
October 29, 2020, the Company formed a new wholly owned subsidiary, Ozop Surgical Name Change Subsidiary, Inc., a Nevada corporation
(“Merger Sub”). The Merger Sub was formed under the Nevada Revised Statutes for the sole purpose and effect of changing
the Company’s name to “Ozop Energy Solutions, Inc.” That same day the Company entered into an Agreement and
Plan of Merger (the “Merger Agreement”) with the Merger Sub and filed Articles of Merger (the “Articles of Merger”)
with the Nevada Secretary of State, merging the Merger Sub into the Company, which were stamped effective as of November 3, 2020.
As permitted by the Section 92.A.180 of the Nevada Revised Statutes, the sole purpose and effect of the filing of Articles of
Merger was to change the name of the Company from Ozop Surgical Corp to “Ozop Energy Solutions, Inc.”
On
December 11, 2020, the Company formed Ozop Energy Systems, Inc. (“OES”), a Nevada corporation and a wholly owned subsidiary
of the Company. OES was formed to be a manufacturer and distributor of renewable energy products.
Stock
Purchase Agreement
On
July 10, 2020, the Company entered into a Stock Purchase Agreement (the “SPA”) with Power Conversion Technologies,
Inc., a Pennsylvania corporation (“PCTI”), and Catherine Chis (“Chis”), PCTI’s Chief Executive Officer
(“CEO”) and its sole shareholder. Under the terms of the SPA, the Company acquired one thousand (1,000) shares of
PCTI, which represents all of the outstanding shares of PCTI, from Chis in exchange for the issuance of 47,500 shares of the Company’s
Series C Preferred Stock, 18,667 shares of the Company’s Series D Preferred Stock, and 500 shares of the Company’s
Series E Preferred Stock to Chis. The Acquisition is being accounted for as a business combination and was treated as a reverse
acquisition for accounting purposes with PCTI as the accounting acquirer in accordance with Financial Accounting Standards Board
Accounting Standards Codification Topic 805, Business Combinations (“ASC 805”). In accordance with the accounting
treatment for a reverse acquisition, the Company’s historical financial statements prior to the reverse merger were and
will be replaced with the historical financial statements of PCTI prior to the reverse merger, in all future filings with the
U.S. Securities and Exchange Commission (the “SEC”). The consolidated financial statements after completion of the
reverse merger have and will include the assets, liabilities and results of operations of the combined company from and after
the closing date of the reverse merger.
PCTI
designs, develops, manufactures and distributes standard and custom power electronic solutions. PCTI serves clients in several
industries including energy storage, shore power, DEWs, microgrid, telecommunications, military, transportation, renewable energy,
aerospace and mission critical defense systems. Customers include the United States military, other global military organizations
and many of the world’s largest industrial manufacturers. All of its products are manufactured in the United States. Because
of the Company’s product scope and the high-power niche that their products occupy, the Company is aggressively targeting
the rapidly growing renewable and energy storage markets. The Company’s mission is to be a global leader for high power
electronics with a standard of continued innovation.
The
Company utilized the Option Pricing Method (the “OPM”) to value the transaction. The OPM method treats all equity
linked instruments as call options on the enterprise value, with exercise prices and liquidation preferences based on the terms
of the various common, preferred, options, warrants, and convertible debt. Under this method, the common stock only has value
if the funds available for distribution to the shareholders exceed the liquidation preferences of the preferred stock and face
value of the convertible debt. The timing of a liquidity event is required to utilize this method. The OPM considers the various
terms of the stockholder agreements—including the level of seniority among the securities, dividend policy, conversion ratios,
and cash allocations—upon liquidation of the enterprise. In addition, the method implicitly considers the effect of the
liquidation preference as of the future liquidation date, not as of the valuation date. A feature of the OPM is that it explicitly
recognizes the option-like payoffs of the various share classes utilizing information in the underlying asset (that is, estimated
volatility) and the risk-free rate to adjust for risk by adjusting the probabilities of future payoffs. The following table summarizes
the preliminary value of the consideration issued and the preliminary purchase price allocation of the fair value of assets acquired
and liabilities assumed in the transaction.
|
|
Purchase Price Allocation
|
|
Fair value of OZOP equity consideration issued
|
|
$
|
818,444
|
|
Assets acquired
|
|
$
|
1,229,917
|
|
Goodwill
|
|
|
11,201,145
|
|
Liabilities assumed
|
|
|
(11,612,618
|
)
|
|
|
$
|
818,444
|
|
The
Company reviews the goodwill allocated to each of our reporting units for possible impairment annually and whenever events or
changes in circumstances indicate the carrying amount may not be recoverable. Pursuant to that review, management has determined
that the goodwill arising from the above transaction has been impaired and accordingly $11,201,145 was recorded as an impairment
expense for the year ended December 31, 2020.
The
following table provides unaudited pro forma results of operations for the three months ended March 31, 2020, as if the acquisition
had been consummated as of the beginning of that period presented. The pro forma results include the effect of certain purchase
accounting adjustments, such as the estimated changes in depreciation and amortization expense on the acquired intangible assets.
However, pro forma results do not include any anticipated cost savings (if any) of the combined companies. Accordingly, such amounts
are not necessarily indicative of the results if the acquisition has occurred on the date indicated, or which may occur in the
future.
|
|
Unaudited pro forma results three months ended March 31, 2020
|
|
Revenues
|
|
$
|
892,590
|
|
Loss before income taxes
|
|
|
(5,660,362
|
)
|
Basic and fully diluted loss per share
|
|
$
|
(0.00
|
)
|
Corporate
History
OZOP
was originally incorporated in Switzerland on November 28, 1998 under the name Perma Consultants Holding AG (“Perma”).
On July 19, 2016, Mr. Eric Siu (“Siu”), a former director purchased 100% of the outstanding capital stock of Perma
and changed the name from Perma to Ozop Surgical AG (“Ozop AG”). On February 1, 2018, Ozop AG was re-domiciled as
a Delaware corporation and changed its name to Ozop Surgical, Inc. On July 28, 2016, Ozop formed as the sole member, Ozop Surgical,
LLC (“Ozop LLC”), a Wyoming limited liability company. On October 28, 2016, Ozop acquired 100% of Ozop Surgical Limited
(“Ozop HK”), from Siu, the sole shareholder of Ozop HK. Ozop HK, is a private limited company incorporated in Hong
Kong.
NOTE
2 – RESTATEMENT
During
the preparation of the financial statements as of March 31, 2021, and for the three months ended March 31, 2021, the Company discovered
an error was made in the financial statements as of and for the period ended December 31, 2020. The error relates to the recognition
of certain warrants as derivative liabilities due to the fact the Company has insufficient authorized shares to cover the exercises.
Management believes that the error as of and for December 31, 2020, does not materially impact the balance sheet as December 31, 2020.
New warrants issued in the three months ended March 31, 2021, have been properly accounted for as derivatives. The following table reflects
the effect of the error on the balance sheet as of December 31, 2020:
|
|
Adjusted
December 31,
2020
|
|
|
December 31,
2020
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
2,387,933
|
|
|
$
|
2,387,933
|
|
Current liabilities
|
|
|
8,213,788
|
|
|
|
6,885,845
|
|
Total liabilities
|
|
|
8,723,877
|
|
|
|
7,395,934
|
|
Total stockholders’ deficit
|
|
|
(6.335.885
|
)
|
|
|
(5,007,942
|
)
|
The
change in the current and total liabilities is as a result of the fair value of $2,061,307 of warrants based on the Black-Scholes
option pricing valuation method, and an increase in notes payable of $733,364 as a result of reclassifying amounts previously
recorded as discounts on notes payable, related to the warrants.
NOTE
3 – GOING CONCERN AND MANAGEMENT’S PLANS
The
accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets
and the satisfaction of liabilities in the normal course of business. As of March 31, 2021, the Company had an accumulated deficit of
$231,757,208 and a working capital deficit of $59,996.026 (including derivative liabilities of $65,778,693). These factors, among others, raise substantial doubt about the ability of the Company
to continue as a going concern.
In
December 2019, a novel strain of coronavirus (COVID-19) emerged. Because COVID-19 infections have been reported throughout the
United States, certain federal, state and local governmental authorities have issued stay-at-home orders, proclamations and/or
directives aimed at minimizing the spread of COVID-19. The ultimate impact of the COVID-19 pandemic on the Company’s operations
is unknown and will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including
the duration of the COVID-19 outbreak, new information which may emerge concerning the severity of the COVID-19 pandemic, and
any additional preventative and protective actions that governments, or the Company, may direct, which may result in an extended
period of continued business disruption, and reduced operations. Any resulting financial impact cannot be reasonably estimated
at this time but it may have a material adverse impact on our business, financial condition and results of operations. Management
expects that its business will be impacted to some degree, but the significance of the impact of the COVID-19 outbreak on the
Company’s business and the duration for which it may have an impact cannot be determined at this time.
Management’s
Plans
As
a public company, Management believes it will be able to access the public equities market for fund raising for product development,
sales and marketing and inventory requirements as we expand our distribution in the U.S. market.
During
the three months ended March 31, 2021, the Company raised $12,000,000 and has begun to implement the following business operations,
plans and strategies:
In
April 2021, the Company signed a five- year lease of approximately 8,100 SF in California, for office and warehouse space to support
the sales and distribution of our west coast residential solar business. In anticipation of our taking possession of the facility
on June 1, 2021, as well as for future drop shipment orders to our customers, we have placed purchase orders to various suppliers
of approximately $2.6 million. Also, we have begun to drop ship orders in May 2021 and have received sales orders of approximately
$2.9 million.
OES
is actively engaged in the renewable, electric vehicle (“EV”), energy storage and energy resiliency sectors. We are
engaged in multiple business lines that include Project Development as well as Equipment Distribution. Our solar and energy storage
projects involve large-scale battery and solar photovoltaics (PV) installations. The utility-scale storage business is based on
an arbitrage business model in which we install multiple 1+ megawatt batteries, charge them with off-peak grid electricity under
contract with the utility, then sell the power back during peak load hours at a premium, as dictated by prevailing electricity
tariffs.
Solar
PV: Our PV business model involves the design and construction of electrical generating PV systems that can sell power
to the utilities or be used for off grid use as part of our developing Neo-Grids solution. The Neo-Grids proprietary program,
patent/s pending, was developed for the off-grid distribution of electricity to remove or reduce the dependency on utilities that
currently burdens the EV Charging sectors. It will also reduce or eliminate the lengthy permitting processes and streamline the
installations of those EV chargers.
Electric
Vehicle Chargers: The Neo-Grids, patent pending, is comprised of the design engineering, installation, and operational
methodologies as well as the financial arbitrage of how we produce, capture and distribute electrical energy for the EV markets.
Neo-Grids will serve both the private auto and the commercial sectors. OES has license rights to the proprietary “flow”
that was filed with the United States Patent and Trademark Office in March 2021. The exponential growth of the EV industry has
been accelerated by the recent major commitments of most of the major car manufacturers. Our Neo-Grids business model leverages
this accelerated growth by offering (1) charging locations that can be installed with reduced delays, restricted areas or load
limits and (2) EV charger electricity that is produced from renewable sources claiming little to no carbon footprint.
OES
has developed a business plan for the Neo Grids distribution solution that is being executed now and will be coming out of Research
and Development for proof of concept in Q3 2021. Having identified several manufacturers and established a supply line for EV
chargers, we have entered into agreements for EV charger installations as part of this proof of concept and plan to service them
under multi-year agreements.
Equipment
Distributor: OES has also entered the component supply/distribution side of the renewable, resiliency and energy storage
industries distributing the core components associated with residential and commercial solar PV systems as well as onsite battery
storage and power generation. The components we are distributing include PV panels, solar inverters, solar mounting systems, stationary
batteries, onsite generators and other associated electrical equipment and components that are all manufactured by multiple companies,
both domestic and international. These core products are sourced from management-developed relationships and are distributed through
our existing network and our in-house sales team.
OES
management has decades of experience in the renewable, storage and resilient energy businesses and associated markets, which include
but are not limited to project finance, project development, equipment finance, construction, utility protocol, regulatory policy
and technology assessment.
The
accompanying financial statements do not include any adjustments to reflect the possible future effects on the recoverability
and classification of assets or the amounts and classification of liabilities that may result from the possible inability of the
Company to continue as a going concern.
NOTE
4 – SUMMARY OF SIGNIFICANT ACCOUNTING PRONOUNCEMENTS
Basis
of Presentation
The
accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles
generally accepted in the United States of America for interim financial statements and with the instructions to Form 10-Q and
Article 8 of Regulation S-X of the SEC. Accordingly, they do not contain all information and footnotes required by accounting
principles generally accepted in the United States of America for annual financial statements. In the opinion of the Company’s
management, the accompanying unaudited condensed consolidated financial statements contain all the adjustments necessary (consisting
only of normal recurring accruals) to present the financial position of the Company as of March 31, 2021, and the results of operations
and cash flows for the periods presented. The results of operations for the three months ended March 31, 2021, are not necessarily
indicative of the operating results for the full fiscal year or any future period. These unaudited condensed consolidated financial
statements should be read in conjunction with the financial statements and related notes thereto included in the Company’s
Current Report on Form 10-K filed on April 15, 2021.
The
unaudited condensed consolidated financial statements include the accounts of the Company and
PCTI and the Company’s other wholly owned subsidiaries Ozop Energy Systems, Inc., Ozop LLC, Ozop HK and Spinus, LLC (“Spinus”).
All intercompany accounts and transactions have been eliminated in consolidation.
Emerging
Growth Companies
The
Company qualifies as an “emerging growth company” under the 2012 JOBS Act. Section 107 of the JOBS Act provides that
an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities
Act for complying with new or revised accounting standards. As an emerging growth company, the Company can delay the adoption
of certain accounting standards until those standards would otherwise apply to private companies. The Company has elected to take
advantage of the benefits of this extended transition period.
Use
of Estimates
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 disclosures
of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses
during the reported period. Actual results could differ from those estimates.
Cash
and Cash Equivalents
The
Company considers all highly liquid investments with an original term of three months or less to be cash equivalents. These investments
are carried at cost, which approximates fair value. Cash and cash equivalent balances may, at certain times, exceed federally
insured limits. The Company has no cash equivalents at March 31, 2021 and December 31, 2020.
Sales
Concentration and credit risk
Following
is a summary of customers who accounted for more than ten percent (10%) of the Company’s revenues for the three months ended
March 31, 2021, and 2020, and their accounts receivable balance as of March 31, 2021:
|
|
Sales %
Three Months
Ended
March 31,
2021
|
|
|
Sales %
Three Months
Ended
March 31,
2020
|
|
|
Accounts
receivable
%
March 31,
2021
|
|
Customer A
|
|
|
95
|
%
|
|
|
-
|
%
|
|
|
100
|
%
|
Customer B
|
|
|
-
|
%
|
|
|
92
|
%
|
|
|
-
|
|
As
disclosed in the above table, PCTI, historically does not have year to year many recurring clients as the Company produces capital
equipment for its’ customers.
Accounts
Receivable
The
Company records accounts receivable at the time products and services are delivered. An allowance for losses is established through
a provision for losses charged to expenses. Receivables are charged against the allowance for losses when management believes
collectability is unlikely. The allowance (if any) is an amount that management believes will be adequate to absorb estimated
losses on existing receivables, based on evaluation of the collectability of the accounts and prior loss experience.
Inventory
Inventories
are valued at the lower of cost or net realizable value, with cost determined on the first-in, first-out basis. Inventory costs
include material, labor and manufacturing overhead. In evaluating the net realizable value of inventory, management also considers,
if applicable, other factors, including known trends, market conditions, currency exchange rates and other such issues.
The
components of inventories at March 31, 2021, and December 31, 2020 are as follows:
|
|
March 31,
2021
|
|
|
December 31,
2020
|
|
|
|
|
|
|
|
|
Raw materials
|
|
$
|
207,178
|
|
|
$
|
207,178
|
|
Work in process
|
|
|
33,862
|
|
|
|
142,526
|
|
Finished goods
|
|
|
9,643
|
|
|
|
9,643
|
|
|
|
$
|
250,683
|
|
|
$
|
359,347
|
|
Purchase
concentration
The
principal purchases by the Company are comprised of parts and raw materials that the Company assembles and manufactures and sells
to its customers. There were no suppliers who accounted for more than ten percent (10%) of the Company’s purchases for the
three months ended March 31, 2021, and 2020.
Suppliers
to the Company vary from period to period dependent upon our customer’s order specifications. In any specific reporting
period, we may be relying on certain vendors, however these vendors will vary dependent on the parts and materials needed. The
Company believes it is not reliant on any particular vendor for future needs.
Property,
plant and equipment
Property
and equipment are stated at cost, and depreciation is provided by use of a straight-line method over the estimated useful lives
of the assets.
The
Company reviews property and equipment for potential impairment whenever events or changes in circumstances indicate that the
carrying amounts of assets may not be recoverable. The estimated useful lives of property and equipment is as follows:
Office furniture and equipment
|
3-5 years
|
Warehouse equipment
|
7 years
|
Revenue
Recognition
The
Company recognizes revenue from the commercial sales of products by: (1) identify the contract (if any) with a customer; (2) identify
the performance obligations in the contract (if any); (3) determine the transaction price; (4) allocate the transaction price
to each performance obligation in the contract (if any); and (5) recognize revenue when each performance obligation is satisfied.
Under ASC 606, revenue is recognized when the following criteria are met: (1) persuasive evidence of an arrangement exists; (2)
the performance of service has been rendered to a customer or delivery has occurred; (3) the amount of fee to be paid by a customer
is fixed and determinable; and (4) the collectability of the fee is reasonably assured. Other than The Company has no outstanding
contracts with any of its’ customers. The Company recognizes revenue when title, ownership, and risk of loss pass to the
customer, all of which occurs upon shipment or delivery of the product and is based on the applicable shipping terms.
For
contracts with customers, ownership of the goods and associated revenue are transferred to customers at a point in time, generally
upon shipment of a product to the customer or receipt of the product by the customer and without significant judgments. Advance
payments are typically required for commercial customers and are recorded as current liability until revenue is recognized. Advance
payments are not required for government customers. The majority of contracts typically require payment within 30 to 60 days after
transfer of ownership to the customer.
For
the periods covered herein, we did not have post shipment obligations such as training or installation, customer acceptance provisions,
credits and discounts, rebates and price protection, or other similar privileges.
Advertising
and Marketing Expenses
The
Company expenses advertising and marketing costs as incurred. For the three months ended March 31, 2021, and 2020, the Company
recorded $22,590 and $6,106, respectively, of advertising and marketing expenses.
Research
and Development
Costs
and expenses that can be clearly identified as research and development are charged to expense as incurred. For the three months
ended March 31, 2021, and 2020, the Company did not record any research and development expenses.
Convertible
Instruments
The
Company evaluates and accounts for conversion options embedded in convertible instruments in accordance with ASC 815, Derivatives
and Hedging Activities.
Applicable
GAAP requires companies to bifurcate conversion options from their host instruments and account for them as free standing derivative
financial instruments according to certain criteria. The 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 other GAAP 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
Company accounts for convertible instruments (when it has been determined that the embedded conversion options should not be bifurcated
from their host instruments) as follows: 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 this note transaction and the effective conversion price embedded in this note. Debt discounts
under these arrangements are amortized over the term of the related debt to their stated date of redemption.
The
Company accounts for the conversion of convertible debt when a conversion option has been bifurcated using the general extinguishment
standards. The debt and equity linked derivatives are removed at their carrying amounts and the shares issued are measured at
their then-current fair value, with any difference recorded as a gain or loss on extinguishment of the two separate accounting
liabilities.
Fair
Value of Financial Instruments
The
Company measures assets and liabilities at fair value based on an expected exit price as defined by the authoritative guidance
on fair value measurements, which represents the amount that would be received on the sale of an asset or paid to transfer a liability,
as the case may be, in an orderly transaction between market participants. As such, fair value may be based on assumptions that
market participants would use in pricing an asset or liability. The authoritative guidance on fair value measurements establishes
a consistent framework for measuring fair value on either a recurring or nonrecurring basis whereby inputs, used in valuation
techniques, are assigned a hierarchical level.
The
following are the hierarchical levels of inputs to measure fair value:
|
●
|
Level
1 - Observable inputs that reflect quoted market prices in active markets for identical assets or liabilities.
|
|
●
|
Level
2 - Inputs reflect quoted prices for identical assets or liabilities in markets that are not active; quoted prices for similar
assets or liabilities in active markets; inputs other than quoted prices that are observable for the assets or liabilities;
or inputs that are derived principally from or corroborated by observable market data by correlation or other means.
|
|
●
|
Level
3 - Unobservable inputs reflecting the Company’s assumptions incorporated in valuation techniques used to determine
fair value. These assumptions are required to be consistent with market participant assumptions that are reasonably available.
|
From
time to time, certain of the Company’s embedded conversion features on debt and outstanding warrants have been treated as
derivative liabilities for accounting purposes under ASC 815 due to insufficient authorized shares to fully settle conversion
features of the instruments if exercised. In this case, the Company utilized the latest inception date sequencing method to reclassify
outstanding instruments as derivative instruments. These contracts were recognized at fair value with changes in fair value recognized
in earnings until such time as the conditions giving rise to such derivative liability classification were settled.
The
carrying amounts of the Company’s financial assets and liabilities, such as cash, prepaid expenses, other current assets,
accounts payable and accrued expenses, certain notes payable and notes payable - related party, approximate their fair values
because of the short maturity of these instruments.
The
following table represents the Company’s derivative instruments that are measured at fair value on a recurring basis as
of March 31, 2021 and December 31, 2020, for each fair value hierarchy level:
March 31, 2021
|
|
Derivative
Liabilities
|
|
|
Total
|
|
Level I
|
|
$
|
-
|
|
|
$
|
-
|
|
Level II
|
|
$
|
-
|
|
|
$
|
-
|
|
Level III
|
|
$
|
65,778,693
|
|
|
$
|
65,778,693
|
|
December 31, 2020
|
|
Derivative
Liabilities
|
|
|
Total
|
|
Level I
|
|
$
|
-
|
|
|
$
|
-
|
|
Level II
|
|
$
|
-
|
|
|
$
|
-
|
|
Level III
|
|
$
|
3,299,685
|
|
|
$
|
3,299,685
|
|
Leases
The
Company accounts for leases under ASU 2016-02 (see Note 14), applying the package of practical expedients to leases that commenced
before the effective date whereby the Company elected to not reassess the following: (i) whether any expired or existing contracts
contain leases; (ii) the lease classification for any expired or existing leases; and (iii) initial direct costs for any existing
leases. For contracts entered into on or after the effective date, at the inception of a contract the Company assess whether the
contract is, or contains, a lease. Our assessment is based on: (1) whether the contract involves the use of a distinct identified
asset, (2) whether we obtain the right to substantially all the economic benefit from the use of the asset throughout the period,
and (3) whether we have the right to direct the use of the asset. We allocate the consideration in the contract to each lease
component based on its relative stand-alone price to determine the lease payments.
Operating
lease ROU assets represent the right to use the leased asset for the lease term and operating lease liabilities are recognized
based on the present value of the future minimum lease payments over the lease term at commencement date. As most leases do not
provide an implicit rate, the Company used an incremental borrowing rate of 7.5%, for the existing lease, based on the information
available at the adoption date in determining the present value of future payments. Operating lease expense is recognized pursuant
to on a straight-line basis over the lease term and is included in rent in the condensed consolidated statements of operations.
Income
Taxes
Income
taxes are accounted for 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 and operating loss and tax credit carryforwards. 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. A valuation allowance on deferred tax assets is established when management considers
it is more likely than not that some portion or all of the deferred tax assets will not be realized.
Tax
benefits from an uncertain tax position are only recognized if it is more likely than not that the tax position will be sustained
on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial
statements from such a position are measured based on the largest benefit that has a greater than fifty percent likelihood of
being realized upon ultimate resolution. Interest and penalties related to unrecognized tax benefits are recorded as incurred
as a component of income tax expense. The Company has not recognized any tax benefits from uncertain tax positions for any of
the reporting periods presented.
Earnings
(Loss) Per Share
The
Company reports earnings (loss) per share in accordance with ASC 260, “Earnings per Share.” Basic earnings (loss)
per share is computed by dividing net income (loss) by the weighted-average number of shares of common stock outstanding during
each period. Diluted earnings per share is computed by dividing net loss by the weighted-average number of shares of common stock,
common stock equivalents and other potentially dilutive securities outstanding during the period. As of March 31, 2021, the Company’s
dilutive securities are convertible into approximately 14,294,157,540 shares of common stock. There were no dilutive securities
as of March 31, 2020. This amount is not included in the computation of dilutive loss per share because their impact is antidilutive.
The following table represents the classes of dilutive securities as of March 31, 2021:
|
|
March 31,
2021
|
|
Common stock to be issued
|
|
|
5,000,000
|
|
Convertible preferred stock
|
|
|
13,357,511,800
|
|
Unexercised common stock purchase warrants
|
|
|
707,950,819
|
|
Convertible notes payable
|
|
|
144,569,921
|
|
|
|
|
14,215,032,540
|
|
Recent
Accounting Pronouncements
There
have no recent accounting pronouncements or changes in accounting pronouncements during the period ended March 31, 2021, that
are of significance or potential significance to the Company.
NOTE
5 – PROPERTY AND EQUIPMENT
The
following table summarizes the Company’s property and equipment:
|
|
March 31,
2021
|
|
|
December 31,
2020
|
|
Office equipment
|
|
$
|
178,553
|
|
|
$
|
143,247
|
|
Less: Accumulated Depreciation
|
|
|
(90,904
|
)
|
|
|
(82,576
|
)
|
Property and Equipment, Net
|
|
$
|
87,649
|
|
|
$
|
60,671
|
|
Depreciation
expense was $8,328 and $-0- for the three months ended March 31, 2021, and 2020, respectively.
NOTE
6 - CONVERTIBLE NOTES PAYABLE
The
transaction with PCTI is being accounted for as a business combination and was treated as a reverse acquisition for accounting
purposes with PCTI as the accounting acquirer in accordance with Financial Accounting Standards Board Accounting Standards Codification
Topic 805, Business Combinations (“ASC 805”). In accordance with the accounting treatment for a reverse acquisition,
the Company’s historical financial statements prior to the reverse merger were and will be replaced with the historical
financial statements of PCTI prior to the reverse merger. The consolidated financial statements after completion of the reverse
merger have and will include the assets, liabilities and results of operations of the combined company from and after the closing
date of the reverse merger.
On
July 10, 2020, PCTI (the accounting acquirer) assumed the balance of a past-due 15% convertible note issued by the Company on
September 13, 2017. As of March 31, 2021 and December 31, 2020, the outstanding principal balance of this note was $25,000.
On
July 10, 2020, PCTI (the accounting acquirer) assumed the balance of a 12% convertible promissory note issued by the Company on
June 1, 2020, (the “Issuance Date”) to an investor, pursuant to a Securities Purchase Agreement. This note matures
6 months after the Issuance Date. This note is convertible into shares of the Company’s common stock beginning on the Issuance
Date at $0.025 for the first three months after the Issuance Date. After the first three months after the Issuance Date, the conversion
price shall be equal to the lower of (i) $.025 or 50% of the lowest trading price for the thirty-five trading days prior to the
conversion. As of July 10, 2020, the outstanding principal balance of this note was $127,500 with a carrying value of $27,625,
net of unamortized discounts of $99,875. In conjunction with this note, the Company issued a warrant to purchase 6,375,000 shares
of common stock at an exercise price of $0.02, subject to adjustments and expiring on the five-year anniversary of the Issuance
Date. For the three months March 31, 2021, the investor converted a total of $127,500 of the face value and $14,433 of accrued
interest and fees into 88,708,118 shares of common stock at an average conversion price of $0.0016. On March 10, 2021, the investor
received 6,355,008 shares of common stock upon the cashless exercise of the warrants. As of March 31, 2021, and December 31, 2020,
the outstanding principal balance of this note was $-0- and $127,500, respectively.
On
July 10, 2020, PCTI (the accounting acquirer) assumed the balance of a 15% convertible promissory note issued by the Company on
June 30, 2020, (the “Issuance Date”) to an investor, pursuant to a Securities Purchase Agreement. This note matures
6 months after the Issuance Date. This note is convertible into shares of the Company’s common stock beginning on the Issuance
Date at $0.025 for the first three months after the Issuance Date. After the first three months after the Issuance Date, the conversion
price shall be equal to the lower of (i) $.025 or 50% of the lowest trading price for the thirty-five trading days prior to the
conversion. As of July 10, 2020, the outstanding principal balance of this note was $129,500 with a carrying value of $8,375,
net of unamortized discounts of $121,125. In conjunction with this note, the Company issued a warrant to purchase 6,375,000 shares
of common stock at an exercise price of $0.02, subject to adjustments and expiring on the five-year anniversary of the Issuance
Date. For the three months March 31, 2021, the investor converted a total of $129,500 of the face value and $30,264 of accrued
interest and fees into 110,946,972 shares of common stock at an average conversion price of $0.00144. On March 10, 2021, the investor
received 6,355,008 shares of common stock upon the cashless exercise of the warrants. As of March 31, 2021, and December 31, 2020,
the outstanding principal balance of this note was $-0- and $129,500, respectively.
On
July 10, 2020, PCTI (the accounting acquirer) assumed the balance of a 15% convertible promissory note issued by the Company on
July 8, 2020, (the “Issuance Date”) to an investor, pursuant to a Securities Purchase Agreement. This note matures
6 months after the Issuance Date. This note is convertible into shares of the Company’s common stock beginning on the Issuance
Date at $0.025 for the first three months after the Issuance Date. After the first three months after the Issuance Date, the conversion
price shall be equal to the lower of (i) $.025 or 50% of the lowest trading price for the thirty-five trading days prior to the
conversion. In conjunction with this note, the Company issued a warrant to purchase 12,500,000 shares of common stock at an exercise
price of $0.02, subject to adjustments and expiring on the five-year anniversary of the Issuance Date. For the three months ended
March 31, 2021, amortization of the debt discounts of $10,416 was charged to interest expense. As of December 31, 2020, the outstanding
principal balance of this note is $250,000 with a carrying value of $239,583 net of unamortized discounts of $10,417. For the
three months March 31, 2021, the investor converted a total of $250,000 of the face value and $44,733 of accrued interest and
fees into 188,605,491 shares of common stock at an average conversion price of $0.00156. On March 10, 2021, the investor received
12,460,800 shares of common stock upon the cashless exercise of the warrants. As of March 31, 2021, and December 31, 2020, the
outstanding principal balance of this note was $-0- and $250,000, respectively.
On
February 26, 2020, (the “Issuance Date”) PCTI issued a 12% Convertible Promissory Note (the “Note”), in the principal
amount of $106,950, to an investor. This note matures 12 months after the Issuance Date. This note is convertible into shares of the
Company’s common stock beginning on the Issuance Date at 55% of the lowest trading price for the twenty-five trading days prior
to the conversion. If the trading price cannot be calculated for such security on such date, the trading price shall be the fair market
value as mutually determined by the Company and the investor for which the calculation of the trading price is required in order to determine
the conversion price. PCTI received proceeds of $85,000 on February 26, 2020, and the Note included an original issue discount of $13,950
and lender costs of $8,000. This note proceeds were used by the Company for general working capital purposes. The Note also required
a daily payment via ACH of $400. On June 25, 2020, the Note was amended to add $111,225 of additional principal to the outstanding balance.
Pursuant to the PCTI transaction with Ozop, on July 10, 2020, the conversion price is equal to 45% multiplied by the lowest closing bid
price during the twenty-five-trading day period ending on the last completed trading date in the OTC Markets prior to the date of conversion.
Accordingly, the Company determined the conversion feature of the Notes represented an embedded derivative since the note is convertible
into a variable number of shares upon conversion, as the note was not considered to be conventional debt under ASC 815 and the embedded
conversion feature was bifurcated from the debt host and accounted for as a derivative liability. The embedded feature included in the
note resulted in an initial debt discount of $85,000, interest expense of $135,786 and initial derivative liability of $220,786. For
the three months ended March 31, 2021, amortization of the debt discounts of $17,737 was charged to interest expense. For the three months
March 31, 2021, the investor converted a total of $50,550 of the face value and $11,265 of accrued interest and fees into 20,218,562
shares of common stock at an average conversion price of $0.00306. The Investor also amended the note to deduct the previously added
principal amount of $111,225. As of March 31, 2021, and December 31, 2020, the outstanding principal balance of this note was $-0- and
$161,775, respectively. The Company accounted for the amendment as an extinguishment of debt.
On
July 15, 2020, (the “Issuance Date”) the Company issued a 15% convertible promissory note, in the principal amount
of $127,500, to an investor. This note matures 6 months after the Issuance Date. This note is convertible into shares of the Company’s
common stock beginning on the Issuance Date at $0.011 for the first three months after the Issuance Date. After the first three
months after the Issuance Date, the conversion price shall be equal to the lower of (i) $.025 or 50% of the lowest trading price
for the thirty-five trading days prior to the conversion. The Company received proceeds of $102,000 on July 22, 2020, and this
note included an original issue discount of $25,500. This note proceeds will be used by the Company for general working capital
purposes. In conjunction with this note, the Company issued a warrant to purchase 6,375,000 shares of common stock at an exercise
price of $0.02, subject to adjustments and expiring on the five-year anniversary of the Issuance Date. The Company allocated the
proceeds to the debt of $82,068 and to the warrant $19,932 based on the relative fair value. The embedded conversion feature included
in this note resulted in an initial derivative liability of $207,699, a debt discount of $82,068 with the excess of $125,541 charged
to interest expense of $125,541. For the three months ended March 31, 2020, amortization of the debt discounts of $10,792 was
charged to interest expense. As of March 31, 2021, and December 31, 2020, the outstanding principal balance of this note was $127,500
with a carrying value of $127,500 as of March 31, 2021, and $116,708, net of unamortized discounts of $10,792 as of December 31,
2020.
On
July 29, 2020, (the “Issuance Date”) the Company issued a 15% convertible promissory note, in the principal amount
of $127,500, to an investor. This note matures 6 months after the Issuance Date. This note is convertible into shares of the Company’s
common stock beginning on the Issuance Date at $0.011 for the first three months after the Issuance Date. After the first three
months after the Issuance Date, the conversion price shall be equal to the lower of (i) $.025 or 50% of the lowest trading price
for the thirty-five trading days prior to the conversion. The Company received proceeds of $100,000 on August 3, 2020, and this
note included an original issue discount of $25,500. This note proceeds will be used by the Company for general working capital
purposes. In conjunction with this note, the Company issued a warrant to purchase 12,750,000 shares of common stock at an exercise
price of $0.01, subject to adjustments and expiring on the five-year anniversary of the Issuance Date. The Company allocated the
proceeds to the debt $61,733 and warrant $40,267 based on the relative fair value. The embedded conversion feature included in
this note resulted in an initial derivative liability of $198,239, a debt discount of $61,733 with the excess of $136,506 charged
to interest expense. For the three months ended March 31, 2021, amortization of the debt discounts of $21,583 was charged to interest
expense. As of March 31, 2021, and December 31, 2020, the outstanding principal balance of this note was $127,500 with a carrying
value of $127,500 as of March 31, 2021, and $105,917, net of unamortized discounts of $21,583 as of December 31, 2020.
On
November 16, 2020, (the “Issuance Date”) the Company issued a promissory note, in the principal amount of $250,000,
to an investor. The note carries a guaranteed interest payment of 15%, which is added to the principal on the Issuance Date. Principal
payments shall be made in six instalments of $57,500 commencing May 21, 2021, and continuing each 30 days thereafter for 4 months.
The Holder shall have the right from time to time, and at any time following an event of default, as defined on the agreement,
to convert all or any part of the outstanding and unpaid principal, interest and any other amounts due into fully paid and non-assessable
shares of common stock of the Company. This note is convertible into shares of the Company’s common stock beginning on the
Issuance Date at $0.01 for the first three months after the Issuance Date. After the first three months after the Issuance Date,
the conversion price shall be equal to the lower of (i) $.01 or the volume weighted average price of the common stock during the
five (5) Trading Day period ending on the day prior to conversion. The Company received proceeds of $200,000 on November 19, 2020,
and this note included an original issue discount of $50,000. This note proceeds will be used by the Company for general working
capital purposes. The embedded conversion feature included in this note resulted in an initial derivative liability of $14,750
and a debt discount of $50,000. In conjunction with this note, the Company issued a warrant to purchase 35,000,000 shares of common
stock at an exercise price of $0.25, subject to adjustments and expiring on the five-year anniversary of the Issuance Date. The
warrants issued resulted in a debt discount of $3,050, with the offset to additional paid in capital. For the three months ended
March 31, 2021, amortization of the debt discounts of $23,625 was charged to interest expense. As of March 31, 2021, and December
31, 2020, the outstanding principal balance of this note was $250,000 with a carrying value of $216,969 and $190,736, net of unamortized
discounts of $33,031 and $59,264, respectively.
A
summary of the convertible note balance as of March 31, 2021, is as follows:
|
|
March 31,
2021
|
|
|
|
|
|
Principal balance
|
|
$
|
530,000
|
|
Unamortized discount
|
|
|
(33,030
|
)
|
Ending balance, net
|
|
$
|
496,970
|
|
NOTE
7 – DERIVATIVE LIABILITIES
The
Company determined the conversion feature of the convertible notes, which all contain variable conversion rates, represented an
embedded derivative since the notes were convertible into a variable number of shares upon conversion. Accordingly, the notes
are not considered to be conventional debt under ASC 815 and the embedded conversion feature was bifurcated from the debt host
and accounted for as a derivative liability.
At
any given time, certain of the Company’s embedded conversion features on debt and outstanding warrants may be treated as
derivative liabilities for accounting purposes under ASC 815-40 due to insufficient authorized shares to settle these outstanding
contracts. Pursuant to SEC staff guidance that permits a sequencing approach based on the use of ASC 815-15-25 which provides
guidance for contracts that permit partial net share settlement. The sequencing approach may be applied in one of two ways: contracts
may be evaluated based on (1) earliest issuance date or (2) latest maturity date. Pursuant to the sequencing approach, the Company
evaluates its contracts based upon the latest maturity date.
The
Company valued the derivative liabilities at March 31, 2021, and December 31, 2020, at $65,778,693 and $3,299,685, respectively.
For the derivative liability associated with convertible notes, the Company used the Monte Carlo simulation valuation model with the
following assumptions as of March 31, 2021, and December 31, 2020, risk free interest rates at 0.05% and 0.09%, respectively, and volatility
of 199% and 48% to 61%, respectively. During the three months ended, the Company issued 300,000,000 warrants in conjunction with notes
payable (see Note 8). Due to insufficient authorized shares (see above), the Company recorded a discount to notes payable of $12,000,000
and interest expense of $38,907,939, with the offset to derivative liabilities for the initial fair value of the warrants
based on the Black-Scholes option pricing method of $50,907,939. The following assumptions were utilized in the Black-Scholes valuation,
risk free interest rate of .48% to .80%, volatility of 363% to 366%, and exercise prices of $0.13 to $0.15. The Company revaluated
the warrants outstanding at December 31, 2020, and based on the insufficient authorized shares, the Company determined that the warrants
should have been classified as a liability, The accompanying financial statements have been adjusted to reflect the change from an equity
classification to a liability classification (see Note 2).
A
summary of the activity related to derivative liabilities for the three months ended March 31, 2021, is as follows:
Balance- December 31, 2020
|
|
$
|
3,299,685
|
|
Fair value of warrants issued during period
|
|
|
50,907,939
|
|
Notes Converted or paid and exercise of warrants
|
|
|
(40,626,832
|
)
|
Change in fair value of convertible notes and warrants recognized in operations
|
|
|
52,197,901
|
|
Balance- March 31, 2021
|
|
$
|
65,778,693
|
|
NOTE
8 – NOTES PAYABLE
The
Company has the following note payables outstanding:
|
|
March 31,
2021
|
|
|
December 31,
2020
|
|
Note payable bank, interest at 7.75%, matures December 26, 2021
|
|
$
|
149,425
|
|
|
$
|
151,469
|
|
Note payable bank, interest at 6.5%, matures December 26, 2021
|
|
|
344,166
|
|
|
|
345,211
|
|
Economic Injury Disaster Loan
|
|
|
10,000
|
|
|
|
10,000
|
|
Paycheck Protection Program loan
|
|
|
100,400
|
|
|
|
100,400
|
|
Notes payable, interest at 8%, matured January 5, 2020, currently in default
|
|
|
45,000
|
|
|
|
45,000
|
|
Other, due on demand, interest at 6%
|
|
|
50,000
|
|
|
|
50,000
|
|
Note payable $203,000 face value, interest at 12%, matures June 25, 2021, net of discount of $13,185
|
|
|
-
|
|
|
|
189,815
|
|
Note payable $750,000 face value, interest at 12%, matures August 24, 2021, net of discount of $182,875
(2021) and $540,562 (2020)
|
|
|
567,125
|
|
|
|
209,438
|
|
Note payable $389,423 face value, interest at 18%, matures November 6, 2023
|
|
|
389,423
|
|
|
|
389,423
|
|
Note payable $1,000,000 face value, interest at 12%, matures November 13, 2021, net of discount of $693,750
(2021) and $971,250 (2020)
|
|
|
306,250
|
|
|
|
28,750
|
|
Note payable $2,200,000 face value, interest at 12%, matures February 9, 2022, net of discount of $1,893,833
|
|
|
306,167
|
|
|
|
-
|
|
Note payable $11,110,000 face value, interest at 12%, matures March 17, 2022,
net of discount of $10,647,083
|
|
|
462,917
|
|
|
|
-
|
|
Sub- total notes payable
|
|
|
2,730,873
|
|
|
|
1,519,506
|
|
Less long-term portion
|
|
|
389,423
|
|
|
|
389,423
|
|
Current portion of notes payable, net of discount
|
|
$
|
2,341,450
|
|
|
$
|
1,130,083
|
|
On
March 17, 2021, the Company entered into a 12%, $11,110,000 face value promissory note with a third- party lender with a maturity date
of March 17, 2022. In exchange for the issuance of the $11,110,000 note, inclusive of an original issue discount of $1,000,000 and lender
costs of $110,000 the Company received proceeds of $10,000,000 on March 23, 2021, from the lender. In conjunction with the note, the
Company issued a warrant to purchase 250,000,000 shares of common stock at $0.13 per share (subject to adjustments) with an expiry date
on the three- year anniversary of the note. For the three months ended March 31, 2021, amortization of the costs of $46,250 was charged
to interest expense. The fair value of the warrant calculated by the Black- Scholes option pricing method of $33,248,433 has been recorded
as an initial debt discount of $10,000,000, interest expense of $23,248,433 and initial derivative liability of $32,248,433. For the
three months ended March 31, 2021, amortization of the warrant discount of $416,667 was charged to interest expense. As of March
31, 2021, the outstanding principal balance of this note was $11,110,000 with a carrying value of $462,917, net of unamortized
discounts of $10,647,083.
On
February 9, 2021, the Company entered into a 12%, $2,200,000 face value promissory note with a third- party lender with a maturity
date of February 9, 2022. In exchange for the issuance of the $2,200,000 note, inclusive of an original issue discount of $200,000
the Company received proceeds of $2,000,000 on February 16, 2021, from the lender. In conjunction with the note, the Company issued
a warrant to purchase 50,000,000 shares of common stock at $0.15 per share (subject to adjustments) with an expiry date on the
three- year anniversary of the note. For the three months ended March 31, 2021, amortization of the costs of $27,833 was charged to
interest expense. The fair value of the warrant calculated by the Black- Scholes option pricing method of $17,659,506 has been
recorded as an initial debt discount of $2,000,000, interest expense of $15,659,506 and initial derivative liability of
$17,659,506. For the three months ended March 31, 2021, amortization of the warrant discount of $278,333 was charged to interest
expense. As of March 31, 2021, the outstanding principal balance of this note was $2,200,000 with a carrying value of $306,167,
net of unamortized discounts of $1,893,833.
On November 13, 2020, the Company entered into a
12%, $1,000,000 face value promissory note with a third-party due November 13, 2021. Principal payments shall be made in six instalments
of $166,667 commencing 180 days from the issue date and continuing each 30 days thereafter for 5 months and the final payment of principal
and interest due on the maturity date. The Company received proceeds of $890,000 on November 20, 2020, and the Company reimbursed the
investor for expenses for legal fees and due diligence of $110,000. For the three months ended March 31, 2021, amortization of the costs
of $27,500 was charged to interest expense. In conjunction with this note, the Company issued 2 common stock purchase warrants; each
warrant entitles the Holder to purchase 125,000,000 shares of common stock at an exercise price of $0.008, subject to adjustments and
expires on the five-year anniversary of the issue date. The warrants issued resulted in a debt discount of $1,000,000. For the three
months ended March 31, 2021, amortization of the warrant discount of $250,000 was charged to interest expense. As of March 31, 2021,
and December 31, 2020, the outstanding principal balance of this note was $1,000,000 with a carrying value of $306,250 and $28,750,
respectively, net of unamortized discounts of $693,750 and $971,250, respectively.
On
November 6, 2020, the Company entered into a Settlement Agreement with the holder of $120,000 of convertible notes with accrued
and unpaid interest of $8,716 and a $210,000 Promissory Noted dated June 23, 2020 with accrued and unpaid interest of $15,707.
The Company issued a new 12% Promissory Note with a face value of $389,423 and a maturity date of November 6, 2023. In conjunction
with this settlement, the Company issued a warrant to purchase 60,000,000 shares of common stock at an exercise price of $0.0075,
subject to adjustments and expires on the five-year anniversary of the issue date. The Company analyzed the transaction and concluded
that this was a modification to the existing debt. The investor exercised the warrant on January 14, 2021.
On
October 26, 2016, PCTI entered into a $210,000 note payable with a bank. On July 24, 2020, due to defaults with the terms of the
note, the note was amended with the outstanding balance due December 26, 2020 and the interest rate changed to 7.75%. Borrowings
are collateralized by substantially all of the assets of PCTI and the personal guarantee of PCTI’s President. At March 31,
2021, and December 31, 2020, $149,425 and $151,469, respectively, was outstanding on the note payable. On March 15, 2021, the
maturity date of this note was extended to December 5, 2021.
On
September 25, 2019, PCTI renewed their $350,000 promissory note with a bank that provides for borrowings of up to $350,000. Interest
is due monthly and the principal was due on April 12, 2020, however, on July 24, 2020, due to PCTI being in default with agreement
was amended with a change in the maturity date to December 26, 2020, and the interest rate changed to the prime rate plus 3.25%
(6.5% at September 30, 2020). Borrowings are collateralized by substantially all of the assets of PCTI and the personal guarantee
of PCTI’s President. At March 31, 2021, and December 31, 2020, $344,166 and $345,211, respectively, was outstanding on the
promissory note. On March 15, 2021, the maturity date of this note was extended to December 26, 2021.
On
August 24, 2020 (the “Issue Date”), the Company entered into a 12%, $750,000 face value promissory note with a third-party
(the “Holder”) due August 24, 2021 (the “Maturity Date”). Principal payments shall be made in six instalments
of $125,000 commencing 180 days from the Issue Date and continuing each 30 days thereafter for 5 months and the final payment of principal
and interest due on the Maturity Date. The Holder shall have the right from time to time, and at any time following an event of default,
as defined on the agreement, to convert all or any part of the outstanding and unpaid principal, interest and any other amounts due into
fully paid and non-assessable shares of common stock of the Company, at the lower of i) the Trading Price (as defined in the agreement)
during the previous five trading days prior to the Issuance Date or ii) the volume weighted average price during the five trading days
ending on the day preceding the conversion date. The Company received proceeds of $663,000 on August 25, 2020, and the Company reimbursed
the investor for expenses for legal fees and due diligence of $87,000. For the three months ended March 31, 2021, amortization of the
costs of $21,750 was charged to interest expense. In conjunction with this Note, the Company issued 2 common stock purchase warrants;
each warrant entitles the Holder to purchase 122,950,819 shares of common stock at an exercise price of $0.0061, subject to adjustments
and expires on the five-year anniversary of the Issue Date. The warrants issued resulted in a debt discount of $750,000. For the
three months ended March 31, 2021, amortization of the debt discount of $335,938 was charged to interest expense. As of March
31, 2021, and December 31, 2020, the outstanding principal balance of this note was $750,000 with a carrying value of $567,125
and $209,438, net of unamortized discounts of $182,875 and $540,562, respectively.
On
April 20, 2020, PCTI was granted a loan from Huntington Bank in the amount of $100,400, pursuant to the Paycheck Protection Program
(“PPP”) under Division A, Title I of the CARES Act, which was enacted March 27, 2020. The loan matures on April 20,
2022 and bears interest at a rate of 1.0% per annum, payable monthly beginning on November 20, 2020. The loan may be prepaid at
any time prior to maturity with no prepayment penalties. Payments are deferred until the SBA determines the amount to be forgiven.
The Company utilized the proceeds of the PPP loan in a manner which will enable qualification as a forgivable loan. However, no
assurance can be provided that all or any portion of the PPP loan will be forgiven. The balance on this PPP loan was $100,400
as of March 31, 2021, and December 31, 2020 and has been classified in notes payable. On March 26, 2021, the Company received
notice from Huntington Bank the they have determined that PCTI’s loan forgiveness application has been approved and has
been submitted to the SBA. The SBA has ninety days to submit the loan proceeds to Huntington Bank.
On
July 14, 2020, PCTI received $10,000 grant under the Economic Injury Disaster Loan (“EIDL”) program. Up to $10,000
of the EIDL can be forgiven as long as such funds were utilized to provide working capital. The first payment due is deferred
one year. The entirety of the loan as of March 31, 2021, and December 31, 2020 and has been classified in notes payable.
The
following note was assumed on July 10, 2020, pursuant to the PCTI transaction:
On
June 25, 2020, the Company entered into a 12%, $203,000 face value promissory note with a third-party lender with a maturity date
of June 25, 2021. Principal payments shall be made in six instalments of $33,333 commencing 180 days from the issue date and continuing
each 30 days thereafter for 5 months and the final payment of principal and interest due on the maturity date. The Holder shall
have the right from time to time, and at any time following an event of default, as defined on the agreement, to convert all or
any part of the outstanding and unpaid principal, interest and any other amounts due into fully paid and non-assessable shares
of common stock of the Company, at the lower of i) the Trading Price (as defined in the agreement) during the previous five trading
days prior to the issuance date or ii) the volume weighted average price during the five trading days ending on the day preceding
the conversion date. The Company received proceeds of $176,000 on June 26, 2020, and the Company reimbursed the investor for expenses
for legal fees and due diligence of $27,000. For the three months ended March 31, 2021, amortization of the costs of $13,185 was
charged to interest expense. In conjunction with this Note, the Company issued 2 common stock purchase warrants; each warrant
entitles the Holder to purchase 10,000,000 shares of common stock at an exercise price of $0.02, subject to adjustments and expires
on the five-year anniversary of the Issue Date. During the three months ended March 31, 2021, the investor converted a total of
$203,000 of the face value and $15,899 of accrued interest and fees into 20,268,511 shares of common stock at an average conversion
price of $0.0108. On January 8, 2021, and January 15, 2021, the investor received 100,668,692 and 9,121,265 shares of common stock,
respectively, upon the cashless exercise of the warrants. As of March 31, 2021, and December 31, 2020, the outstanding principal
balance of this note was $-0- and $203,000, respectively.
NOTE
9 – DEFERRED LIABILITY
On
September 2, 2020, PCTI entered into an agreement with a third- party. Pursuant to the terms of the agreement, in exchange for
$750,000, PCTI agreed to pay the third-party a perpetual three percent (3%) payment of revenues, as defined in the agreement.
Payments are due ninety (90) days after each calendar quarter, with the first payment due on or before March 31, 2021, for revenues
for the quarter ending December 31, 2020. The Company has recorded the $750,000 as deferred liability on the March 31, 2021, and
December 31, 2020, condensed consolidated balance sheet. No payments have been made and the Company is in default of the agreement.
On February 26, 2021, the agreement was assigned to Ozop and on March 4, 2021, the note was amended, whereby in exchange for 175,000,000
shares of common stock, the royalty percentage was amended to 1.8%. The Company valued the shares at $0.094 per share (the market
value of the common stock on the date of the agreement) and recorded $16,450,000 as debt restructure expense on the condensed
consolidated statement of operations for the three months ended March 31, 2021.
NOTE
10 – DEFERRED REVENUE
During
the year ended December 31, 2020, the Company received $64,353 form a customer for a payment of a three- year extended warranty.
The extended warranty period is from, March 2021 through February 2024, and accordingly the Company will recognize the revenue
over such period. For the three months ended March 31, 2021, the Company recognized $1,788 of revenue. Of the remaining deferred
liability of $62,565, $21,451 is recognized as the current portion of deferred revenue and $41,114 is classified as a long- term
liability on the condensed consolidated financial statements. As of December 31, 2020, $17,876 is classified as the current portion
and $46,477 is classified as a long- term liability on the consolidated financial statements.
NOTE
11 – RELATED PARTY TRANSACTIONS
Employment
Agreement
On
July 10, 2020, pursuant to the PCTI transaction, the Company assumed an employment contract entered into on February 28, 2020,
between the Company and Mr. Conway (the “Employment Agreement”). Pursuant to the terms of the Employment Agreement,
Mr. Conway is to receive an initial annual salary of $120,000, for his position of CEO of the Company, payable monthly. Mr. Conway
was issued 2,500 shares of Series C Preferred Stock. The Company valued the shares at $5,000. On August 28, 2020, Mr. Conway was
issued 1,333 shares of Series D Preferred stock and 500 shares of series E Preferred Stock. The Series D Preferred Stock is convertible
in the aggregate into three times the number of shares of common stock outstanding at the time of conversion. Mr. Conway owns
6.67% of the issued and outstanding Series D Preferred Stock, and based on the 3,107,037,634 shares outstanding on August 28,
2020, Mr. Conway’s Preferred Stock is convertible into 621,253,401 shares of common stock. Based on the share price of the
common stock on that date of $0.0065, the shares were valued at $4,286,648 and recognized as compensation during the year ended
December 31, 2020. Effective January 1, 2021, Mr. Conway’s compensation is $20,000 per month.
Series
E Preferred Stock
On
March 21, 2021, the Company issued 2,000 shares of Series E Preferred Stock (see Note 12), Of the shares issued 1,800 were issued
to Mr. Conway. Pursuant to the terms and conditions of the Certificate of Designation of the Series E Preferred Stock, including
the redemption value of $1,000 per share, the Company recorded $1,800,000 as stock compensation expense for the Series E shares
issued to Mr. Conway.
Management
Fees and related party payables
For
the three months ended March 31, 2021, and 2020, the Company recorded expenses to its officers in the following amounts:
|
|
Three Months Ended
March 31,
|
|
|
|
2021
|
|
|
2020
|
|
CEO, parent
|
|
$
|
279,999
|
|
|
$
|
-
|
|
CEO, parent- Series E Preferred Stock
|
|
|
1,800,000
|
|
|
|
-
|
|
President, subsidiary
|
|
|
35,009
|
|
|
|
-
|
|
Total
|
|
$
|
2,115,008
|
|
|
$
|
-
|
|
As
of March 31, 2021, and December 31, 2020, included in related party payable is $-0- and $9,120, respectively, for the amounts
owed the CEO of PCTI.
NOTE
12 – COMMITMENTS AND CONTINGENCIES
Leases
On
January 2, 2021, the Company entered into a ten (10) year lease for a 6-bay garage storage facility of approximately 2,500 square
feet. Pursuant to the lease the Company agreed to issue 100,000,000 shares of restricted common stock. The shares were certificated
on March 8, 2021, with an effective date of January 2, 2021. The Company valued the shares $0.0063, (the market value of the common
stock on the date of the agreement) and has recorded $630,000 as a prepaid expense. The space should be ready for occupancy during
the calendar quarter ending September 30, 2021.
Agreements
On
March 30, 2021, OES hired 2 individuals as Co-Directors of Sales. Pursuant to their respective offers of employment, the Company
agreed to an annual salary of $130,000 with a signing bonus of $20,000 for each and to issue each 2,500,000 shares of restricted
common stock upon the execution of the agreements and every 90 days thereafter for the first year as long as the employee is still
employed. The Company valued the shares at $0.092 per share (the market price of the common stock on the date of the agreement),
and $460,000 is included in stock-based compensation expense for the three months ended March 31, 2021.The shares were issued
in April 2021.
On
March 15, 2021, the Company entered into a consulting agreement with Aurora Enterprises (“Aurora”). Mr. Steven Martello
is a principal of Aurora. Pursuant to the agreement Mr. Martello will provide strategic analysis regarding existing markets and
revenue streams as well as the development of new lines of revenue. The Company agreed to a monthly retainer fee of $10,000 and
to issue to Aurora or their designee 5,000,000 shares of restricted common stock. The shares were issued in April 2021.
On
March 9, 2021, Mr. Green filed a provisional patent with the USPTO. The provisional patent covers proprietary methods and procedures
that, will allow the expansion of OES into the EV charging and support industry. The provisional patent relates to the more efficient
production, distribution, and delivery of energy, particularly renewable energy, to the EV end consumer and enables OES to build
the support systems for such.
On
February 24, 2021, the Company entered into a consulting agreement with Christopher Ruppel. Pursuant to the agreement Mr. Ruppel
will join the Ozop Advisory Board. During the three months ended March 31, 2021, the Company issued 10,000,000 shares of restricted
common stock to Mr. Ruppel and agreed to a monthly fee of $2,500. The Company valued the shares at $0.2386 per share (the market
price of the common stock on the date of the agreement), and $2,386,000 is included in stock-based compensation expense for the
three months ended March 31, 2021. Effective April 1, 2021, the agreement was amended to $10,000 per month.
On
February 19, 2021, the Company entered into a Joint Business Alliance agreement with Grid and Energy Master Planning, LLC (“GEMM”).
GEMM will provide advisory, financing and implementation solutions for behind-the-meter customers in the areas of energy efficiency,
solar, EV charging, and battery storage for OES. The GEMM services allows OES to provide one-stop-shopping in these emerging and
maturing sectors. As of March 31, 2021, there has not been any transactions related to this agreement and the Company is continuing
to evaluate the accounting treatment of any future transactions.
On
February 4, 2021, the Company entered into a Consulting Services Agreement with Energy Elements Works, LLC and Mr. Ian Graham.
Pursuant to the agreement, Mr. Graham will provide services as a Consulting Engineer for the Company’s wholly owned subsidiary
OES. The Company has agreed to compensate Mr. Graham $100 per hour for his services.
On
January 22, 2021, the Company issued 10,000,000 shares of restricted common stock for legal services performed in 2020 and approved
by the BOD of the Company on December 1, 2020. The Company valued the shares at $0.0056 per share (the market price of the common
stock on the date of the agreement), and $56,000 is included in stock-based compensation expense for the three months ended March
31, 2021.
On
January 14, 2021, the Company entered into a Consulting Agreement with Mr. Allen Sosis. Pursuant to the agreement, Mr. Sosis will
provide services as the Director of Business Development for the Company’s wholly owned subsidiary. Pursuant to the agreement,
as amended, the Company will pay Mr. Sosis a monthly fee of $15,000 and an additional $1,000 in benefits. The Company also agreed
to issue Mr. Sosis 5,000,000 shares of restricted common stock. The shares were issued in April 2021.
On
January 6, 2021, the Company entered into a consulting agreement with Ezra Green to begin on February 8, 2021. The Company agreed
to issue 10,000,000 shares of restricted common stock to Mr. Green and to a monthly fee of $2,500. Effective April 1, 2021, the
agreement was amended to $10,000 per month and the shares were issued in April 2021.
On
March 4, 2019, the Company entered into a Separation Agreement (the “Separation Agreement”) with Salman J. Chaudhry,
pursuant to which the Company agreed to pay Mr. Chaudry $227,200 (the “Outstanding Fees”) in certain increments as
set forth in the Separation Agreement. As of March 31, 2021 and December 31, 2020, the balance owed Mr. Chaudhry is $162,085.
On
September 2, 2020, PCTI entered into an Agreement with a third- party. Pursuant to the terms of the agreement, in exchange for
$750,000, PCTI agreed to pay the third-party a perpetual three percent (3%) payment of revenues, as defined in the agreement.
On February 26, 2021, the agreement was assigned to Ozop and on March 4, 2021, the agreement was amended, whereby in exchange
for 175,000,000 shares of common stock, the royalty percentage was amended to 1.8% (see Note 9). The Company valued the shares
at $0.094 per share (the market value of the common stock on the date of the agreement) and recorded $16,450,000 as debt restructure
expense on the condensed consolidated statement of operations for the three months ended March 31, 2021.
Legal
matters
On
March 4, 2021 a Complaint and Demand for Jury Trial (the “Complaint”) was filed by a plaintiff (the “Plaintiff”)
in the United States District Court for the Southern District of New York. The Complaint named Ozop Energy Solutions, Inc. (“OZOP”)
and Brian Conway, Ozop’s Chief Executive Officer, (the “CEO”). OZOP and the CEO are collectively referred to
herein as “Defendants”. The Complaint alleges that the Plaintiff’s purchase and sale of OZOP’s securities,
and damages caused by OZOP and its CEO, were violations of federal and state securities law and common laws. This securities fraud
complaint is based on two (2) press releases issued by OZOP: the first dated January 12, 2021, which the complainant alleges contained
materially false and misleading information about the execution of a Master Supply Agreement, and the second dated February 5,
2021, that retracted the press release it issued on January 12, 2021. In reliance on OZOP’s January 12, 2021 press release
(which was retracted and corrected by OZOP’s February 5, 2021 press release), on the same date, Plaintiff sold all of his
4,370,180 OZOP shares on the public market. The Plaintiff alleges that the February 5, 2021 corrective press release (which retracted
the January 12, 2021 press release and corrected the material misrepresentations provided therein) caused a dramatic increase
in the price of OZOP’s shares, significantly in excess of the price at which Plaintiff sold his OZOP shares on January 12,
2021 (in reliance on the January 12, 2021 press release), causing Plaintiff to suffer significant losses, in excess of two Million
Dollars, as a direct and proximate result of Defendants’ material misrepresentations. The Company disputes the allegations
in the Complaint has engaged counsel to vigorously defend the Company and the CEO. On May 3, 2021, the Company notified the court,
that the Defendants intend to file a motion to dismiss for the foregoing reasons, and respectfully request that the Court enter
a briefing schedule. Defendants propose that their opening papers be filed on or before May 14, 2021; that Plaintiff’s opposition
papers by filed on or before June 4, 2021, and that Defendants’ reply papers be filed on or before June 18, 2021. On
May 12, 2021, the plaintiff and or their counsel, gave notice that the above action is voluntarily dismissed, pursuant to Rule
41(a)(1)(A)(i) of the Federal Rules of Civil Procedure, without prejudice against the defendants Brian Conway and OZOP Energy
Solutions, Inc.
On
November 12, 2020, a former employee of PCTI filed a Charge of Discrimination against PCTI, for wrongful discharge based on sex
and retaliation with the Equal Employment Opportunity Commission (“EEOC”) and the Pennsylvania Human Relations Commission
for events occurring on or before June 3, 2020. The matter is currently under investigation with the EEOC.
NOTE
13– STOCKHOLDERS’ EQUITY
Common
stock
During
the period from January 1, 2021, to March 31, 2021, holders of an aggregate of $760,500 in principal and $116,594 of accrued interest
and fees of convertible and promissory notes, converted their debt into 428,747,654 shares of our common stock at an average conversion
price of $0.002 per share.
During
the three months ended March 31 2021, the Company also issued the following shares of restricted common stock:
|
●
|
100,000,000 shares of restricted
common stock pursuant to a lease agreement (see Note 10).
|
|
●
|
175,000000 shares of restricted
common stock pursuant to restructuring agreement related to a deferred liability (see Note 9).
|
|
●
|
20,000,000 shares of restricted
common stock in the aggregate for services and consulting agreements.
|
During
the three months ended March 31, 2021, the Company also issued 330,797,987 shares of common stock upon the cashless exercise of common
stock purchase warrants.
As
of March 31, 2021, the Company has 4,990,000,000 shares of $0.001 par value common stock authorized and there are 4,452,503,933 shares
of common stock issued and outstanding.
Preferred
stock
As
of March 31, 2021, 10,000,000 shares have been authorized as preferred stock, par value $0.001 (the “Preferred Stock”), which
such Preferred Stock shall be issuable in such series, and with such designations, rights and preferences as the Board of Directors may
determine from time to time.
On
July 7, 2020, the Company filed an Amended and Restated Certificate of Designation with the State of Nevada of the Company’s Series
C Preferred Stock. Under the terms of the Amendment to Certificate of Designation of Series C Preferred Stock, 50,000 shares of the Company’s
preferred remain designated as Series C Preferred Stock. The holders of Series C Preferred Stock have no conversion rights and no dividend
rights. For so long as any shares of the Series C Preferred Stock remain issued and outstanding, the Holder thereof, voting separately
as a class, shall have the right to vote on all shareholder matters equal to sixty-seven (67%) percent of the total vote. On July 10,
2020, pursuant to the SPA with PCTI, the Company issued 47,500 shares of Series C preferred Stock to Chis. As of March 31, 2021, and
December 31, 2020, there were 50,000 shares of Series C Preferred Stock issued and outstanding, of which 2,500 are held by Mr. Conway.
On
July 7, 2020, the Company filed a Certificate of Designation with the State of Nevada of the Company’s Series D Preferred Stock.
Under the terms of the Certificate of Designation of Series D Preferred Stock, 20,000 shares of the Company’s preferred stock have
been designated as Series D Convertible Preferred Stock. The holders of the Series D Convertible Preferred Stock shall not be entitled
to receive dividends. The holders as a group may, at any time convert all of the shares of Series D Convertible Preferred Stock into
a number of fully paid and nonassessable shares of common stock determined by multiplying the number of issued and outstanding shares
of common stock of the Company on the date of conversion, by 3. Except as provided in the Certificate of Designation or as otherwise
required by law, no holder of the Series D Convertible Preferred Stock shall be entitled to vote on any matter submitted to the shareholders
of the Company for their vote, waiver, release or other action. The Series D Convertible Preferred Stock shall not bear any liquidation
rights. On July 10, 2020, pursuant to the SPA with PCTI, the Company issued 18,667 shares of Series D preferred Stock to Chis, and on
August 28, 2020, pursuant to Mr. Conway’s employment agreement, the Company issued 1,333 shares of Series D Preferred Stock to
Mr. Conway. Accordingly, Mr. Conway owns 6.67% of the issued and outstanding Series D Preferred Stock, and based on the 3,107,037,634
shares outstanding on August 28, 2020, Mr. Conway’s Preferred Stock is convertible into 621,253,401 shares of common stock. Based
on the share price of the common stock on that date of $0.0065, the shares were valued at $4,286,648. As of March 31, 2021, and December
31, 2020, there were 20,000 shares of Series D Preferred Stock issued and outstanding.
On
July 7, 2020, the Company filed a Certificate of Designation with the State of Nevada of the Company’s Series E Preferred Stock.
Under the terms of the Certificate of Designation of Series E Preferred Stock, 3,000 shares of the Company’s preferred stock have
been designated as Series E Preferred Stock. The holders of the Series E Convertible Preferred Stock shall not be entitled to receive
dividends. No holder of the Series E Preferred Stock shall be entitled to vote on any matter submitted to the shareholders of the Corporation
for their vote, waiver, release or other action, except as may be otherwise expressly required by law. At any time, the Corporation may
redeem for cash out of funds legally available therefor, any or all of the outstanding Preferred Stock (“Optional Redemption”)
at $1,000 (one thousand dollars) per share. The shares of Series E Preferred Stock have not been registered under the Securities Act
of 1933 or the laws of any state of the United States and may not be transferred without such registration or an exemption from registration.
On July 10, 2020, pursuant to the SPA with PCTI, the Company issued 500 shares of Series E preferred Stock to Chis, and on August 28,
2020. Pursuant to Mr. Conway’s employment agreement, the Company issued 500 shares of Series E Preferred Stock to Mr. Conway. On
March 2, 2021, the BOD authorized the issuance of 1,800 shares of Series E Preferred Stock to Mr. Conway and 200 shares of Series E Preferred
Stock to a third-party service provider. The issuances were for services performed. Pursuant to the terms and conditions of the Certificate
of Designation of the Series E Preferred Stock, including the redemption value of $1,000 per share, the Company recorded $2,000,000 as
stock-based compensation expense for the three months ended March 31, 2021. On March 24, 2021, the Company redeemed the 3,000 shares
of Series E Preferred Stock outstanding on that date. As of March 31, 2021, and December 31, 2020, there were-0- and 1,000 shares of
Series E Preferred Stock issued and outstanding, respectively.
NOTE
14 - OPERATING LEASE RIGHT-OF-USE ASSETS AND OPERATING LEASE LIABILITIES
On
October 25, 2019, PCTI executed a non-cancellable lease for office and industrial space which began December 1, 2019 and expires on November
30, 2022. Operating lease right-of-use assets and liabilities are recognized at the present value of the future lease payments at the
lease commencement date. The interest rate used to determine the present value is our incremental borrowing rate, estimated to be 7.5%,
as the interest rate implicit in most of our leases is not readily determinable. Prior to July 10, 2020, PCTI recorded monthly lease
expense pursuant to the lease agreement and effective July 10, 2020, pursuant to the PCTI transaction, operating lease expense is recognized
pursuant to ASC Topic 842. Leases (Topic 842) over the lease term. During the years ended December 31, 2020, and 2019, the Company recorded
$84,278 and $100,946 respectively, for rent expense.
In
adopting Topic 842, the Company has elected the ‘package of practical expedients’, which permit it not to reassess under
the new standard its prior conclusions about lease identification, lease classification and initial direct costs. The Company did not
elect the use-of-hindsight or the practical expedient pertaining to land easements; the latter is not applicable to the Company. In addition,
the Company elected not to apply ASC Topic 842 to arrangements with lease terms of 12 month or less. During the year ended December 31,
2020, upon adoption of ASC Topic 842, the Company recorded right-of-use assets and lease liabilities of $185,139.
Right-of-
use assets are summarized below:
|
|
March 31, 2021
|
|
Office and warehouse lease
|
|
$
|
185,139
|
|
Less accumulated amortization
|
|
|
(53,920
|
)
|
Right-of-us assets, net
|
|
$
|
131,219
|
|
Operating
lease liabilities are summarized as follows:
|
|
March 31, 2021
|
|
Lease liability
|
|
$
|
131,219
|
|
Less current portion
|
|
|
(76,762
|
)
|
Long term portion
|
|
$
|
54,457
|
|
Maturity
of lease liabilities are as follows:
|
|
Amount
|
|
For the year ending December 31, 2021
|
|
$
|
63,000
|
|
For the eleven months ending November 30, 2022
|
|
|
77,000
|
|
Total
|
|
$
|
140,000
|
|
Less: present value discount
|
|
|
(8,781
|
)
|
Lease liability
|
|
$
|
131,219
|
|
NOTE
15 – SUBSEQUENT EVENTS
From April 1, 2021, through May 14, 2021, the Company
has issued 54,406,964 shares of common stock upon the conversion of $85,310 of principal, accrued interest and fees of convertible notes,
pursuant to a settlement agreement with an investor. Pursuant to the settlement agreement, the investor agreed that the convertible notes
dated July 15, 2020, July 29, 2020 and November 16, 2020 as well as any outstanding warrants issued in connection with those notes are
cancelled and considered paid in full. The Company has also issued 75,000,000 shares of common stock upon the cashless exercise of
warrants, 20,000,000 shares pursuant to consulting agreements and 5,000,000 shares to employees.
On
April 13, 2021, the Company agreed to engage PJN Strategies, LLC (“PJN”) as a consultant. Pursuant to the agreement, the
Company agreed to compensate PJN $20,000 per month.
On
April 14, 2021, the Company signed a five- year lease of approximately 8,100 SF in Carlsbad California. The office and warehouse
facility will be available June 1, 2021, and will be utilized for sales and distribution of PV products.
On
April 16, 2021, the Company signed a letter of agreement with Rubenstein Public Relations, Inc. (“RPR”). Pursuant to the
letter of agreement, the Company agreed to engage RPR, effective May 1, 2021, on a month-to-month basis for $17,000 per month.
On
April 16, 2021, the BOD of the Company authorized the issuance of 2,000 shares of Series E Preferred Stock. Of these shares, 1.050 were
issued to Company’s CEO and 950 shares were issued to consultants.
The
Company has evaluated subsequent events through the date the financial statements were issued. The Company has determined that there
are no other such events that warrant disclosure or recognition in the financial statements, except as stated herein.