Annual Report (10-k)

Date : 03/29/2019 @ 10:13AM
Source : Edgar (US Regulatory)
Stock : Remsleep Holdings, Inc. (PN) (RMSL)
Quote : 0.0109  0.0018 (19.78%) @ 9:45PM

Annual Report (10-k)

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Wa shington, D.C. 20549

 

Form 10-K

 

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the fiscal year ended December 31, 2018

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from                      to                     

 

Commission file number: 000-53450

 

REMSLEEP HOLDINGS, INC.

(Exact name of re gistrant as specified in its charter)

 

Nevada   47-5386867

(State or other jurisdiction of
incorporation or organization)

 

(I.R.S. Employer

Identification No.)

 

637 N. Orange Ave., Suite 609, Orlando, FL 32789

(Address of principal executive offices) (Zip Code)

 

912-590-2001

(Registrant’s telephone number)

 

Securities registered pursuant to Section 12(b) of the Exchange Act: None.

 

Securities registered pursuant to Section 12(g) of the Exchange Act:

 

Common Stock, $0.001 par value   OTCQB
(Title of class)   (Name of exchange on which registered)

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐  No ☒

 

Check whether the issuer is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act. Yes ☐  No ☒

 

Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☐  No ☒

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒  No ☐

 

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment of this Form 10-K. ☐ Yes  ☒ No

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer ☐

Non-accelerated filer ☒

Emerging growth company ☐

Accelerated filer ☐

Smaller reporting company ☒

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐  No ☒

 

The aggregate market value of the 2,188,988 shares of voting and non-voting common equity held by non-affiliates computed by reference to the closing price of $0.69 on June 30, 2018, at which the common equity was last sold in its most recently completed second fiscal quarter was approximately $1,510,402.

 

As of March 28, 2019, there were 4,618,947 shares of common stock outstanding.

 

 

 

 

 

TABLE OF CONTENTS

 

    Page
  PART I  
     
ITEM 1 Description of Business 1
     
ITEM 1A. Risk Factors 7
     
ITEM 2. Properties 7
     
ITEM 3. Legal Proceedings 7
     
ITEM 4. Mine Safety Disclosures 7
     
  PART II  
     
ITEM 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 8
     
ITEM 6. Selected Financial Data 8
     
ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 9
     
ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk 11
     
ITEM 8. Financial Statements and Supplementary Data F-1
     
ITEM 9. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure 12
     
ITEM 9A. Controls and Procedures 12
     
ITEM 9B. Other Information 13
     
  PART III  
     
ITEM 10. Directors, Executive Officers, and Corporate Governance 14
     
ITEM 11. Executive Compensation 15
     
ITEM 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 16
     
ITEM 13. Certain Relationships and Related Transactions, and Director Independence 16
     
ITEM 14. Principal Accountant Fees and Services 16
     
ITEM 15. Exhibits and Financial Statement Schedules 17
     
  Signatures 18

 

i

 

 

Forward Looking Statements

 

Except for statements of historical fact, the information presented herein constitutes forward-looking statements. These forward-looking statements generally can be identified by phrases such as “anticipates,” “believes,” “estimates,” “expects,” “forecasts,” “foresees,” “intends,” “plans,” or other words of similar import.  Similarly, statements herein that describe our business strategy, outlook, objectives, plans, intentions or goals also are forward-looking statements.  Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements.  Such factors include, but are not limited to, our ability to: successfully commercialize our technology; generate revenues and achieve profitability in an intensely competitive industry; compete in products and prices with substantially larger  and better capitalized competitors; secure, maintain and enforce a strong intellectual property portfolio; attract additional capital sufficient to finance our working capital requirements, as well as any investment of plant, property and equipment; develop a sales and marketing infrastructure; identify and maintain relationships with third party suppliers who can provide us a reliable source of raw materials; acquire, develop, or identify for our own use, a manufacturing capability; attract and retain talented individuals; continue operations during periods of uncertain general economic or market conditions, and; other events, factors and risks previously and from time to time disclosed in our filings with the Securities and Exchange Commission, including, specifically, the “Risk Factors” enumerated herein. Although we believe the expectations reflected in our forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements.  You should not place undue reliance on our forward-looking statements, which speak only as of the date of this report.  Except as required by law, we do not undertake to update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.

 

ii

 

 

PART I

 

ITEM 1. DESCRIPTION OF BUSINESS

 

We were incorporated in the State of Nevada on June 6, 2007. On August 26, 2010, we changed our name from Bella Viaggio, Inc. to Kat Gold Holdings Corp. Effective January 1, 2015, we completed an exchange agreement to purchase 100% of the outstanding interests of RemSleep LLC in exchange for 50,000,000 common shares of RemSleep Holdings, Inc.’s stock, at which time RemSleep LLC became our wholly-owned subsidiary and adopted their business of developing and distributing our sleep apnea products. On January 5, 2015, we changed our name to REMSleep Holdings, Inc. to reflect our new business model.

 

Our officers have 35 years of sleep-industry experience, including having been employed at sleep industry companies. Our officers invented our DeltaWave CPAP interface (the “DeltaWave”) as an innovative new device to treat patients with sleep apnea. The patent-pending DeltaWave product is a nasal-pillows type interface that will result in better comfort and, therefore, better compliance since it was specifically designed with unique airflow characteristics to enable patients with sleep apnea to breathe normally. A survey that appeared in DME Business found that 89% of patients stated that mask-interface comfort was their primary concern. The primary issue that we have addressed with the DeltaWave is the “work of breathing” component. We believe that our DeltaWave is designed to effectively address the stubborn issues that continue to affect a patient’s ability to comply with treatment, as follows:

 

Does not disrupt normal breathing mechanics;
     
Is not claustrophobic;
     
Causes zero work of breathing (WOB);
     
Minimizes or eliminates drying of the sinuses;
     
Uses less driving pressure; and
     
Allows users to feel safe and secure while sleeping.

 

Pending adequate financing, we plan to conduct clinical trials to test product effectiveness.

 

On June 28, 2016, we applied for a patent for a new, innovative sleep apnea product that serves as an interface for the delivery of CPAP therapy and other respiratory needs. Our goal is to develop sleep products that achieve optimum compliance and comfort for CPAP patients.

 

Our website is located at: http://www.remsleeptech.com . No information from our website is incorporated herein. REMSleep Holding, Inc. is referred to herein as “we”, “us”, “our”.

 

1

 

 

Industry Background

 

The market for sleep treatment and equipment was $7.96 billion in 2011 and will reach a projected $19.72 billion by 2017, with North America accounting for a majority of the market. More than 8 million CPAP interfaces are sold annually in the U.S., with another 2.5 million globally. There are also an estimated 80 million people with undiagnosed sleep apnea. Sleep apnea is a condition that affects millions of people in the United States alone. An increasingly sedentary lifestyle and bad working habits has led to obesity and otherwise poor cardiac and aerobic health. This has led to a fast-growing epidemic of obstructive sleep apnea (OSA), which greatly reduces the quality of sleep one gets and can ultimately result in hypertension, heart failure, stroke, and at the least, reduced performance in everyday life. The market for sleep treatment and equipment was $7.96 billion in 2011 and will reach a projected $19.72 billion by 2017, with North America accounting for a majority of the market. More than 8 million CPAP interfaces are sold annually in the U.S., with another 2.5 million globally. There are also an estimated 80 million people with undiagnosed sleep apnea. Sleep apnea results in numerous afflictions that affect people’s day-to-day lives and can eventually contribute to serious health conditions. While people’s knowledge of this affliction has grown strongly in recent years, and the market is expanding fast nationwide, up to 80% of people with sleep apnea may be undiagnosed 1 – a market of millions of new potential users. Even those who are tested and prescribed a sleep apnea machine often give up after a short time due to discomfort or what is called the “work of breathing” with traditional machines. In fact, over 50% of patients give up on using CPAP therapy after 6 months. This is a major waste of resources and a very telling statistic.

 

A major challenge in the current market is not only to get more patients diagnosed but to also increase CPAP compliance. According to market analyst Frost & Sullivan, “The development of finer and ergonomic CPAP devices will help increase patient ability to adhere to sleep therapy. The market is also seeing a rise in newer technologies that replace elaborate practices, target patient comfort to improve compliance, and help drive acceptance of sleep monitoring devices.”

 

A growing knowledge of sleep apnea and its treatment has helped to increase awareness with the public. In addition to making the use of a CPAP or related device less intimidating, a move toward affordable and prescription-based technology can greatly expand the market “Evolving technologies will also influence patient preferences for products, treatment modalities, and diagnostic locations,” states Frost & Sullivan 2 . “As such, the global sleep apnea treatment market is expected to shift to home-based diagnostics for early identification and treatment of patients as well as portable devices that can reduce sleep apnea with minimal inconvenience.”

 

Sleep apnea causes breathing interruptions of between 10 to 20 seconds that can occur hundreds of times during a night, disrupting the natural sleep rhythm and depriving people of the restorative sleep they need to be energetic, mentally sharp, and productive the next day. CPAP can be a very effective method used to treat sleep apnea, but as noted, noncompliance remains a stubborn issue for both physicians and patients. CPAP technology therefore is constantly being updated and improved, and the new CPAP devices are lighter, quieter, and more comfortable.

 

Health care spending continues to grow rapidly on an annual basis in the United States. Spending was $2.7 trillion in 2011 and, in 2013, it reached over $3.6 trillion. By 2022, spending is projected to reach $5 trillion, or around 20% of GDP, according to the Centers for Medicare and Medicaid Services 3. Growing alongside this market is the U.S. life science industry, which will grow an estimated 2.2% in 2014 to $93 billion. This includes R&D spending, with growth primarily from smaller biopharmaceutical innovators and medical device manufacturers.

 

Within this market, sleep apnea products have experienced rapid growth. In the past couple of decades there has been a rapid increase in the technological developments in the field of sleep apnea diagnosis and treatment. The result has been strong growth for sleep apnea devices globally. Demand for new and innovative treatment methodologies is driving growth, helping to provide patients with a healthy lifestyle. “Obstructive sleep apnea is destroying the health of millions of Americans, and the problem has only gotten worse over the last two decades,” according to American Academy of Sleep Medicine President Dr. Timothy Morgenthaler 5 . “The effective treatment of sleep apnea is one of the keys to success as our nation attempts to reduce health care spending and improve chronic disease management.”

 

Sleep problems are considered a “global epidemic,” with sleep apnea as a major contributor to the disorder. An estimated 100 million people worldwide have sleep apnea, though more than 80% of these people are undiagnosed. The market for sleep apnea diagnostic and therapeutic devices on a global level was $7.96 billion in 2011 and will reach a projected $19.72 billion by 2017, according to a study from Markets & Markets. 6 Nationwide in the U.S., there are more than 1,600 businesses in the Sleep Disorder Clinics market, according to research firm IBISWorld. These businesses have combined annual revenue of $7 billion and have maintained a combined annual growth rate (CAGR) of 9.8% from 2008 to 2013. “Sleep clinics have gained exposure during the period due to the rising number of sleep disorders,” states IBISWorld. “Moreover, health insurance policies are increasingly covering all or at least part of the costs of tests and, as more patients have been able to gain greater access to specialized sleep clinics, industry revenue grows.”

 

2

 

 

There are also more than 972,000 physicians and 365,000 doctors’ offices, as well as nearly 5,800 hospitals. In addition, the market for U.S. home healthcare is served by about 30,000 businesses with combined annual revenue of $59 billion. The market includes medical and skilled nursing services; medical equipment, supplies, and medication services; personal care; and therapeutic services (like physical and respiratory therapy).

 

Sources:

1. Markets & Markets. “Global Sleep Apnea Diagnostics & Therapeutic Devices Market.” http://www.marketsandmarkets.com/PressReleases/sleep-apnea-devices.asp

2. Frost & Sullivan. “Sleep apnea market is in need of finer, ergonomic treatments.” June 4, 2014. http://www.frost.com/prod/servlet/press-release.pag?docid=290951848

3. Forbes. “Annual U.S. Healthcare Spending Hits $3.8 Trillion.” Feb. 2, 2014. http://www.forbes.com/sites/danmunro/2014/02/02/annual-u-s-healthcare-spending-hits-3-8-trillion/

4. Battelle/R&D Magazine. “Life Sciences.” Dec. 2013. http://www.rdmag.com/articles/2013/12/industry-breakout-life-sciences

5. American Academy of Sleep Medicine. “Rising prevalence of sleep apnea in U.S. threatens public health.” Sept. 2014. http://www.aasmnet.org/articles.aspx?id=5043

6. Markets & Markets. “Global Sleep Apnea Diagnostics & Therapeutic Devices Market.” http://www.marketsandmarkets.com/PressReleases/sleep-apnea-devices.asp

 

Marketing

 

We plan to market the DeltaWave product in the U.S., as follows

 

Submit manufacture orders to our manufacturer according to market demand
     
Negotiate and secure agreements with industry distributor partners
     
Secure agreements with Internet retailers for online sales
     
Market DeltaWave at respiratory trade shows, social media, press releases
     
Market and generate online sales through our website supplemented by search engine optimization,
     
Disseminate press releases to media outlets and publications that reach sleep medical practices and DME managers/distributors, including trade publications like Sleep Medicine, Sleep Review, Sleep, The Sleep Magazine.
     
Attend sleep and healthcare, respiratory industry trade shows.

 

All of the foregoing is contingent upon adequate financing.

 

Target Market

 

Our target market includes:

 

Sleep product distributors that will distribute our product
     
Home care dealers
     
Private sleep labs
     
Internet providers
     
Product end users
     
Physicians, particularly sleep physicians
     
Medical groups
     
Hospitals
     
Medical associations, such as the American Academy of Sleep Medicine and the American Sleep Association

 

We expect that most of our revenues will be in the home care dealers and hospital target market.

 

Manufacturing

 

Our product will be manufactured by mold makers.  We presently have molds made in China; however, we are considering relocating the manufacturing of our molds to the United States.

 

3

 

 

Operations Contingent Upon Adequate Financing

 

Our entire business plan, including our ability to conduct manufacturing, marketing, generate sales and further develop products, are entirely dependent upon adequate financing. Should we fail to obtain adequate financing: (a) our financial condition will be negatively affected; (b) we will be unable to conduct the essential aspects of our business plan, including marketing as reflected above; (c) investments in our common stock will be negatively impacted; (d) we will be forced to liquidate our business and file for bankruptcy protection.

 

Competition

 

The sleep apnea devices market is highly consolidated, with primary competitors being:

 

ResMed
     
Philips Respironics
     
Naus Medical
     
Fisher & Paykel Healthcare
     
DeVilbiss Healthcare
     
CareFusion
     
InnoMed
     
DeVilbiss
     
TAP

 

ResMed is the market leader (45% of market share), followed by Philips (30%), and Fisher/Paykel (12%). Our competitors offer a full range of sleep products.

 

Our competitors have greater financial, operational and personnel resources than we do. We will attempt to overcome our competitors’ competitive advantages by emphasizing the advantages of our Delta Wave product.

 

Government Regulations

 

FDA

 

Our products are subject to extensive regulation particularly as to safety, efficacy and adherence to FDA Quality System Regulation, and related manufacturing standards. Medical device products are subject to rigorous FDA and other governmental agency regulations in the United States and similar regulations of foreign agencies abroad. The FDA regulates the design, development, research, preclinical and clinical testing, introduction, manufacture, advertising, labeling, packaging, marketing, distribution, import and export, and record keeping for such products, to ensure that medical products distributed in the United States are safe and effective for their intended use. In addition, the FDA is authorized to establish special controls to provide reasonable assurance of the safety and effectiveness of most devices. Non-compliance with applicable requirements can result in import detentions, fines, civil and administrative penalties, injunctions, suspensions or losses of regulatory approvals, recall or seizure of products, operating restrictions, refusal of the government to approve product export applications or allow us to enter supply contracts, and criminal prosecution.

 

Unless an exemption applies, the FDA requires that a manufacturer introducing a new medical device or a new indication for use of an existing medical device obtain either a Section 510(k) premarket notification clearance or a premarket approval, or PMA, before introducing it into the U.S. market. The type of marketing authorization is generally linked to the classification of the device. The FDA classifies medical devices into one of three classes (Class I, II or III) based on the degree of risk the FDA determines to be associated with a device and the level of regulatory control deemed necessary to ensure the device’s safety and effectiveness.

 

Our products currently marketed in the United States are marketed in reliance on 510(k) pre-marketing clearances as either Class I or Class II devices. The process of obtaining a Section 510(k) clearance generally requires the submission of performance data and often clinical data, which in some cases can be extensive, to demonstrate that the device is “substantially equivalent” to a device that was on the market before 1976 or to a device that has been found by the FDA to be “substantially equivalent” to such a pre-1976 device, a predecessor device is referred to as “predicate device.” As a result, FDA clearance requirements may extend the development process for a considerable length of time. In addition, in some cases, the FDA may require additional review by an advisory panel, which can further lengthen the process. The PMA process, which is reserved for new devices that are not substantially equivalent to any predicate device and for high-risk devices or those that are used to support or sustain human life, may take several years and requires the submission of extensive performance and clinical information.

 

4

 

 

Medical devices can be marketed only for the indications for which they are cleared or approved. After a device has received 510(k) clearance for a specific intended use, any change or modification that significantly affects its safety or effectiveness, such as a significant change in the design, materials, method of manufacture or intended use, may require a new 510(k) clearance or PMA approval and payment of an FDA user fee. The determination as to whether a modification could significantly affect the device’s safety or effectiveness is initially left to the manufacturer using available FDA guidance; however, the FDA may review this determination to evaluate the regulatory status of the modified product at any time and may require the manufacturer to cease marketing and recall the modified device until 510(k) clearance or PMA approval is obtained. The manufacturer may also be subject to significant regulatory fines or penalties. The FDA is currently reviewing its guidance describing when it believes a manufacturer is obligated to submit a new 510(k) for modifications or changes to a previously cleared device. The FDA is expected to issue revised guidance to assist device manufacturers in making this determination. It is unclear whether the FDA’s approach in this new guidance will result in substantive changes to existing policy and practice regarding the assessment of whether a new 510(k) is required for changes or modifications to existing devices.

 

Any devices we manufacture and distribute pursuant to clearance or approval by the FDA are subject to pervasive and continuing regulation by the FDA and certain state agencies. These include product listing and establishment registration requirements, which help facilitate FDA inspections and other regulatory actions. As a medical device manufacturer, our manufacturing facilities are subject to inspection on a routine basis by the FDA. We are required to adhere to applicable regulations setting forth detailed cGMP requirements, as set forth in the QSR, which require, manufacturers, including third-party manufacturers, to follow stringent design, testing, control, documentation and other quality assurance procedures during all phases of the design and manufacturing process. Noncompliance with these standards can result in, among other things, fines, injunctions, civil penalties, recalls or seizures of products, total or partial suspension of production, refusal of the government to grant 510(k) clearance or PMA approval of devices, withdrawal of marketing approvals and criminal prosecutions. We believe that our design, manufacturing and quality control procedures are in compliance with the FDA’s regulatory requirements.

 

We must also comply with post-market surveillance regulations, including medical device reporting, or MDR, requirements which require that we review and report to the FDA any incident in which our products may have caused or contributed to a death or serious injury. We must also report any incident in which our product has malfunctioned if that malfunction would likely cause or contribute to a death or serious injury if it were to recur.

 

Labeling and promotional activities are subject to scrutiny by the FDA and, in certain circumstances, by the Federal Trade Commission. Medical devices approved or cleared by the FDA may not be promoted for unapproved or un-cleared uses, otherwise known as “off-label” promotion. The FDA and other agencies actively enforce the laws and regulations prohibiting the promotion of off-label uses, and a company that is found to have improperly promoted off-label uses may be subject to significant liability, including substantial monetary penalties and criminal prosecution.

 

Other Healthcare Laws

 

Even though we do not submit claims or bill governmental programs and other third-party payers directly for reimbursement for our products sold in the United States, we are still subject to laws and regulations that may restrict our business practices, including, without limitation, anti-kickback, false claims, physician payment transparency and data privacy and security laws. The government has interpreted these laws broadly to apply to the marketing and sales activities of manufacturers and distributors like us.

 

The federal Anti-Kickback Statute prohibits, among other things, persons or entities from knowingly and willfully soliciting, receiving, offering or providing remuneration, directly or indirectly, in cash or in kind, in exchange for or to induce either the referral of an individual for, or the purchase, lease, order or recommendation of, any good, facility, item or service for which payment may be made, in whole or in part, under federal healthcare programs such as Medicare and Medicaid. In addition, a claim including items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the federal civil False Claims Act.

 

The federal civil False Claims Act prohibits, among other things, any person or entity from knowingly presenting, or causing to be presented, a false or fraudulent claim for payment or approval to the federal government or knowingly making, using or causing to be made or used a false record or statement material to a false or fraudulent claim to the federal government. A claim includes “any request or demand” for money or property presented to the U.S. government. The civil False Claims Act also applies to false submissions that cause the government to be paid less than the amount to which it is entitled, such as a rebate. Intent to deceive is not required to establish liability under the civil False Claims Act.

 

5

 

 

The Federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, created federal criminal statutes that prohibit among other actions, knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program, including private third-party payors, knowingly and willfully embezzling or stealing from a healthcare benefit program, willfully obstructing a criminal investigation of a healthcare offense, and knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false, fictitious or fraudulent statement in connection with the delivery of or payment for healthcare benefits, items or services. Like the Anti-Kickback Statute, a person or entity does not need to have actual knowledge of these statutes or specific intent to violate them to have committed a violation.

 

Also, many states and countries outside the U.S. have similar fraud and abuse statutes or regulations that may be broader in scope and may apply regardless of payor, in addition to items and services reimbursed under Medicaid and other state programs.

 

Under HIPAA, the Department of Health and Human Services, or HHS, has issued regulations to protect the privacy and security of protected health information used or disclosed by covered entities including health care providers, such as us. HIPAA also regulates standardization of data content, codes and formats used in health care transactions and standardization of identifiers for health plans and providers. Penalties for violations of HIPAA regulations include civil and criminal penalties. In addition to federal privacy and security regulations, there are state laws governing confidentiality and security of health information that are applicable to our business. New laws governing privacy may be adopted in the future as well. Failure to comply with privacy requirements could result in civil or criminal penalties, which could have a materially adverse effect on our business.

 

Additionally, there has been a recent trend of increased federal and state regulation of payments and transfers of value provided to healthcare professionals or entities. The Physician Payment Sunshine Act was enacted in law as part of PPACA, which imposed new annual reporting requirements on device manufacturers for payments and other transfers of value provided by them, directly or indirectly, to physicians and teaching hospitals, as well as ownership and investment interests held by physicians and their family members. A manufacturer’s failure to submit timely, accurately and completely the required information for all payments, transfers of value or ownership or investment interests may result in civil monetary penalties. Certain states also mandate implementation of commercial compliance programs, impose restrictions on device manufacturer marketing practices and/or require the tracking and reporting of gifts, compensation and other remuneration to healthcare professionals and entities.

 

The shifting commercial compliance environment and the need to build and maintain robust systems to comply with different compliance or reporting requirements in multiple jurisdictions increase the possibility that a healthcare company may fail to comply fully with one or more of these requirements. If our operations are found to be in violation of any of the health regulatory laws described above or any other laws that apply to us, we may be subject to penalties, including potentially significant criminal and civil and administrative penalties, damages, fines, disgorgement, imprisonment, exclusion from participation in government healthcare programs, contractual damages, reputational harm, administrative burdens, diminished profits and future earnings, and the curtailment or restructuring of our operations, any of which could adversely affect our ability to operate our business and our results of operations.

 

Environmental Regulation

 

Our operations are not subject to environmental regulation.

 

Employees

 

We have the following employees:

 

Tom Wood, Chief Executive Officer
     
John Lane, Chief Technology Officer

 

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ITEM 1A. RISK FACTORS

 

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and, as such, are not required to provide the information under this Item. Prospective and existing investors should carefully consider the following risk factors in evaluating our business.  

 

ITEM 2. PROPERTIES

 

We have a virtual office at 637 N. Orange Ave., Suite 609, Orlando, FL 32789 where we have access to a conference room for meetings.

 

ITEM 3. LEGAL PROCEEDINGS

 

None

 

ITEM 4. MINE SAFETY DISCLOSURES

 

None.

 

7

 

 

PART II

 

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

 

Market Information

 

Our common stock, par value $.001 per share (the “Common Stock”), is currently listed to trade on the OTC Markets Group OTCQB tier under the symbol “RMSL”. The high/low market prices of our common stock were as follows for the periods below, as reported on www.OTCQB.com. The quotations below reflect inter-dealer bid prices without retail markup, markdown, or commission and may not represent actual transactions.

 

 

    High $     Low $  
    Fiscal Year Ended
December 31,
2018
 
March 31, 2018   $ 2.50     $ 0.55  
June 30, 2018   $ 1.87     $ 0.40  
September 30, 2018   $ 1.20     $ 0.04  
December 31, 2018   $ 0.14     $ 0.04  

 

     

Fiscal Year Ended

December 31,
2017

 
March 31, 2017   $ 12.00     $ 1.00  
June 30, 2017   $ 35.00     $ 7.20  
September 30, 2017   $ 2.30     $ 0.75  
December 31, 2017   $ 0.87     $ 0.55  

 

As of March 21, 2019, we had approximately 156 shareholders of record of our common stock.  

 

Recent Issuances of Unregistered Securities

 

On November 2, 2018, the Company granted 50,000 shares of common stock for services for total non-cash expense of $2,000.

 

ITEM 6. SELECTED FINANCIAL DATA

 

Not applicable since we are a smaller reporting company as defined under the applicable SEC rules.

 

8

 

 

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

Overview

 

We are a Nevada corporation formed on June 6, 2007. Our headquarters are in Orlando, FL. We have been engaged in our current business model since January 1, 2015.

 

We have experienced recurring losses and negative cash flows from operations since inception, including in our current business model. We anticipate that our expenses will increase as we ramp up our expansion, which likely will lead to additional losses, until such time that we approach profitability, or which there are no assurances. We have relied on equity financing to fund operations. There can be no guarantee that we will ever become profitable, or that adequate additional financing will be realized in the future or otherwise may be available to us on acceptable terms, or at all. If we are unable to raise capital when needed, we would be forced to delay, reduce or eliminate our expansion efforts. We will need to generate significant revenues to achieve profitability, of which there are no assurances.

 

Going Concern

 

Our financial statements have been prepared on a going concern basis which assumes that we will be able to realize our assets and discharge our liabilities and commitments in the normal course of business for the foreseeable future. We have an accumulated deficit of $1,502,022 at December 31, 2018, had a net loss of $412,702 and net cash used in operating activities of $111,560 for the year ended December 31, 2018. Our ability to raise additional capital through the future issuances of common stock and/or debt financing is unknown. The obtainment of additional financing, the successful development of our contemplated plan of operations, and its transition, ultimately, to the attainment of profitable operations are necessary for us to continue operations. These conditions and the ability to successfully resolve these factors over the next twelve months raise substantial doubt about our ability to continue as a going concern.

 

Results of Operations for the year ended December 31, 2018 compared to the year ended December 31, 2017

 

The following information should be read in conjunction with our financial statements and related notes thereto included elsewhere in this Form 10-K.

 

Revenues

 

We generated no revenues during our fiscal years ending December 31, 2018 and 2017.

 

Operating Expenses

 

For the year ended December 31, 2018, professional fees decreased $42,312 or 49% to $43,900 compared to $86,212 for the year ended December 31, 2017. Professional fees consist mostly of accounting, audit and legal fees. The decrease of $42,312 in the current year is attributed to a decrease in legal fees. In 2017 $21,250 of the legal expense was non-cash expense from the issuances of common stock.

 

Consulting expense was $175,582 compared to $516,396 for the years ended December 31, 2018 and 2017, respectively. In the prior year we granted 1,574,761 shares of common stock to consultants for total non-cash expense of $709,168, $173,282 of which was booked to prepaids as of December 31, 2017. In the current year we granted common stock to consultants for total non-cash expense of $175,282.

 

Officer compensation was $38,650 and $24,000 for the years ended December 31, 2018 and 2017, respectively, an increase of $14,650 or 61%. There was an increase to the monthly compensation for our CEO.

 

General and administrative expense was $36,249 and $24,857 for the years ended December 31, 2018 and 2017, respectively, an increase of $11,392 or 45.8%. The increase in the current period can be largely attributed to an increase in depreciation, development and other fee expense.

 

9

 

 

Net Loss

 

For the year ended December 31, 2018, we had a net loss of $412,702 as compared to a net loss of $653,965 for the year ended December 31, 2017. Our net loss was lower in the current period primarily due to a decrease in stock issued for services.

 

Liquidity and Capital Resources

 

Net cash used in operating activities was $111,560 for year ended December 31, 2018. During the year ended December 31, 2017 we used cash of $94,890 in operating activities.

 

We used $42,526 on the purchase of property and equipment, including $23,105 on tooling/molds and $16,963 on the purchase of an automobile.

 

We received a net total of $168,712 from financing activities for the year ended December 31, 2018, including $90,000 from the sale of common stock, and $72,000 from a convertible promissory note. We received $96,904 from shareholder loans for the year ended December 31, 2017

 

As of December 31, 2018, we owed $45,000 and $2,589 of principal and interest, respectively to Power Up Lending Group LTD. The note matures on July 9, 2019.

 

As of December 31, 2018, we owed $32,000 and $1,078 of principal and interest, respectively to LG Capital Funding LLC. The note matures on August 30, 2019.

 

On January 23, 2019, the Company issued a Convertible Promissory Note in favor of One44 Capital LLC (“One44”). The principal amount of the Note is $100,000 with an interest rate of 12% per annum. It becomes due and payable with accrued interest on January 23, 2020.

 

Critical Accounting Estimates and Policies

 

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  Note 1 to the Financial Statements describes the significant accounting policies and methods used in the preparation of the Financial Statements. Estimates are used for, but not limited to, contingencies and taxes.  Actual results could differ materially from those estimates. The following critical accounting policies are impacted significantly by judgments, assumptions, and estimates used in the preparation of the Financial Statements.

 

We are subject to various loss contingencies arising in the ordinary course of business.  We consider the likelihood of loss or impairment of an asset or the incurrence of a liability, as well as our ability to reasonably estimate the amount of loss in determining loss contingencies.  An estimated loss contingency is accrued when management concludes that it is probable that an asset has been impaired, or a liability has been incurred and the amount of the loss can be reasonably estimated.  We regularly evaluate current information available to us to determine whether such accruals should be adjusted.

 

We recognize deferred tax assets (future tax benefits) and liabilities for the expected future tax consequences of temporary differences between the book carrying amounts and the tax basis of assets and liabilities.  The deferred tax assets and liabilities represent the expected future tax return consequences of those differences, which are expected to be either deductible or taxable when the assets and liabilities are recovered or settled.  Future tax benefits have been fully offset by a 100% valuation allowance as management is unable to determine that it is more likely than not that this deferred tax asset will be realized.

  

Off-Balance Sheet Arrangements

 

We have not entered into any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources and would be considered material to investors.

 

10

 

 

Recent Accounting Pronouncements

 

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) . ASU 2016-02 requires lessees to recognize lease assets and lease liabilities on the balance sheet and requires expanded disclosures about leasing arrangements. The new standard supersedes the present U.S. GAAP standard on leases and requires substantially all leases to be reported on the balance sheet as right-of-use assets and lease obligations. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018 and interim periods in fiscal years beginning after December 15, 2018, with early adoption permitted. At this point in time we do not expect any material impact on our financial statements as a result of adopting this standard.

 

Topic 606, Revenue from Contracts with Customers , of the Financial Accounting Standards Board’s (FASB) Accounting Standards Codification (ASC). The guidance in ASC 606 was originally issued by the FASB in May 2014 in Accounting Standards Update (ASU) 2014-09, Revenue from Contracts with Customers (Topic 606) . Since then, the FASB has issued several ASUs that have revised or clarified the guidance in ASC 606. The Company has evaluated the impact of this accounting standard update and noted that it has had no material impact.

 

 On June 20, 2018, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2018-07,  Compensation—Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting . ASU 2018-07 is intended to reduce cost and complexity and to improve financial reporting for share-based payments to nonemployees (for example, service providers, external legal counsel, suppliers, etc.). Under the new standard, companies will no longer be required to value non-employee awards differently from employee awards. Meaning that companies will value all equity classified awards at their grant-date under ASC718 and forgo revaluing the award after this date. The Company has chosen to early adopt this standard.

 

In January 2017, the Financial Accounting Standards Board (“FASB”) issued an Accounting Standards Update (“ASU”) 2017-01, Business Combinations (Topic 805) Clarifying the Definition of a Business . The amendments in this update clarify the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions or disposals of assets or businesses. The definition of a business affects many areas of accounting including acquisitions, disposals, goodwill, and consolidation. The guidance is effective for interim and annual periods beginning after December 15, 2017 and should be applied prospectively on or after the effective date. The Company is in the process of evaluating the impact of this accounting standard update.

 

The Company has implemented all new accounting pronouncements that are in effect.  These pronouncements did not have any material impact on the financial statements unless otherwise disclosed, and the Company does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.

 

Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

Not applicable to smaller reporting companies.

 

11

 

 

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

 

REMSLEEP HOLDINGS, INC.

 

Report of Independent Registered Public Accounting Firm F-2
   
Balance Sheets as of December 31, 2018 and 2017 F-3
   
Statements of Operations for the Years ended December 31, 2018 and 2017 F-4
   
Statements of Stockholders’ Equity (Deficit) for the Years ended December 31, 2018 and 2017 F-5
   
Statements of Cash Flows for the Years ended December 31, 2018 and 2017 F-6
   
Notes to Financial Statements F-7

 

F- 1

 

 

 

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

To the Board of Directors and Shareholders of REMSleep Holdings, Inc.

 

Opinion on the Financial Statements

 

We have audited the accompanying balance sheets of REMSleep Holdings, Inc. (“the Company”) as of December 31, 2018 and 2017, and the related statements of operations, stockholders’ equity (deficit), and cash flows for each of the years in the two-year period ended December 31, 2018, and the related notes (collectively referred to as the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2018 and 2017, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2018, in conformity with accounting principles generally accepted in the United States of America.

 

Going Concern

 

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company has an accumulated deficit, net losses, and negative cash flows from operations. These factors raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

Basis for Opinion

 

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

 

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

 

Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.

 

/s/ Fruci & Associates II, PLLC  

 

We have served as the Company’s auditor since 2018.

Spokane, Washington

March 28, 2019  

 

F- 2

 

 

REMSLEEP HOLDINGS, INC.

BALANCE SHEETS

 

 

   

December 31,

2018

   

December 31,

2017

 
ASSETS            
Current assets:            
Cash   $ 16,640     $ 2,014  
Prepaid expenses     2,000       173,282  
Total current assets     18,640       175,296  
Property and equipment, net     38,436       8,486  
                 
Total Assets   $ 57,076     $ 183,782  
                 
LIABILITIES AND STOCKHOLDERS’ DEFICIT                
                 
Current Liabilities:                
Accounts payable   $ 240,399     $ 239,878  
Accrued compensation     -       2,850  
Accrued interest     18,508       12,341  
Accrued stock to be issued     -       194,068  
Convertible Notes, net of discount of $33,759     43,241       -  
Derivative Liability     96,110       -  
Loan payable – related party     179,191       182,191  
Loans payable     59,712       50,000  
                 
Total Liabilities     637,161       681,328  
                 
Commitments and Contingencies     -       -  
                 
STOCKHOLDERS’ DEFICIT:                
                 
Series A preferred stock, no par value, 5,000,000 shares authorized, 3,500,000 and 3,500,000 issued and outstanding, respectively     105,000       105,000  
Series B preferred stock, no par value, 5,000,000 shares authorized, no shares issued     -       -  
Series C preferred stock, no par value, 5,000,000 shares authorized, no shares issued     -       -  
Common stock, $.001 par value, 1,000,000,000 shares authorized, 4,315,894 and 3,610,751 shares issued and outstanding, respectively     4,316       3,611  
Common stock to be issued     228,604       58,225  
Additional paid in capital     584,017       424,938  
Accumulated Deficit     (1,502,022 )     (1,089,320 )
TOTAL STOCKHOLDERS’ DEFICIT     (580,085 )     (497,546 )
                 
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT   $ 57,076     $ 183,782  

 

The accompanying notes are an integral part of these financial statements.

 

F- 3

 

 

REMSLEEP HOLDINGS, INC.

STATEMENTS OF OPERATIONS

 

 

    For the Years Ended
December 31,
 
    2018     2017  
Operating Expenses:            
Professional fees   $ 43,900     $ 86,212  
Consulting     175,582       516,396  
Officer compensation     38,650       24,000  
General and administrative     36,249       24,857  
                 
Total operating expenses     294,381       651,465  
                 
Loss from operations     (294,381 )     (651,465 )
                 
Other expense:                
Interest expense     (6,875 )     (2,500 )
Discount amortization     (40,441 )     -  
Loss on issuance of convertible debt     (47,020 )     -  
Change in fair value of derivative     (23,985 )     -  
Total other expense     (118,321 )     (2,500 )
                 
Loss before income taxes     (412,702 )     (653,965 )
                 
Provision for income taxes     -       -  
                 
Net Loss   $ (412,702 )   $ (653,965 )
                 
Net loss per share, basic and diluted   $ (0.10 )   $ (0.19 )
                 
Weighted average common shares outstanding, basic and diluted     4,065,317       3,391,703  

 

The accompanying notes are an integral part of these financial statements.

 

F- 4

 

 

REMSLEEP HOLDINGS, INC.

STATEMENT OF STOCKHOLDERS’ EQUITY (DEFICIT)

FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017

 

 

    Series A Preferred Shares     Series A Preferred Stock Amount     Common Shares     Common Stock Amount     Common stock to be issued     Additional Paid-in Capital     Accumulated Deficit     Total  
Balance, December 31, 2016     5,000,000     $ 105,000       3,273,111     $ 3,273     $ -     $ (31,599 )   $ (435,355 )   $ (358,681 )
Cancellation of outstanding stock     (1,500,000 )     -       (150,000 )     (150 )     -       150       -       -  
Common stock issued for services     -       -       487,640       488       58,225       456,387       -       515,100  
Net loss for the year ended December 31, 2017     -       -       -       -       -       -       (653,965 )     (653,965 )
Balance, December 31, 2017     3,500,000       105,000       3,610,751       3,611       58,225       424,938       (1,089,320 )     (497,546 )
Common stock sold for cash     -       -       477,143       477       -       89,523       -       90,000  
Common stock issued for services     -       -       228,000       228       170,379       42,356               212,963  
Beneficial Conversion feature     -       -       -       -       -       27,200       -       27,200  
Net loss for the year ended December 31, 2018     -       -       -       -       -       -       (412,702 )     (412,702 )
Balance, December 31, 2018     3,500,000     $ 105,000       4,315,894     $ 4,316     $ 228,604     $ 584,017     $ (1,502,022 )   $ (580,085 )

 

The accompanying notes are an integral part of these financial statements.

 

F- 5

 

 

REMSLEEP HOLDINGS, INC.

STATEMENTS OF CASH FLOWS

 

 

    For the Years Ended
December 31,
 
    2018     2017  
Cash Flows from Operating Activities:                
Net loss   $ (412,702 )   $ (653,965 )
Adjustments to reconcile net loss to net cash used in operating activities:                
Depreciation expense     12,576       4,359  
Stock based compensation     175,282       535,886  
Change in fair value of derivative     23,985       -  
Discount amortization     40,441       -  
Loss on issuance of convertible debt     47,020       -  
Changes in Operating Assets and Liabilities:                
Accounts payable     520       13,480  
Accrued officer compensation     (2,850 )     2,850  
Accrued interest     6,167       2,500  
Prepaid expenses     (2,000 )     -  
Net cash used by operating activities     (111,561 )     (94,890 )
                 
Cash Flows from Investing Activities:                
Purchase of property and equipment     (42,526 )     -  
Net cash used by investing activities     (42,526 )     -  
                 
Cash Flows from Financing Activities:                
Proceeds/repayments – related party     (3,000 )     96,904  
Proceeds from loan payable     16,963       -  
Repayment of loans     (7,250 )     -  
Proceeds from convertible notes payable     72,000       -  
Proceeds from sale of common stock     90,000       -  
Net cash provided by financing activities     168,713       96,904  
                 
Net increase in cash     14,626       2,014  
Cash at beginning of the year     2,014       -  
Cash at end of the year   $ 16,640     $ 2,014  
                 
Supplemental cash flow information:                
Interest paid in cash   $ -     $ -  
Taxes paid   $ -     $ -  
                 
Supplemental non-cash disclosure:                
Loan payable for purchase of automobile   $ 16,936     $ -  

 

The accompanying notes are an integral part of these financial statements.

 

F- 6

 

 

REMSLEEP HOLDINGS, INC.

NOTES TO FINANCIAL STATEMENTS

December 31, 2018

 

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Business Activity

 

REMSleep Holdings, Inc., (the “Company”) was incorporated in the State of Nevada on June 6, 2007. On January 5, 2015 the name of the Company was changed to REMSleep Holdings, Inc. and the business model was changed to reflect the new direction of the Company; to develop and distribute products to help people affected by sleep apnea. On May 30, 2015 REMSleep LLC was formally merged into REMSleep Holdings, Inc.

 

Basis of Presentation

The Company’s financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”).

 

Use of Estimates

The preparation of financial statements in conformity with 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 at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.

 

Concentrations of Credit Risk

We maintain our cash in bank deposit accounts, the balances of which at times may exceed federally insured limits. We continually monitor our banking relationships and consequently have not experienced any losses in our accounts. We believe we are not exposed to any significant credit risk on cash.

 

Cash equivalents

The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. There were no cash equivalents for the year ended December 31, 2018 or 2017.

 

Fair value of financial instruments

The Company follows paragraph 825-10-50-10 of the FASB Accounting Standards Codification for disclosures about fair value of its financial instruments and paragraph 820-10-35-37 of the FASB Accounting Standards Codification (“Paragraph 820-10-35-37”) to measure the fair value of its financial instruments. Paragraph 820-10-35-37 establishes a framework for measuring fair value in accounting principles generally accepted in the United States of America (U.S. GAAP), and expands disclosures about fair value measurements.  To increase consistency and comparability in fair value measurements and related disclosures, Paragraph 820-10-35-37 establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three (3) broad levels.  The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The three (3) levels of fair value hierarchy defined by Paragraph 820-10-35-37 are described below:

 

Level 1: Quoted market prices available in active markets for identical assets or liabilities as of the reporting date.

 

Level 2: Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date.

 

Level 3: Pricing inputs that are generally unobservable inputs and not corroborated by market data.

 

The carrying amount of the Company’s financial assets and liabilities, such as cash, prepaid expenses and accrued expenses approximate their fair value because of the short maturity of those instruments. The Company’s notes payable approximates the fair value of such instruments based upon management’s best estimate of interest rates that would be available to the Company for similar financial arrangements at December 31, 2018.

 

The following table presents assets and liabilities that are measured and recognized at fair value as of December 31, 2018 on a recurring basis:

 

Description   Level 1     Level 2     Level 3     Total Gains and (Losses)  
Derivative     -       -       96,110       (23,985 )
Total   $ -     $ -     $ 96,110     $ (23,985 )

 

F- 7

 

 

Fixed Assets

Fixed assets are carried at the lower of cost or net realizable value. All fixed assets with a cost of $2,000 or greater are capitalized. Major betterments that extend the useful lives of assets are also capitalized. Normal maintenance and repairs are charged to expense as incurred. When assets are sold or otherwise disposed of, the cost and accumulated depreciation are removed from the accounts and any resulting gain or loss is recognized in operations.

 

Depreciation is computed using the straight-line method over the estimated useful lives of three years.

 

Income taxes

The Company follows Section 740-10-30 of the FASB Accounting Standards Codification, which requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax assets and liabilities are based on the differences between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the fiscal year in which the differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance to the extent management concludes it is more likely than not that the assets will not be realized. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the fiscal years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the Statements of Income in the period that includes the enactment date.

 

The Company adopted section 740-10-25 of the FASB Accounting Standards Codification (“Section 740-10-25”) with regards to uncertainty income taxes.  Section 740-10-25 addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements.  Under Section 740-10-25, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position.  The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than fifty percent (50%) likelihood of being realized upon ultimate settlement. Section 740-10-25 also provides guidance on de-recognition, classification, interest and penalties on income taxes, accounting in interim periods and requires increased disclosures.  The Company had no material adjustments to its liabilities for unrecognized income tax benefits according to the provisions of Section 740-10-25.

 

Stock-based Compensation

We account for equity-based transactions with nonemployees under the provisions of ASC Topic No. 505-50, Equity-Based Payments to Non-Employees (“ASC 505-50”). ASC 505-50 establishes that equity-based payment transactions with nonemployees shall be measured at the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable. The fair value of common stock issued for payments to nonemployees is measured at the market price on the date of grant. The fair value of equity instruments, other than common stock, is estimated using the Black-Scholes option valuation model. In general, we recognize the fair value of the equity instruments issued as deferred stock compensation and amortize the cost over the term of the contract.

 

We account for employee stock-based compensation in accordance with the guidance of FASB ASC Topic 718, Compensation—Stock Compensation, which requires all share-based payments to employees, including grants of employee stock options, to be recognized in the financial statements based on their fair values.  The fair value of the equity instrument is charged directly to compensation expense and credited to additional paid-in capital over the period during which services are rendered.

 

Basic and Diluted Earnings Per Share

Net income (loss) per common share is computed pursuant to section 260-10-45 of the FASB Accounting Standards Codification.  Basic net income (loss) per common share is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding during the period.  Diluted net income (loss) per common share is computed by dividing net income (loss) by the weighted average number of shares of common stock and potentially outstanding shares of common stock during the period. The weighted average number of common shares outstanding and potentially outstanding common shares assumes that the Company incorporated as of the beginning of the first period presented.

 

The Company’s diluted loss per share is the same as the basic loss per share for the years ended December 31, 2018 and 2017, as the inclusion of any potential shares would have had an anti-dilutive effect due to the Company generating a loss.

 

F- 8

 

 

Recent Accounting Pronouncements

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) . ASU 2016-02 requires lessees to recognize lease assets and lease liabilities on the balance sheet and requires expanded disclosures about leasing arrangements. The new standard supersedes the present U.S. GAAP standard on leases and requires substantially all leases to be reported on the balance sheet as right-of-use assets and lease obligations. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018 and interim periods in fiscal years beginning after December 15, 2018, with early adoption permitted. At this point in time we do not expect any material impact on our financial statements as a result of adopting this standard.

 

Topic 606, Revenue from Contracts with Customers , of the Financial Accounting Standards Board’s (FASB) Accounting Standards Codification (ASC). The guidance in ASC 606 was originally issued by the FASB in May 2014 in Accounting Standards Update (ASU) 2014-09, Revenue from Contracts with Customers (Topic 606) . Since then, the FASB has issued several ASUs that have revised or clarified the guidance in ASC 606. The Company has evaluated the impact of this accounting standard update and noted that it has had no material impact.

 

On June 20, 2018, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2018-07,  Compensation—Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting . ASU 2018-07 is intended to reduce cost and complexity and to improve financial reporting for share-based payments to nonemployees (for example, service providers, external legal counsel, suppliers, etc.). Under the new standard, companies will no longer be required to value non-employee awards differently from employee awards. Meaning that companies will value all equity classified awards at their grant-date under ASC718 and forgo revaluing the award after this date. The Company has chosen to early adopt this standard.

 

In January 2017, the Financial Accounting Standards Board (“FASB”) issued an Accounting Standards Update (“ASU”) 2017-01, Business Combinations (Topic 805) Clarifying the Definition of a Business . The amendments in this update clarify the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions or disposals of assets or businesses. The definition of a business affects many areas of accounting including acquisitions, disposals, goodwill, and consolidation. The guidance is effective for interim and annual periods beginning after December 15, 2017 and should be applied prospectively on or after the effective date. The Company is in the process of evaluating the impact of this accounting standard update.

 

The Company has implemented all new accounting pronouncements that are in effect.  These pronouncements did not have any material impact on the financial statements unless otherwise disclosed, and the Company does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.

 

NOTE 2 - GOING CONCERN

 

The accompanying 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. The Company has an accumulated deficit of $1,502,022 at December 31, 2018, had a net loss of $412,702 and net cash used in operating activities of $111,560 for the year ended December 31, 2018. The Company’s ability to raise additional capital through the future issuances of common stock and/or debt financing is unknown. The obtainment of additional financing, the successful development of the Company’s contemplated plan of operations, and its transition, ultimately, to the attainment of profitable operations are necessary for the Company to continue operations. These conditions and the ability to successfully resolve these factors over the next twelve months raise substantial doubt about the Company’s ability to continue as a going concern. The financial statements of the Company do not include any adjustments that may result from the outcome of these aforementioned uncertainties.

 

F- 9

 

 

NOTE 3 - PROPERTY & EQUIPMENT

 

Property and Equipment are first recorded at cost. Depreciation is computed using the straight-line method over the estimated useful lives of the various classes of assets as follows between three and five years.

 

Long lived assets, including property and equipment, to be held and used by the Company are reviewed for impairment whenever events or changes in circumstances indicate that the carrying value of the assets may not be recoverable. Impairment losses are recognized if expected future cash flows of the related assets are less than their carrying values. Measurement of an impairment loss is based on the fair value of the asset. Long-lived assets to be disposed of are reported at the lower of carrying amount or fair value less cost to sell.

 

Maintenance and repair expenses, as incurred, are charged to expense. Betterments and renewals are capitalized in plant and equipment accounts. Cost and accumulated depreciation applicable to items replaced or retired are eliminated from the related accounts with any gain or loss on the disposition included as income.

 

Property and equipment stated at cost, less accumulated depreciation consisted of the following:

 

    December 31,
2018
    December 31,
2017
 
Furniture/fixtures   $ 14,904     $ 14,904  
Office equipment     2,458       -  
Automobile     16,963       -  
Tooling/Molds     23,105       -  
Less: accumulated depreciation     (18,994 )     (6,418 )
Fixed assets, net   $ 38,436     $ 8,486  

 

Depreciation expense

Depreciation expense for the years ended December 31, 2018 and 2017 was $12,576 and $4,359, respectively.

 

NOTE 4 - LOANS PAYABLE

 

On October 24, 2017, the Company was notified that a petition had been filed in the Iowa District Court for Polk County by a Mr. John M. Wesson for failure to repay a loan. Mr. Wesson had loaned the Company $30,000 and $20,000 on October 24, 2012 and June 12, 2013, respectively. The loans were to accrue interest at 5%. While the Company was under previous management the loans were removed from the books in Q1 of 2015. On April 26, 2018, the Company agreed to repay the loan in full including accrued interest and $5,000 for legal fees. The $50,000 plus $7,341 was booked to retained earnings in 2016 as a correction of an error. As of December 31, 2018, there is $14,841 of interest accrued on the loan.

 

On March 23, 2018, the Company purchased an automobile. The purchase price was $16,963.46. The interest rate on the loan is 5.8% and matures on April 7, 2023. Payments on the loan, consisting of principal and interest, are $327 per month.

 

NOTE 5 - CONVERTIBLE NOTES

 

On July 9, 2018, the Company issued a Convertible Promissory Note in favor of Power Up Lending Group LTD (“Power Up”). The principal amount of the Note is $45,000 with an original issue discount of $3,000 and carries an interest rate of 12% per annum. It becomes due and payable with accrued interest on July 9, 2019. Power Up has the option to convert the Note plus accrued interest into common shares of the Company, after 180 days. The conversion rate is a 39% discount to the average of the lowest two trading price for twenty days prior to the date of conversion. The company bifurcated the conversion feature and accounted for it as a derivative liability. The Company recorded the derivative liability at its fair value of $89,020 based on the Black Scholes Merton pricing model and a corresponding debt discount of $42,000 to be amortized utilizing the interest method of accretion over the term of the note. As of December 31, 2018, the Company fair valued the derivative at $96,110. In addition, $21,575 of the debt discount has been amortized to interest expense.

 

A summary of the activity of the derivative liability for the notes above is as follows:

 

Balance at December 31, 2017   $ -  
Increase to derivative due to new issuances   $ 89,020  
Derivative loss due to mark to market adjustment   $ 7,090  
Balance at December 31, 2018   $ 96,110  

 

F- 10

 

 

A summary of quantitative information about significant unobservable inputs (Level 3 inputs) used in measuring the Company’s derivative liability that are categorized within Level 3 of the fair value hierarchy for the year ended December 31, 2018 is as follows:

 

Inputs   December 31,
2018
    Initial Valuation  
Stock price   $ .06     $ .55  
Conversion price   $ .0244     $ .244  
Volatility (annual)     342.93 %     261.04 %
Risk-free rate     2.56 %     2.34 %
Years to maturity     .52       1  

 

The development and determination of the unobservable inputs for Level 3 fair value measurements and fair value calculations are the responsibility of the Company’s management. The Company noted that there was no material difference between the results of the Black Scholes Pricing Model and that of the Binomial Option Pricing Model.

 

On August 30, 2018, the Company issued a Convertible Promissory Note in favor of LG Capital Funding LLC (“LG”). The principal amount of the Note is $32,000 with an original issue discount of $2,000 and carries an interest rate of 10% per annum. It becomes due and payable with accrued interest on August 30, 2019. During the first six months LG has the option to convert the Note plus accrued interest at a fixed price of $0.10 per share. After the 6-month anniversary, the Conversion Price shall be equal to 60% of the lowest closing bid price for the eighteen prior trading days including the day of conversion. The Company accounted for the initial conversion feature as a beneficial conversion feature. A beneficial conversion feature arises when the conversion price of a convertible instrument is below the per share fair value of the underlying stock into which it is convertible. If LG were to convert at the price of $0.10 they could convert the full $32,000 into 320,000 shares of common stock. Using the stock price on the date the note was issued of $.185 and the conversion price of $.10, the Company valued each share at $.085 for an additional expense of $27,200. The Company has accounted for the $27,200 has debt discount with a credit to additional paid in capital. The discount will be amortized over the term of the note. As of December 31, 2018, $13,659 has been amortized to interest expense.

 

NOTE 6 - RELATED PARTY TRANSACTIONS

 

The Company has received support from parties related through common ownership and directorship. All of the expenses herein have been borne by these individuals on behalf of the Company and are treated as shareholder loans. These loans are unsecured, non-interest bearing and due on demand. As of December 31, 2018, and, 2017, the balance due on these loans is $179,191 and $182,191, respectively.

 

NOTE 7 - COMMON STOCK

 

On January 15, 2017, the Company issued, as compensation for services provided, 5,000 common shares with a fair value of $4.25 ($0.2125 pre-split) for total non-cash expense of $21,250. The $21,250 was recognized over the six-month term of the contract. As of December 31, 2017, all $21,250 has been expensed.

 

On March 6, 2017, the Company issued, as compensation for services provided, 32,500 common shares with a fair value of $4.25 ($0.2125 pre-split) for total non-cash expense of $138,125.

 

On June 15, 2017, the Company filed a Certificate of Amendment to its Articles of Incorporation (the “Certificate of Amendment”), with the Secretary of State of the State of Nevada to affect a 1-for-20 reverse stock split of its common stock, whereby every twenty shares of existing common stock will be converted into one share of new common stock.

 

On April 1, 2017, the Company entered into a Fee Agreement with Frederick M. Lehrer to provide legal services to the Company. Per the terms of that agreement Mr. Lehrer was granted 5,000 shares of common stock with a fair value of $4.25 for total non-cash expense of $21,250. As of December 31, 2018, the shares have not yet been issued by the transfer agent; so therefore, have been credited to common stock to be issued.

 

On April 10, 2017, the Company issued, as compensation for services provided, 50,000 common shares with a fair value of $4.25 for total non-cash expense of $212,500.

 

F- 11

 

 

In April 2017, with the agreement of the executive of the Company’s previous management, the Company cancelled 150,000 common shares that had been previously issued to him.

 

On June 29, 2017, FINRA approved the Company’s Reverse Stock Split. The Reverse Stock Split took effect at the open of business on June 30, 2017. All shares through these financial statements have been retroactively adjusted to reflect the reverse.

 

On August 1, 2017, the Company issued, as compensation for services provided, 150,000 common shares with a fair value of $0.2125 for total non-cash expense of $31,875.

 

On August 11, 2017, the Company issued, as compensation for services provided, 250,000 common shares with a fair value of $0.2125 for total non-cash expense of $53,125.

 

On November 16, 2017, the Company issued, as compensation for services provided, 1,087,261 common shares with a fair value of $0.2125 per share for total non-cash expense of $231,043. The expense is being recognized over the six-month term of the contract. As of December 31, 2017, $57,761 has been debited to consulting expense. In addition, as of December 31, 2017, the shares have not yet been issued; as a result, $36,975 has been credited to common stock to be issued and the remaining $194,068 to accruals. As of September 30, 2018, the shares were re-valued at $0.231 for a change in value of $16,895. In addition, $173,282 was amortized to stock for services expense and the accrual for stock to be issued was reclassed to common stock to be issued in equity, which was reduced $40,584 for the issuance of 178,000 shares by the transfer agent. As of December 31, 2018, the full amount has been amortized to stock compensation expense.

 

During the year ended December 31, 2018, the Company sold 477,143 shares of common stock for total cash proceeds of $90,000.

 

During the nine months ended September 30, 2018, the Company granted 1,760,000 shares of common stock for services at $0.25 per share for total non-cash expense of $440,000. Subsequent to the year ended December 31, 2018 all of the shares were returned. As the expense that was recorded was material to the financial statements, the fact that the services agreed upon were not performed and that all shares were returned to the Company, the previous $440,000 of expense that was recorded as of September 30, 2018, has been reversed as of December 31, 2018.

 

NOTE 8 - PREFERRED STOCK

 

The Company is currently authorized to issue 5,000,000 Class A preferred shares, $0.001 par value with 1:25 voting rights. The Series A Preferred Stock ranks equal to the common stock on liquidation and pays no dividend.

 

In April 2017, with the agreement of the executive of the Company’s previous management, the Company cancelled 1,500,000 Class A Preferred Shares that had been previously issued to him in 2015.

 

The Company is currently authorized to issue 5,000,000 Class B Preferred Shares, $0.001 par value. Each share of Series B Preferred Stock has a 1:100 voting right and is convertible into 100 shares of common stock. No dividends will be paid and in the event of liquidation all shares of Series B will automatically convert into common stock. There are no shares of Series B Preferred Stock issued and outstanding.

 

The Company is currently authorized to issue 5,000,000 Class C Preferred Shares, $0.001 par value. Each share of Series C Preferred Stock has a 1:50 voting right and is convertible into 50 shares of common stock. No dividends will be paid and in the event of liquidation all shares of Series B will automatically convert into common stock. There are no shares of Series C Preferred Stock issued and outstanding.

 

NOTE 9 - INCOME TAX

 

Deferred taxes are provided on a liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carry forwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. The U.S. federal income tax rate is 21%.

 

F- 12

 

 

The provision for Federal income tax consists of the following December 31:

 

    2018     2017  
Federal income tax benefit attributable to:                
Current Operations   $ 87,000     $ 137,000  
Less: valuation allowance     (87,000 )     (137,000 )
Net provision for Federal income taxes   $ -     $ -  

 

The cumulative tax effect at the expected rate of 21% of significant items comprising our net deferred tax amount is as follows:

 

    2018     2017  
Deferred tax asset attributable to:            
Net operating loss carryover   $ 315,000     $ 229,000  
Less: valuation allowance     (315,000 )     (229,000 )
Net deferred tax asset   $ -     $ -  

 

At December 31, 2018, the Company had net operating loss carry forwards of approximately $315,000 that maybe offset against future taxable income.  No tax benefit has been reported in the December 31, 2018 or 2017 financial statements since the potential tax benefit is offset by a valuation allowance of the same amount. The change in the valuation allowance for the year ended December 31, 2018 was a decrease of $50,000.

 

On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cut and Jobs Act (the “Tax Act”). The Tax Act establishes new tax laws that affects 2018 and future years, including a reduction in the U.S. federal corporate income tax rate to 21% effective January 1, 2018. For certain deferred tax assets and deferred tax liabilities.

 

Due to the change in ownership provisions of the Tax Reform Act of 1986, net operating loss carry forwards for Federal income tax reporting purposes are subject to annual limitations. Should a change in ownership occur, net operating loss carry forwards may be limited as to use in future years.

 

ASC Topic 740 provides guidance on the accounting for uncertainty in income taxes recognized in a company’s financial statements. Topic 740 requires a company to determine whether it is more likely than not that a tax position will be sustained upon examination based upon the technical merits of the position. If the more-likely-than-not threshold is met, a company must measure the tax position to determine the amount to recognize in the financial statements.

 

The Company includes interest and penalties arising from the underpayment of income taxes in the statements of operations in the provision for income taxes. As of December 31, 2018, the Company had no accrued interest or penalties related to uncertain tax positions.

 

NOTE 10 - SUBSEQUENT EVENTS

 

In accordance with SFAS 165 (ASC 855-10) management has performed an evaluation of subsequent events through the date that the financial statements were available to be issued and has determined that it does not have any material subsequent events to disclose in these financial statements other then the following.

 

Subsequent to December 31, 2018, PowerUp converted $7,940 into 303,053 shares of common stock.

 

On January 23, 2019, the Company issued a Convertible Promissory Note in favor of One44 Capital LLC (“One44”). The principal amount of the Note is $100,000 with an interest rate of 12% per annum. It becomes due and payable with accrued interest on January 23, 2020. Power Up has the option to convert the Note plus accrued interest into common shares of the Company, after 180 days. The conversion rate is a 55% of the lowest two trading prices for twenty days prior to the date of conversion.

 

F- 13

 

 

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

 

On July 26, 2018, Michael Gillespie & Associates, PLLC (“Gillespie”) was dismissed as the registrant’s independent registered public accountant.

 

On July 26, 2018, the registrant engaged Fruci & Associates II, PLLC (“Fruci”) as its new independent registered public accountant.

 

ITEM 9A. CONTROLS AND PROCEDURES

 

Under the supervision and with the participation of our management, including the Chief Executive Officer who also acts as our principal financial officer, we have evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) of the Exchange Act) as of the end of the period covered by this report.  The disclosure controls and procedures ensure that all information required to be disclosed by us in the reports that we file or submit under the Exchange Act is: (i) recorded, processed, summarized and reported, within the time periods specified in the SEC’s rule and forms; and (ii) accumulated and communicated to our management, including our Chief Executive Officer as appropriate to allow timely decisions regarding required disclosure.  Based on that evaluation, the Chief Executive Officer concluded that, as of December 31, 2018, these disclosure controls and procedures were not effective.

 

Management’s Report on Internal Control Over Financial Reporting

 

Evaluation of Disclosure Controls and Procedures

 

Under the supervision and with the participation of our management, including the Chief Executive Officer who also acts as our principal financial officer, we have evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) of the Exchange Act) as of the end of the period covered by this report.  The disclosure controls and procedures ensure that all information required to be disclosed by us in the reports that we file or submit under the Exchange Act is: (i) recorded, processed, summarized and reported, within the time periods specified in the SEC’s rule and forms; and (ii) accumulated and communicated to our management, including our Chief Executive Officer as appropriate to allow timely decisions regarding required disclosure.  Based on that evaluation, the Chief Executive Officer concluded that, as of December 31, 2018, these disclosure controls and procedures were not effective.

 

Management’s Annual Report on Internal Control over Financial Reporting

 

Our management is responsible to establish and maintain adequate internal control over financial reporting. Our Chief Executive Officer is responsible to design or supervise a process that provides reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.  The policies and procedures include:

 

maintenance of records in reasonable detail to accurately and fairly reflect the transactions and dispositions of assets,
     
reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures are being made only in accordance with authorizations of management and directors, and
     
reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of assets that could have a material effect on our financial statements.

 

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance of achieving their control objectives.

 

12

 

 

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our internal control over financial reporting as of the end of the period December 31, 2018.  In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control – Integrated Framework (2013).  Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of the end of the fiscal year December 31, 2018, our internal control over financial reporting were not effective at that reasonable assurance level. The following aspects of the Company were noted as potential material weaknesses:

 

timely and accurate reconciliation of accounts
     
lack of segregation of duties

 

Changes in Internal Control Over Financial Reporting

 

There were no changes in our internal control over financial reporting that occurred during our most recent fiscal quarter that have materially affected, or reasonably likely to materially affect, our internal control over financial reporting.

 

Attestation Report of Independent Public Accounting Firm

 

This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting because as a smaller reporting company we are not subject to attestation by our independent registered public accounting firm pursuant to rules of the Securities and Exchange Commission that permit us to provide only management’s report in this annual report.

 

ITEM 9B. OTHER INFORMATION

 

None

 

13

 

PART III

 

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

 

Directors and Executive Officers

 

The names of our director and executive officers as of December 31, 2018, their ages, positions, and biographies are set forth below. Our executive officers are appointed by, and serve at the discretion of, our board of directors.

 

Name   Age     Position(s)
Russell Bird     70     Chairman and Director
Tom Wood     73     Chief Executive Officer and Director

 

Russell Bird has been our Chairman and Director since January 1, 2015 . From year to year, he operated businesses that offered sleep apnea interfaces, devices, and other respiratory equipment and supplies. In 1979, he founded Medical Gases Australia, a medical manufacturing and distribution firm that specializing in respiratory and other health products. Medical Gases Australia placed the first patients on CPAP therapy. He then started Medical Industries of America in 1985, a medical manufacturing and distribution firm specializing in respiratory and other health products.

 

Tom Wood has been our Chief Executive Officer/Chief Financial Officer/Chief Accounting Officer/Director effective January 1, 2015. From May 23, 2013 to present, he has been the Managing Member of RemSleep, LLC, a Iowa Limited Liability Company. Tom Wood has been awarded several U.S. patents in the area of sleep apnea. He is the inventor and developer of Nasal Aire, which won the 2004 Frost and Sullivan Award for Product Innovation. His US Patents also include the Nasal Aire II and Petite Nasal Aire. Tom has 25 years of experience as a respiratory therapist in the ICU at Baylor Medical Center and Parkland Memorial hospitals in Dallas, Texas. He also worked for two years with the Muscular Dystrophy Association, responsible for respiratory care for patients with Amyotrophic Lateral Sclerosis.

 

Indemnification of Directors and Officers

 

Our Articles of Incorporation and Bylaws both provide for the indemnification of our officers and directors, to the fullest extent, permitted by Nevada law.

 

14

 

 

Compliance with Section 16(a) of the Exchange Act

 

Section 16(a) of the Securities Exchange Act of 1934 requires our directors, executive officers and persons who own more than ten percent of our common stock, to file with the SEC initial reports of ownership and reports of changes in ownership of common stock.  Officers, directors and ten-percent or greater beneficial owners are required by SEC regulations to furnish us with copies of all Section 16(a) reports they file.  Based upon a review of those forms and representations regarding the need for filing for the year ended December 31, 2018, we believe all necessary forms have been filed.

 

Corporate Governance

 

We do not have a standing nominating committee for directors, nor do we have an audit committee with an audit committee financial expert serving on that committee.

 

Code of Ethics

 

The Company has not adopted a Code of Ethics.

 

ITEM 11. EXECUTIVE COMPENSATION

 

Summary Compensation

 

The following table provides information as to cash compensation of all executive officers of the Company, for each of the Company’s last two fiscal years.

 

SUMMARY COMPENSATION TABLE  
                                        Nonqualified              
                                  Non-Equity     Deferred              
                      Stock     Option     Incentive Plan     Compensation     All Other        
Name and         Salary     Bonus     Awards     Awards     Compensation     Earnings     Compensation     Total  
principal position   Year     ($)     ($)     ($)     ($)     ($)     ($)     ($)     ($)  
Russell Bird     2018     $ 0     $ 0     $ 0     $ 0     $        0     $      0     $      0     $ 0  
(Chairman)     2017     $ 0     $ 0     $ 0     $ 0     $ 0     $ 0     $ 0     $ 0  
Tom Wood     2018     $ 38,850     $ 0     $ 0     $ 0     $ 0     $ 0     $ 0     $ 38,850  
(Executive Officer)     2017     $ 21,150     $ 0     $ 0     $ 0     $ 0     $ 0     $ 0     $ 21,150  

 

Outstanding Equity Awards at Fiscal Year End . There were no outstanding equity awards as of December 31, 2018.

 

Board Committees

 

We do not currently have any committees of the Board of Directors. Additionally, due to the nature of our intended business, the Board of Directors does not foresee a need for any committees in the foreseeable future.

15

 

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

 

The following table sets forth, as of March 21, 2019, certain information with respect to the beneficial ownership of shares of our common stock by: (i) each person known to us to be the beneficial owner of more than five percent (5%) of our outstanding shares of common stock, (ii) each director or nominee for director of our Company, (iii) each of the executives, and (iv) our directors and executive officers as a group. Unless otherwise indicated, the address of each shareholder is c/o our company at our principal office address:

 

Name and Address of Beneficial Owner (1)(2)   Shares of Common Stock     Percent of Class  
Russell Bird, Chairman (3)     1,219,494       26.4 %
Tom Wood, CEO (4)     969,494       21.0 %
All Officers and Directors as a Group (2 persons)     2,188,988       47.4 %

 

(1) Beneficial ownership is calculated based on 4,618,947 shares of common stock issued and outstanding as of the date hereof, together with securities exercisable or convertible into such shares within sixty (60) days of the date hereof for each stockholder.  The shares of common stock issuable pursuant to those convertible securities, options or warrants are deemed outstanding for computing the percentage ownership of the person holding such convertible securities, options or warrants but are not deemed outstanding for the purposes of computing the percentage ownership of any other person.
   
(2) The address for each of the officers and directors is c/o Remsleep, 37 North Orange Ave., Suite 609, Orlando, FL 32789.
   
(3) Russell Bird also owns 1,500,000 Preferred A Shares, which shares may be converted on a 1 to 1 basis. No Preferred A Shares have been converted.
   
(4) Tom Wood also owns 2,000,000 Preferred A Shares, which shares may be converted on a 1 to 1 basis. No Preferred A Shares have been converted.

 

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

 

We have received support from parties related through common ownership and directorship. All of the expenses herein have been borne by these individuals on our behalf and are treated as shareholder loans. These loans are unsecured, non-interest bearing and due on demand. As of December 31, 2018, and, 2017, the balance due on these loans is $179,191 and $182,191, respectively.

 

Director Independence

 

We currently do not have any independent directors, as the term “independent” is defined in Section 803A of the NYSE Amex LLC Company Guide. Since the OTC Markets does not have rules regarding director independence, the Board makes its determination as to director independence based on the definition of “independence” as defined under the rules of the New York Stock Exchange (“NYSE”) and American Stock Exchange (“Amex”).

 

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

 

Audit Fees

 

The aggregate fees billed for professional services rendered by our former auditors KLJ for the audit and review of our financial statements for the fiscal year ended December 31, 2017 amounted to $13,500.

 

The aggregate fees billed for professional services rendered by our former auditor Michael Gillespie & Associates, PLLC for the audit and review of our financial statements for the fiscal year ended December 31, 2017 amounted to $13,400 and $5,500, respectively.

 

The aggregate fees billed for professional services rendered by our current auditor Fruci & Associates II, PLLC for the audit and review of our financial statements for the fiscal years ended December 31, 2018 and amounted to $5,000.

 

Audit-Related Fees

 

During the fiscal years ended December 31, 2017 and 2018 our principal accountant rendered assurance and related services reasonably related to the performance of the audit or review of our financial statements in the amount of $0.

 

Tax Fees

 

The aggregate fees billed for professional services rendered by our principal accountant for the tax compliance for the years ended December 31, 2018 and 2017 was $0.

 

All Other Fees

 

During the fiscal years ended December 31, 2018 and 2017, there were no fees billed for products and services provided by the principal accountant other than those set forth above.

16

 

 

PART IV

 

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES

 

(a)(1) Financial Statements

 

The audited financial statements of REMSleep Holdings, Inc., are included in this report under Item 8.

 

(a)(2) Financial Statement Schedules

 

All financial statement schedules are included in the footnotes to the financial statements or are inapplicable or not required.

 

(a) (3) Exhibits

 

The following documents have been filed as part of this report.

 

            Incorporated by reference

Exhibit

Number

  Exhibit Description  

Filed

herewith

  Form  

Period

ending

  Exhibit   Filing date
31.1   Certification of Principal Executive Officer and Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act   X                
32.1   Section 1350 Certification   X                
10.1   Convertible Promissory Note with PowerUp Lending Group LTD, dated July 9, 2018   X                
10.2   Convertible Promissory Note with LG Capital Funding, LLC, dated August 31, 2018   X                
10.3   Convertible Promissory Note with ONE44 Capital LLC, dated January 23, 2019   X                
                         
101.INS   XBRL Instance Document                    
101.SCH   XBRL Taxonomy Extension Schema Document                    
101.CAL   XBRL Taxonomy Calculation Linkbase Document                    
101.DEF   XBRL Taxonomy Extension Definition Linkbase Document                    
101.LAB   XBRL Taxonomy Label Linkbase Document                    
101.PRE   XBRL Taxonomy Presentation Linkbase Document                    

 

17

 

 

SIGNATURES

 

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused the report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

REMSleep Holdings, Inc  
     
By: /s/ Tom Wood  
  Tom Wood  
  Chief Executive Officer, Director  
     
Date: March 28, 2019  
     
By: /s/ Russell Bird  
  Russell Bird  
  Chairman  
     
Date:  March 28, 2019  

 

 

18

 

 

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