UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-K
(Mark
One)
[X]
|
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 000-55785
Sun
Pacific Holding Corp
(Exact
name of registrant as specified in its charter)
New
Jersey
|
|
90-1119774
|
(State
or other jurisdiction of
|
|
(I.R.S.
Employer
|
incorporation
or organization)
|
|
Identification
No.)
|
215
Gordon’s Corner Road, Suite 1a
Manalapan
NJ 07726
(Address
of principal executive offices)
Registrant’s
telephone number, including area code:
(732) 845-0906
Securities
registered pursuant to Section 12(b) of the Act: None
Securities
registered pursuant to Section 12(g) of the Exchange Act:
Common
Stock, $.0001 par value per share
(Title
of class)
Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act [ ] Yes [X] No
Indicate
by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. [ ] Yes [X] No
Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days. [X] 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 (Section 232.405 of this chapter) during
the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). [ ] Yes [X] No
Indicate
by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non- accelerated filer, or a smaller
reporting company. See the definitions of “large accelerated filer”, “accelerated filer”, “non-accelerated
filer”, “smaller reporting company” and “emerging growth” in Rule 12b-2 of the Exchange Act.
Large
Accelerated filer [ ]
|
Accelerated
filer [ ]
|
Non-accelerated
filer [ ]
|
Smaller
reporting company [X]
|
(do
not check if smaller reporting company)
|
Emerging
growth company [X]
|
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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (Section 229.405 of this chapter) 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 to this Form 10-K. [X] Yes [ ] No
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). [ ] Yes [X] No
As
of December 31, 2018, the last business day of the Registrant’s most recently completed fiscal year, the market value of
our common stock held by non-affiliates was $346,433, which is based on the closing price of such common equity, as of the last
practical business day of the registrant’s most recently completed fiscal year of $0.0106.
The
number of shares of the Registrant’s common stock, $0.0001 par value per share, outstanding as of April 3, 2019 was
119,816,697.
TABLE
OF CONTENTS
GENERAL
INFORMATION
FORWARD-LOOKING
STATEMENTS
Certain
statements discussed in Item 1 (Business),, Item 3 (Legal Proceedings), Item 7 (Management’s Discussion and Analysis of
Financial Condition and Results of Operations and elsewhere in this Annual Report on Form 10-K as well as in other materials and
oral statements that the Company releases from time to time to the public constitute “forward-looking statements”
within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements concerning management’s
expectations, strategic objectives, business prospects, anticipated economic performance and financial condition and other similar
matters involve significant known and unknown risks, uncertainties and other important factors that could cause the actual results,
performance or achievements of results to differ materially from any future results, performance or achievements discussed or
implied by such forward-looking statements. Such risks, uncertainties and other important factors are discussed and Item 7 Management’s
Discussion and Analysis of Financial Condition and Results of Operations. In addition, these statements constitute the Company’s
cautionary statements under the Private Securities Litigation Reform Act of 1995. It should be understood that it is not possible
to predict or identify all such factors. Consequently, the following should not be considered to be a complete discussion of all
potential risks or uncertainties. The words “anticipate,” “estimate,” “expect,” “project,”
“intend,” “believe,” “plan,” “target,” “forecast” and similar expressions
are intended to identify forward-looking statements. Forward-looking statements speak only as of the date of the document in which
they are made. The Company disclaims any obligation or undertaking to provide any updates or revisions to any forward-looking
statement to reflect any change in the Company’s expectations or any change in events, conditions or circumstances on which
the forward-looking statement is based. It is advisable, however, to consult any further disclosures the Company makes on related
subjects in its Quarterly Reports on Form 10-Q and Current Reports on Form 8-K filed with the Securities and Exchange Commission.
Emerging
Growth Company Status
We
are an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act enacted in April 2012, and,
for as long as we continue to be an “emerging growth company,” we may choose to take advantage of exemptions from
various reporting requirements applicable to other public companies including, but not limited to, not being required to comply
with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, reduced disclosure obligations regarding
executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding
advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. We
will remain an “emerging growth company” until the earliest of (i) the last day of the fiscal year in which we have
total annual gross revenues of $1 billion or more; (ii) the last day of the fiscal year following the fifth anniversary of the
date of an initial public offering of our equity securities; (iii) the date on which we have issued more than $1 billion in non-convertible
debt during the prior three year period; and (iv) the date on which we are deemed to be a “large accelerated filer.”
Pursuant to (ii) above, we will cease to be an emerging growth company effective October 1, 2019.
PART
I
Item
1. Business
Company
Overview
Utilizing
managements history and contacts in general contracting, coupled with our subject matter expertise and intellectual property (“IP”)
knowledge of solar panels and other environmentally friendly technologies, Sun Pacific Holding (“the Company”) is
focused on building a “Next Generation” green energy company. The Company offers competitively priced “Next
Generation” solar panel and lighting products by working closely with design, engineering, integration and installation
firms in order to deliver turnkey solar and other energy efficient solutions. We provide solar bus stops, solar trashcans and
“street kiosks” that utilize advertising offerings that provide State and local municipalities with costs efficient
solutions. We provide general, electrical, and plumbing contracting services to a range of both public and commercials customers
in support of our goals of expanding our green energy market reach. In conjunction with these general contracting services and
as part of our effort to expand our green energy marketplace, we have recently started the process to develop and build out a
Waste to Energy plant in the State of Rhode Island. A facility that we believe may have the ability to handle medical waste in
the Northeast Corridor of the United States of America.
Currently,
the Company has six (6) subsidiary holdings. Sun Pacific Power Corp which was the initial company that specialized in solar, electrical
and general construction, Bella Electric, LLC that in conjunction with the Company operates our electrical contracting work. Bella
Electric, LLC is a Pennsylvania limited liability company. The Company also formed Sun Pacific Security Corp., a New Jersey corporation.
Currently the Company has not begun operations in the security sector but is reviewing plans to provide residential and commercial
security solutions, including installation and monitoring. The Company also formed National Mechanical Group Corp, a New Jersey
corporation focused on plumbing operations in the New Jersey and Pennsylvania areas. The Company also formed Street Smart Outdoor
Corp, a Wyoming corporation that acts as a holding company for the Company’s state specific operations in unique advertising
through solar bus stops, solar trashcans and “street kiosks.” MedRecycler, LLC, is a wholly owned subsidiary duly
formed in the state of Nevada. MedRecycler, LLC was created in 2018 to act as a holding company for potential waste to energy
projects. MedRecycler, LLC, currently owns 51% of MedRecycler RI, Inc. a Rhode Island Corporation. MedRecycler RI, Inc. was created
for the Medical Waste to Energy facility that the Company is attempting to finance and operate in West Warrick, Rhode Island.
As
of today, our principal source of revenues is derived from Street Smart Outdoor Corp. operations in the outdoor advertising business
with contracts in place in Rhode Island and Tallahassee, Florida, along with some other minor contracting work. We are currently
in negotiations with a nationally known outdoor advertising firm to manage and expand our operations, either through a joint venture,
partnership, and or a management arrangement as a result of the company’s insufficient working capital and as an option
to allow for the expansion of our technologies and or contracts by working with other parties that can bring management expertise
and or other resources that may allow us to further optimize our growth strategies.
Sun
Pacific Power Corp. continues to make bids for construction projects throughout the Northeast region. However, as of today, we
have limited operations in Sun Pacific Power Corp.
Bella
Electric, LLC and Sun Pacific Security Corp. have generally ceased operations, but we maintain the subsidiaries in case we find
opportunities to relaunch our operations.
MedRecycler,
LLC, a wholly owned subsidiary of Sun Pacific Holding Company currently holds fifty one percent (51%) of MedRecycler-RI, Inc.,
a corporation formed in the state of Rhode Island for the development of waste to energy projects in the state of Rhode Island.
Currently, MedRecycler-RI, Inc. has entered into an Indenture of Trust in the amount of $6,025,000.00 as bridge financing for
a project in West Warwick, Rhode Island (the “Rhode Island Project”). The original plan was for a facility in Johnston,
Rhode Island, but through our negotiations, determined that the West Warwick location was more suitable. The Indenture of Trust
has been secured by all equity holdings in MedRecycler-RI, Inc., all personal holdings of equity in the Company held by Nick Campanella,
our CEO and member of the Board of Directors. Mr. Campanella has further pledged personal property located in Manapalan in excess
of $1,000,000. Payment for the Indenture of Trust is further guaranteed by the Company and Street Smart Outdoor Corp. Currently,
MedRecycler-RI, Inc. has entered into a lease agreement in West Warwick, Rhode Island, has taken preliminary steps to order the
equipment and is beginning to engage specialists and staff for building out the Rhode Island Project. In order to secure actual
operations of the Rhode Island Project, we estimate that MedRecycler-RI, Inc. must still secure a minimum of $14,500,000 in long
term financing. MedRecycler-RI, Inc. is currently negotiating with the state of Rhode Island and potential bond financiers to
secure the long financing for the Rhode Island Project. Although we anticipate, assuming the long-term financing is secured, the
Rhode Island Project may be fully operation as early as the fourth quarter of 2019. Initially, all operational earnings will be
earmarked for interest, principal repayment, and the fulfillment of other covenants of the long term financing, As we have not
secured long term financing, we can make no statement regarding the long term success of the Rhode Island Project, though, even
in a best case scenario, the Rhode Island Project may not be cash flow positive until fully operational and proceeds fulfill covenants
under the terms of the yet to be finalized debt financing. Through MeRecycler, LLC, the Company owns fifty-one percent (51%) of
MedRecycler-RI, Inc., which was pledged by the Company to Mr. Campanella pursuant to a forbearance agreement related to debts
owed to Mr. Campanella. The remaining forty nine percent (49%) of MedRecycler-RI, Inc. is held by Nicholas Campanella, personally,
Marmac Corporate Advisors, LLC, and Eilers Law Group, P.A., holding thirty nine percent (39%), eight percent (8%), two percent
(2%), respectfully. Mr. Campanella received his ownership as consideration for his personal pledges securing the Indenture of
Trust, Marmac Corporate Advisors, LLC and Eilers Law Group, P.A. received their respective ownership as consideration for efforts
and services performed. One hundred percent (100%) of the ownership of MedRecycler-RI, Inc. has been pledged to bridge financing,
including any pledge rights held by Mr. Campanella in MedRecycler, LLC.
Currently,
the Company has been and is insolvent. Over its history and to augment the Company’s strategy, it has sought out partnerships
and other arrangements with professionals and companies at the operating subsidiary level to counter its insolvent state. It will
continue to look for opportunities that will allow it to partner with others in the form of debt and or equity and other contributions
at the subsidiary level, and where possible attempt to keep control of at least fifty one percent (51%) of those subsidiaries.
While it will also look for the means to correct its insolvent state at the holding company level, given its current negative
economic condition, many parties continue to prefer to work with the Company at an operational subsidiary level. The Company is
currently exploring other equity and or debt opportunities to correct its overall insolvent state. Although we continue operations
through our subsidiary holdings, revenues generated do not produce cash flows sufficient to meet our basic capital requirements.
In order to meet our reporting requirements alone, we will have to seek additional capital through debt or equity financing and/or
request deferred payment or other in-kind payments for services. Street Smart Outdoor is undercapitalized making expansion of
our advertising products highly unlikely. Neither the Company nor Street Smart Outdoor have secured additional financing to support
operations. We are attempting to partner or otherwise develop a capital strategy to allow us to grow the outdoor advertising business
that includes financing outdoor structures with other parties, in which we arrange financing arrangements, and we continue to
look for other professional organizations that we can partner with in expanding our contracts. Our Rhode Island Project currently
represents a liability of over $6,000,000 and has yet to commence. It will require additional financing, we estimate, of not less
than $8,500,000 to complete the build out of phase one for the facility and $14,500,000 if you include consolidating the current
$6,000,000 short term indenture. We have plans upon the successful launch of our phase one to double the capacity of the facility,
which will require additional financing. MedRecycler-RI, Inc. has yet to secure any additional financing. Failure to be successful
with Rhode Island Project could lead to bankruptcy of the Company.
Strategic
Vision
Our
objective is to grow our business profitably as a premier green energy-based provider of both product and services to the public
and private sectors. We are working to deploy our strategy in building upon our general and other contracting expertise in conjunction
with our intellectual property and subject matter expertise in green energy that may allow us to grow a group of profitable business
lines in solar, waste to energy, efficient lighting, and other unique energy related areas.
Recent
advances in a multitude of different yet converging technologies have significantly improved the ability to integrate energy efficient
products and solutions into infrastructure related projects. These technological advances decrease the requirements needed to
jointly operate a multitude of differing assets, devices, and tools that create new ways to integrate evolving new technologies.
This technological change and convergence in energy efficient devices, integrated communications among devices, and societal needs
to more effectively and environmentally friendly handle the removal of waste, we believe presents a significant opportunity for
us in providing and supporting simple to complex integrated solutions.
Our
challenges continue to be reaching critical mass in our solar shelter business, expanding into other green energy related projects,
completion of the Rhode Island Project and securing operational capital. Except for the bridge financing for the Rhode Island
Project, we do not have any existing financing arrangements in place. While the Company has never been adequately funded from
inception, the Company has attempted to use debt, equity, and other opportunistic in-kind compensation to further the Company’s
strategic vision.
Competition
Our
competitive market is made up of a variety of small to large company’s depending upon the area that we are competing within.
In the Contracting marketplace they range from a large number of small to large organizations, while in the solar and advertising
shelter marketplace it is made up of a smaller amount of direct competitors including JC DeCaoux, Lamar, Clear Chanel, Signal
Outdoor, and various others. While the Contractor marketplace we believe is not subject to rapid technological change driven in
part by periodic introductions of new technologies we believe the Shelter marketplace and the new areas in Waste to Energy and
other green energy marketplace may be subject to more technological change. Given this we believe that the major competitive factors
in our marketplace are distinctive technical competencies, governmental certifications and approvals to operate within this space,
successful past contract performance, price of services, reputation for quality, and key management personnel with domain expertise.
Marketing
and Sales
We
currently engage in a limited amount of marketing activities related to request for proposals for projects related to government
contracts and or other contracting activities with commercial and private entities. We are developing a variety of new marketing
activities designed to broaden our market awareness of our products, services and solutions, that may include e-mail and direct
mail campaigns, co-marketing strategies designed to leverage developing strategic relationships, website marketing, topical webcasts,
public relations campaigns, speaking engagements and forums and industry analyst visibility initiatives. We plan to participate
in and sponsor conferences that cater to our target market and demonstrate and promote our products, services and solutions at
trade shows targeted to green energy companies and executives. We also plan to publish white papers relating to green energy projects
and develop customer reference programs, such as customer case studies, in an effort to promote better awareness of industry issues
and demonstrate that our solutions can address many of the benefits of our solutions.
Our
marketing strategy is to build our brand and increase market awareness of our products, services, and solutions in our target
markets and to generate qualified sales leads that will allow us to successfully build strong relationships with key decision
makers. We plan to use partnerships and other business arrangements to augment our marketing and sales reach in both our outdoor
advertising, construction, and waste to energy business.
Clients
We
derive a significant amount of our revenues from contracts funded by state governments and large organizations that we provide
contracting services for which we act in capacity as the prime contractor, or as a subcontractor. Our client base is located predominantly
in the North East region of the U.S. Historically, we have derived, and may continue to derive in the future, a significant percentage
of our total revenues from a relatively small number of contracts. Due to the nature of our business and the relative size of
certain contracts, which are entered into in the ordinary course of business, the loss of any single significant customer would
have a material adverse effect on our results of operations. In future periods, we will continue to focus on diversifying our
revenue by increasing the number of our customer contracts and seeking out partnerships that will allow us to increase our customer
reach beyond our limited reach.
Intellectual
Property
Our
intellectual property rights are important to our business. We believe we will come to rely on a combination of patent, copyright,
trademark, service mark, trade secret and other rights in the United States and other jurisdictions, as well as confidentiality
procedures and contractual provisions to protect our proprietary technology, processes and other intellectual property. We will
protect our intellectual property rights in a number of ways including entering into confidentiality and other written agreements
with our employees, customers, consultants and partners in an attempt to control access to and distribution of our documentation
and other proprietary technology and other information. Despite our efforts to protect our proprietary rights, third parties may,
in an unauthorized manner, attempt to use, copy or otherwise obtain and market or distribute our intellectual property rights
or technology.
U.S.
patent filings are intended to provide the holder with a right to exclude others from making, using, selling or importing in the
United States the inventions covered by the claims of granted patents. Our patents, including our pending patents, if granted,
may be contested, circumvented or invalidated. Moreover, the rights that may be granted in those issued and pending patents may
not provide us with proprietary protection or competitive advantages, and we may not be able to prevent third parties from infringing
those patents. Therefore, the exact benefits of our issued patents and, if issued, our pending patents and the other steps that
we have taken to protect our intellectual property cannot be predicted with certainty.
Currently,
our intellectual property consists of the application for a patent filed by Sun Pacific Power Corp., our wholly owned subsidiary,
for a frame-less encapsulated photo-voltaic solar panel construction and method and apparatus for making the same, filed on March
14, 2018.
MedRecycler,
LLC has filed for trademark protection for its name and logo. The application is currently pending.
Seasonality
Our
business is not seasonal. However, our revenues and operating results may vary significantly from quarter-to-quarter, due to revenues
earned on contracts, the commencement and completion of contracts during any particular quarter; as well as the schedule of government
agencies awarding contracts, the term of each contract that we have been awarded and general economic conditions. Because a portion
of our expenses, such as personnel and facilities costs, are fixed in the short term, successful contract performance and variation
in the volume of activity as well as in the number of contracts commenced or completed during any quarter may cause significant
variations in operating results from quarter to quarter.
Employees
As
of December 31, 2018, we had approximately 10 full-time employees. We periodically engage additional consultants and employ temporary
or full-time employees as needed. Potential employees possessing the unique qualifications required are readily available for
both part-time and full-time employment. The primary method of soliciting personnel is through recruiting resources directly utilizing
all known sources including electronic databases, public forums, and personal networks of friends and former co-workers.
We
believe that our future success will depend in part on our continued ability to offer market competitive compensation packages
to attract and retain highly skilled, highly motivated and disciplined managerial, technical, sales and support personnel. We
generally do not have employment contracts with our employees, but we do selectively maintain employment agreements with key employees.
In addition, confidentiality and non-disclosure agreements are in place with many of our customer, employees and consultants and
such agreements are included our policies and procedures. None of our employees are subject to a collective bargaining agreement.
We believe that our relations with our employees are good.
Corporate
Information
The
Company was incorporated under the laws of the State of New Jersey on July 28, 2009, as Sun Pacific Power Corporation and together
with its subsidiaries, are referred to as the “Company”. On August 24, 2017, the Company entered into an Acquisition
Agreement with EXOlifestyle, Inc. whereby the Company became a wholly owned subsidiary of EXOlifestyle, Inc. The acquisition was
accounted for as a reverse merger, resulting in the Company being consider the accounting acquirer.
On
October 3, 2017, pursuant to the written consent of the majority of the shareholders in lieu of a meeting, Sun Pacific Holding
Corp., f/k/a EXOlifestyle, Inc. (the “Company”) filed a Certificate of Amendment with the state of Nevada to change
the name of the Company from EXOlifestyle, Inc. to Sun Pacific Holding Corp.
Our
principal executive offices are located at 215 Gordon’s Corner Road, Suite 1a, Manalapan NJ 07726. Our internet address
www.sunpacificholding.com
. Information on our website is not incorporated into this Form 10-K. We make available free of
charge through our website our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, current reports on Form 8-K, and amendments
to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 as soon as reasonably
practicable after we electronically file such material with, or furnish it to, the United States Securities and Exchange Commission
(the “SEC”). The SEC maintains an Internet site that contains reports, proxy and information statements, and other
information regarding issuers that file electronically with the SEC at http://www.sec.gov.
Item
1A. Risk Factors
Generally,
as a smaller reporting company, we are permitted to omit risk factors. However, we believe the following Risk Factors are material
to our business. These do not encompass all risks related to our operations.
You
should carefully consider the risks described below together with all of the other information included in this annual report
before making an investment decision with regard to our securities. The statements contained in or incorporated herein that are
not historic facts are forward-looking statements that are subject to risks and uncertainties that could cause actual results
to differ materially from those set forth in or implied by forward-looking statements. If any of the following risks actually
occurs, our business, financial condition or results of operations could be harmed. In that case, you may lose all or part of
your investment. In addition to the other information provided in this prospectus, you should carefully consider the following
risk factors in evaluating our business before purchasing any of our common stock.
Risks
Related to Our Financial Condition
Since
our inception, we have been insolvent and have required debt and equity financing to maintain operations.
Since
our inception, we have failed to create cashflows from revenues sufficient to cover basic costs. As a result, we have relied heavily
on debt and equity financing. Equity financing, in particular, has created a dilutive effect on our common stock, which has hampered
our ability to attract reasonable financing terms. For the foreseeable future, we will continue to rely upon debt and equity financing
to maintain operation of the Company and its subsidiaries.
We
have generated minimal revenues from operations, which makes it difficult for us to evaluate our future business prospects and
make decisions based on those estimates of our future performance.
As
of December 31, 2018, we had generated insufficient revenues. As a consequence, it is difficult, if not impossible, to forecast
our future results based upon our historical data. Our projections are based upon our best estimates on future growth. Because
of the related uncertainties, we may be hindered in our ability to anticipate and timely adapt to increases or decreases in sales,
revenues, or expenses. If we make poor budgetary decisions as a result of unreliable data, we may never become profitable or incur
losses, which may result in a decline in our stock price.
There
is substantial doubt about our ability to continue as a going concern and if we are unable to generate significant revenue or
secure additional financing, we may be unable to implement our business plan and grow our business.
We
are an emerging growth company and are in the process of selling and developing our products. Consequently, we have not generated
enough revenues as of the date of this prospectus. We have an accumulated deficit and have incurred operating losses since our
inception and expect losses to continue during the remainder of fiscal 2019. Our independent registered public accounting firm
has indicated in their report that these conditions raise substantial doubt about our ability to continue as a going concern for
a period of 12 months from the issuance date of this report. The continuation of our business as a going concern is dependent
upon the continued financial support from our stockholders.
There
is uncertainty regarding our ability to grow our business to a greater extent than we can with our existing financial resources,
also described above, without additional financing. We have no agreements, commitments, or understandings to secure additional
financing at this time. Our long-term future growth and success is dependent upon our ability to continue selling our products
and services, generate cash from operating activities and obtain additional financing. There is no assurance that we will be able
to continue selling our products and services, generate sufficient cash from operations, sell additional shares of common stock
or borrow additional funds. Our inability to obtain additional cash could have a material adverse effect on our ability to grow
our business to a greater extent than we can with our existing financial resources, also described above.
Expenses
required to operate as a public company will reduce funds available to implement our business plan and could negatively affect
our stock price and adversely affect our results of operations, cash flow and financial condition.
Operating
as a public company is more expensive than operating as a private company, including additional funds required to obtain outside
assistance from legal, accounting, investor relations, or other professionals that could be costlier than planned. We may also
be required to hire additional staff to comply with additional SEC reporting requirements. We anticipate that the cost of SEC
reporting will be approximately $100,000 annually. Our failure to comply with reporting requirements and other provisions of securities
laws could negatively affect our stock price and adversely affect our results of operations, cash flow and financial condition.
If we fail to meet these requirements, we will be unable to secure a qualification for quotation of our securities on the OTCQB,
or if we have secured a qualification, we may lose the qualification and our securities would no longer trade on the OTCQB. Further,
if we fail to meet these obligations and consequently fail to satisfy our SEC reporting obligations, investors will then own stock
in a company that does not provide the disclosure available in quarterly, annual reports and other required SEC reports that would
be otherwise publicly available leading to increased difficulty in selling their stock due to our becoming a non-reporting issuer.
Our
common stock trades below $0.01 and is substantially at risk of being delisted from the OTCQB Tier.
OTC
Markets requires, amongst other things, that in order to qualify for OTCQB listings, an issuer have their common stock trade above
$0.01 per share. If the bid price closes below $0.01 for 30 consecutive days, an issuer will be notified of their bid price deficiency
and has a 90-day cure period, where by the stock’s closing bid price must be greater than $0.01 for 10 consecutive days.
On February 5, 2019, we received notice of our bid price deficiency from OTC Markets, giving us until May 6, 2019 to cure the
bid price deficiency. If we fail to cure, we will be dropped to the OTCPink tier. This could adversely affect the Company and
our ability to raise funds through equity financing as OTCPink listings are generally deemed to have a greater risk. In addition,
our shareholders face the risk that in order to cure the bid price deficiency, the Board of Directors may recommend a reverse
stock split to the shareholders. As Nicholas Campanella has a majority of the voting rights, such recommendation would likely
be affirmed which could result in the risk of greater dilution to the value of our shareholders.
Risks
Related to Our Business
We
rely on our Chief Executive Officer to operate our business. The loss of our Chief Executive Officer could have a material adverse
effect on our business.
Our
operations are highly dependent upon the efforts of our Chief Executive Officer, Nicholas Campanella. The success of our Company
is heavily reliant upon the efforts and resources of Nicholas Campanella. The loss of our Chief Executive Officer would have a
material adverse effect on our business, financial condition, and results of operations, particularly if we are unable to hire
or relocate and integrate suitable replacements on a timely basis or at all. Further, in order to continue to grow our business,
we will need to expand our senior management team. We may be unable to attract or retain these persons. This could hinder our
ability to grow our business and could disrupt our operations or otherwise have a material adverse effect on our business.
We
are unable to attract additional management personnel and members to our Board of Directors.
Due
to our insolvency, we are unable to dedicate any amount of cashflows to executive salaries and/or directors’ and officers’
insurance, therefore we are unable to attract additional executive personnel or Board Members. Until we can secure, at a minimum
directors’ and officers’ insurance, the executive duties shall remain with our Chief Executive Officer.
The
current ownership has the effect of concentrating voting control with our Chief Executive Officer and his family; this limits
our other stockholders’ and your ability to influence corporate matters.
Nicholas
Campanella currently holds 12,000,000 shares of Series A Preferred Stock. Each share of Series A Preferred Stock is entitled to
125 votes per share. As a result, Nicholas Campanella has 1,500,000,000 voting rights. As a result of this concentration of voting
power, Nicholas Campanella will have significant influence over the management and affairs of the Company and control over matters
requiring stockholder approval, including the election of directors and significant corporate transactions, such as mergers or
other sales of the Company or our assets, for the foreseeable future. This concentration of voting control will limit your ability
to influence corporate matters and could adversely affect the market price of our Common Stock once a market is established.
Our
director and officer, Nicholas Campanella will control and make corporate decisions that may differ from those that might be made
by the other shareholders.
Due
to the controlling amount of their share ownership in our Company, Nicholas Campanella will have a significant influence in determining
the outcome of all corporate transactions, including the power to prevent or cause a change in control. His interests may differ
from the interests of other stockholders and thus result in corporate decisions that are disadvantageous to other shareholders.
Our
director and officer, Nicholas Campanella, holds substantial debt that is convertible into common stock, resulting in even greater
control over the Company.
Nicholas
Campanella holds convertible promissory notes in excess of $600,000, making Nicholas Campanella the largest creditor of the Company.
The convertible promissory notes are convertible into common stock at rate of a 50% discount to market. Our current market cap
is lower than $400,000. If Nicholas Campanella were to either convert his promissory notes or foreclose upon the limited assets
of the Company, we would likely have to file for bankruptcy.
Item
2. Properties
We
currently lease 2,510 square feet at 215 Gordons Corner Road, Manalapan, NJ, 07726 under a five (5) year lease that commenced
on March 15, 2017 for approximately $43,000 per annum with 2.5% annual scheduled rent increases. We believe we can obtain additional
facilities required to accommodate projected needs without difficulty and at commercially reasonable prices, although no assurance
can be given that we will be able to do so. Currently, our Gordons Corner Road office is headquarters for all our subsidiary operations.
MedRecycler-RI, Inc. has entered into a lease for the Rhode Island Project at 1600 Division Road, West Warwick, RI, 02893. The
lease is for ten (10) years, commencing on March 1, 2019 for approximately $192,668.00 per annum, increasing annual at a rate
of five percent (5%). The space leased is approximately 48,000 square feet.
Item
3. Legal Proceedings
From
time to time the Company is a party to various legal or administrative proceedings arising in the ordinary course of our business.
While any litigation contains an element of uncertainty, we have no reason to believe that the outcome of such proceedings will
have a material adverse effect on the financial condition or results of operations of the Company.
Currently,
the Company is not involved in any pending or threatened material litigation or other material legal proceedings, nor have we
been made aware of any pending or threatened regulatory audits.
There
is no material bankruptcy, receivership, or similar proceeding with respect to the Company or any of its significant subsidiaries.
However, given the Company’s insolvency, there is a high risk that the Company may be forced to file for bankruptcy if the
Company is unable to meet its capital requirements in 2019.
The
are no proceedings which any director, officer, or affiliate of the Company, any owner of record or beneficially of more than
five percent (5%) of any class of voting securities of the Company, or any associate of any such director, officer, affiliate
of the Company, or security holder is a party adverse to the Company or any of its subsidiaries or has any material interest adverse
to the Company or any of its subsidiaries. However, several shareholders have threatened derivative suit against our Board of
Directors. As of the date of this filing, no formal suit has been filed.
There
are no administrative or judicial proceedings arising from any federal, state, or local provisions that have been enacted or adopted
regulating the discharge of materials into the environment or primary for the purpose of protecting the environment.
In
addition, no proceeding or action described in this Item 3 were terminated in the past 12 months.
PART
II
Item
5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Market
Information
The
high and low per share closing sales prices of the Company’s stock on the OTC Markets (ticker symbol: SNPW) for each quarter
for the years ended December 31, 2018 and 2017 were as follows:
Quarter
Ended
|
|
High
|
|
|
Low
|
|
|
|
|
|
|
|
|
March 31, 2017
|
|
|
0.98
|
|
|
|
0.32
|
|
June 30, 2017
|
|
|
0.35
|
|
|
|
0.11
|
|
September 31, 2017
|
|
|
0.38
|
|
|
|
0.05
|
|
December 31, 2017
|
|
|
0.35
|
|
|
|
0.11
|
|
March 31, 2018
|
|
|
0.138
|
|
|
|
0.12
|
|
June 30, 2018
|
|
|
0.0635
|
|
|
|
0.0575
|
|
September 31, 2018
|
|
|
0.0325
|
|
|
|
0.0275
|
|
December 31, 2018
|
|
|
0.0145
|
|
|
|
0.0106
|
|
On
February 5, 2019, the Company received notice of a bid price deficiency from OTCMarkets. We have until May 6, 2019 to cure the
bid price deficiency or risk being downlisted to the OTCPink tier.
Holders
of our Common Stock
As
of March 28, 2019, there were approximately 569 stockholders of record of our common stock. This number does not include shares
held by brokerage clearing houses, depositories or others in unregistered form. The stock transfer agent for our securities is
VStock Transfer.
Dividend
Policy
We
have never paid dividends on our Common Stock and intend to continue this policy for the foreseeable future. We plan to retain
earnings for use in growing our business base. Any future determination to pay dividends will be at the discretion of our Board
of Directors and will be dependent on our results of operations, financial condition, contractual and legal restrictions and any
other factors deemed by the management and the Board to be a priority requirement of the business.
Our
Series C Preferred Stock holders were to be paid an annual dividend in the amount of $0.125 per year, for a total of $0.25, over
an eighteen (18) month term, from the date of issuance (the “Commencement Date. Dividend payments shall be payable as follows:
(i) dividend in the amount of $0.0625 per share of Series C Preferred Stock at the end of each of the third quarter and fourth
quarter of the first twelve (12) months of the twenty-four (24) month period after the Commencement Date; and (ii) dividend in
the amount of $0.03125 per share of Series C Preferred Stock at the end of each of the four quarters of the second twelve ( 12)
months of the twenty-four (24) month period after the Commencement Date. The source of payment of the dividends will be derived
from up to thirty-five percent (35%) of net revenues (‘‘Net Revenues”) from the Street Furniture Division of
the Corporation following the seventh (7th) month after the Commencement Date. To the extent the amount derived from the Net Revenues
of the Street Furniture Division is insufficient to pay dividends of Series C Preferred Stock, if a sufficient amount is available,
the next quarterly payment date the funds will first pay dividends of Series C Preferred Stock past due. As of today’s date,
no dividend payments have been made. 275,000 shares of Series C Preferred Stock were originally issued as Series B Preferred Stock
of Sun Pacific Holding Corp. and all dividend payments have ceased, leaving only accrued payments due.
Securities
Authorized for Issuance Under Equity Compensation Plans
The
Company has not adopted an equity compensation plan.
Unregistered
Sales of Equity Securities
Note
that all issuances described below represent the number of shares issued at the time of issuance. On October 13, 2017, the Company
implemented a reverse stock split at a rate of 1:50, rounding fractional shares up to the nearest whole share. Therefore, any
issuance described below that occurred before October 13, 2017 represents pre-reverse stock split numbers.
On
January 10, 2017, the Company issued to each of Randy Romano, the Company’s President, and Vaughan Dugan, the Company’s
Chief Executive Officer, 5,000,000 shares of Series A Preferred Stock of the Company (the “Series A Stock”) in return
for the payment to the Company from each of Randy Romano and Vaughan Dugan of $500.
On
December 28, 2016, a holder of a convertible note payable of the Company with an outstanding principal balance of $7,773.60 converted
$4,000.00 of the note into 2,601,626 shares of our common stock.
The
Company issued the securities to the noteholder, Ms. McComb, Mr. Romano and Mr. Dugan in reliance upon exemptions from registration
provided by the Securities Act of 1933, as amended.
On
or about February 28, 2017, we issued 3,812,306 shares of common stock to one entity pursuant to the conversion of a certain convertible
debenture at a conversion price of $0.0015375 per share of common stock
On
or about April 7, 2017, we issued 4,247,381 shares of common stock to one entity pursuant to the conversion of a certain convertible
promissory note at a conversion price of $0.0018 per share of common stock.
On
or about May 5, 2017, we issued 5,000,000 shares of common stock to one entity pursuant to the conversion of a certain convertible
debenture at a conversion price of $0.0025 per share of common stock.
On
or about May 8, 2017, we issued 4,400,000 shares of common stock to one entity pursuant to the conversion of a certain convertible
promissory note at a conversion price of $0.00165 per share of common stock.
On
or about May 15, 2017, we issued 5,200,000 shares of common stock to one entity pursuant to the conversion of a certain convertible
debenture at a conversion price of $0.00165 per share of common stock.
On
or about May 25, 2017, we issued 6,083,000 shares of common stock to one entity pursuant to the conversion of a certain convertible
debenture at a conversion price of $0.0014 per share of common stock.
On
or about May 26, 2017, we issued 6,233,333 shares of common stock to one entity pursuant to the conversion of a certain convertible
promissory note at a conversion price of $0.0015 per share of common stock.
On
or about June 1, 2017 we issued 3,300,000 shares of common stock to one entity pursuant to the conversion of a certain convertible
debenture dated June 27, 2015 at a conversion price of $0.00165 per share of common stock.
On
or about June 1, 2017, we issued 6,083,000 shares of common stock to one entity pursuant to the conversion of a certain convertible
debenture dated July 20, 2016 at a conversion price of $0.00135 per share of common stock.
On
or about June 8, 2017, we issued 6,233,333 shares of common stock to one entity pursuant to the conversion of a certain convertible
debenture dated June 27, 2015 at a conversion price of $0.0015 per share of common stock.
On
or about June 12, 2017 we issued 7,425,000 shares of common stock to one entity pursuant to the conversion of a certain convertible
debenture dated July 20, 2016 at a conversion price of $0.0011 per share of common stock.
On
August 17, 2017, the Company agreed to issue to 1,000,000 shares of Series B Preferred stock, 200,000 shares of Series C Preferred
stock and 284,215,420 shares of common stock to the respective shareholders of Sun Pacific Power Corp in exchange for services.
On
August 24, 2017, in connection with the reverse merger, the Company issued 5,665,092 shares of common stock to the previous stockholders
of the Company.
On
October 2017, the Company sold 762,500 shares of common stock for gross proceeds of $152,500.
On
August 24, 2017, in connection with the reverse merger, the Company assumed convertible notes with an aggregate principal balance
of $833,787. The notes automatically converted into 17,052,925 shares of common stock on October 3, 2017 upon the effective date
of the Company’s reverse split in accordance with the convertible note agreements.
On
November 9, 2017, the Company issued 12,500 shares of common stock pursuant to subscriptions purchasing share at a rate equal
to $0.20 per share
On
December 5, 2017, the Company issued 1,575,000 shares of common stock pursuant to subscriptions purchasing share at a rate equal
to $0.20 per share.
On
December 19, 2017, the Company issued 258,651 shares of common stock pursuant to subscriptions purchasing shares at a rate equal
to $0.20 per share. On the same date, 121,683 shares were issued to Nicholas Campanella for services.
On
February 20, 2018, the Company issued 1,250,000 shares of common stock to Nicholas Campanella for services. On the same date,
100,000 shares of common stock were issued pursuant to 2 subscription agreements purchasing shares at a rate equal to $0.20 per
share.
On
May 5, 2018, the Company issued 668,324 shares of common stock for settlement of services previously provided.
On
May 8, 2018, the Company issued 880,000 shares pursuant to subscription agreements purchasing shares of common stock at a rate
of $0.20 per share.
On
November 13, 2018, the Company issued 620,000 shares of common stock pursuant to conversions of certain convertible promissory
notes at an average price of $0.013 per share.
On
November 27, 2018, the Company issued 250,000 shares of common stock pursuant to conversion of a portion of a convertible note
at a price of $0.012 per share.
On
December 6, 2018, the Company issued 500,000 shares of common stock pursuant to a conversion of a portion of a convertible promissory
note at a price of $0.005 per share.
On
December 10, 2018, the Company issued 1,000,000 shares of common stock pursuant to a conversion of a portion of a convertible
promissory note at a price of $0.0068 per share.
On
December 26, 2018, the Company issued 1,300,000 shares of common stock pursuant to a conversion of a portion of a convertible
promissory note at a price of $0.005 per share.
On
December 31, 2018, the Company issued 500,000 shares of common stock pursuant to a conversion of a portion of a convertible promissory
note at a price of $0.0044 per share.
In
connection with the reverse merger, the Company issued 2,000,000 shares of Series B Preferred Stock. The Series B Preferred Stock
automatically converted into 30,856,553 shares of common stock after giving effect to the reverse stock split that occurred on
October 3, 2017.
The
issuances of the above shares of common stock were exempt from the registration requirements of Section 5 of the Securities Act
of 1933 (the “Act”) pursuant to Section 4(a)(2) thereto as isolated transactions not involving a public offering.
Following the issuances and as of the date of this filing, the Registrant has a total of 114,378,697 shares of common stock issued
and outstanding.
All
the offers and sales of securities listed above were made to accredited investors. The issuance of the above securities is exempt
from the registration requirements under Rule 4(2) of the Securities Act of 1933, as amended, and/or Rule 506 as promulgated under
Regulation D.
Repurchases
of Equity Securities
We
repurchased no shares of our Common Stock during the year ended December 31, 2018.
Item
7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The
discussion and analysis of our financial condition and results of operations are based on our financial statements, which we have
prepared in accordance with accounting principles generally accepted in the United States of America. This discussion should be
read in conjunction with the other sections of this Form 10-K, including “Risk Factors,” and the Financial Statements.
The various sections of this discussion contain a number of forward-looking statements, all of which are based on our current
expectations and could be affected by the uncertainties and risk factors described throughout this Annual Report on Form 10-K.
See “Forward-Looking Statements.” Our actual results may differ materially. The preparation of these financial statements
requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of
contingent assets and liabilities at the date of the financial statements, as well as the reported revenues and expenses during
the reporting periods. On an ongoing basis, we evaluate estimates and judgments, including those described in greater detail below.
We base our estimates on historical experience and on various other factors that we believe are reasonable under the circumstances,
the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily
apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
As
used in this “Management’s Discussion and Analysis of Financial Condition and Results of Operation,” except
where the context otherwise requires, the term “we,” “us,” “our,” or “the Company,”
refers to the business of Sun Power Holdings Corp.
Organizational
Overview
Utilizing
managements history and contacts in general contracting, coupled with our subject matter expertise and intellectual property (“IP”)
knowledge of solar panels and other environmentally friendly technologies, Sun Pacific Holding (“the Company”) is
focused on building a “Next Generation” green energy company. Currently, the Company has six (6) subsidiary holdings
with our principal executive offices located at 215 Gordon’s Corner Road, Suite 1a, Manalapan NJ 07726.
The
Company was incorporated under the laws of the State of New Jersey on July 28, 2009, as Sun Pacific Power Corporation and together
with its subsidiaries, are referred to as the “Company”. On August 24, 2017, the Company entered into an Acquisition
Agreement with EXOlifestyle, Inc. whereby the Company became a wholly owned subsidiary of EXOlifestyle, Inc. The acquisition was
accounted for as a reverse merger, resulting in the Company being consider the accounting acquirer.
On
October 3, 2017, pursuant to the written consent of the majority of the shareholders in lieu of a meeting, Sun Pacific Holding
Corp., f/k/a EXOlifestyle, Inc. (the “Company”) filed a Certificate of Amendment with the state of Nevada to change
the name of the Company from EXOlifestyle, Inc. to Sun Pacific Holding Corp.
Going
Concern
The
Company has an accumulated deficit of $6,649,017 as of December 31, 2018. The Company’s continuation as a going concern
is dependent on its ability to generate sufficient cash flows from operations to meet its obligations, which it has not been able
to accomplish to date, and/or obtain additional financing from its stockholders and/or other third parties.
In
order to further implement its business plan and satisfy its working capital requirements, the Company will need to raise additional
capital. There is no guarantee that the Company will be able to raise additional equity or debt financing at acceptable terms,
if at all.
There
is no assurance that the Company will ever be profitable. These consolidated financial statements do not include any adjustments
to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of
liabilities that may result should the Company be unable to continue as a going concern.
Critical
Accounting Policies and Estimates
Our
significant accounting policies are more fully described in the notes to our consolidated financial statements. Those material
accounting estimates that we believe are the most critical to an investor’s understanding of our financial results and condition
are discussed immediately below and are particularly important to the portrayal of our financial position and results of operations
and require the application of significant judgment by our management to determine the appropriate assumptions to be used in the
determination of certain estimates.
Use
of estimates in the preparation of financial statements
Preparation
of financial statements in conformity with accounting principles generally accepted in the United States requires management to
make estimates and assumptions that affect reported amounts in the financial statements and accompanying notes. Actual results
could differ from those estimates. Significant estimates include the allowance for doubtful accounts and impairment assessments
related to long-lived assets.
Consolidation
The
consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany
balances and transactions have been eliminated.
Cash
and cash equivalents
For
purposes of the consolidated statements of cash flows, cash includes demand deposits and short-term liquid investments with original
maturities of three months or less when purchased. As of December 31, 2018, the Federal Deposit Insurance Corporation (FDIC) provided
insurance coverage of up to $250,000, per depositor, per institution. At December 31, 2018, none of the Company’s cash balances
were in excess of federally insured limits.
Accounts
Receivable
In
the normal course of business, we decide to extend credit to certain customers without requiring collateral or other security
interests. Management reviews its accounts receivable at each reporting period to provide for an allowance against accounts receivable
for an amount that could become uncollectible. This review process may involve the identification of payment problems with specific
customers. Periodically we estimate this allowance based on the aging of the accounts receivable, historical collection experience,
and other relevant factors, such as changes in the economy and the imposition of regulatory requirements that can have an impact
on the industry. These factors continuously change and can have an impact on collections and our estimation process. The Company’s
allowance for doubtful accounts totaled $145,155 and $118,221 as of December 31, 2018 and 2017, respectively.
Contingencies
Certain
conditions may exist as of the date financial statements are issued, which may result in a loss, but which will only be resolved
when one or more future events occur or do not occur. We assess such contingent liabilities, and such assessment inherently involves
an exercise of judgment. In assessing loss contingencies related to pending legal proceedings that are pending against us or unasserted
claims that may result in such proceedings, we evaluate the perceived merits of any legal proceedings or unasserted claims as
well as the perceived merits of the amount of relief sought or expected to be sought therein. If the assessment of a contingency
indicates that it is probable that a liability has been incurred and the amount of the liability can be estimated, then the estimated
liability would be accrued in our consolidated financial statements. If the assessment indicates that a potentially material loss
contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent
liability, together with an estimate of the range of possible loss if determinable would be disclosed.
Fair
value of financial instruments
The
carrying amounts of the Company’s accounts payable, accrued expenses, and shareholder advances approximate fair value due
to their short-term nature. The Company’s long-term debt approximates fair value based on prevailing market rates.
Property
and equipment
Property
and equipment are stated at cost. Additions and improvements that significantly add to the productive capacity or extend the life
of an asset are capitalized. Maintenance and repairs are expensed as incurred. Depreciation is computed using the straight-line
method over three to five years for vehicles and five to ten years for equipment. Leasehold improvements are amortized over the
lesser of the estimated remaining useful life of the asset or the remaining lease term.
Income
taxes
Under
ASC Topic 740, “Income Taxes”, the Company is required to account for its income taxes through the establishment of
a deferred tax asset or liability for the recognition of future deductible or taxable amounts and operating loss and tax credit
carry forwards. Deferred tax expense or benefit is recognized as a result of timing differences between the recognition of assets
and liabilities for book and tax purposes during the year.
Deferred
tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled. Deferred tax assets are recognized for deductible temporary differences
and operating losses, and tax credit carry forwards. A valuation allowance is established to reduce that deferred tax asset if
it is “more likely than not” that the related tax benefits will not be realized.
Revenue
recognition
100%
of the Company’s revenue for the years ended December 31, 2018 and 2017, is recognized based on the Company’s satisfaction
of distinct performance obligations identified in each agreement, generally at a point in time as defined by Topic 606, as amended.
In
May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts
with Customers. This standard replaced most existing revenue recognition guidance and is codified in FASB ASC Topic 606. Effective
January 1, 2018, the Company adopted ASU No. 2014-09 using the modified retrospective method. Under the new guidance, the Company
recognizes revenue from contracts based on the Company’s satisfaction of distinct performance obligations identified in
each agreement. The adoption of the guidance under ASU No. 2014-09 did not result in a material impact on the Company’s
consolidated revenues, results of operations, or financial position. As part of the implementation of ASC 606 the Company must
present disaggregation of revenues from contracts with customers into categories that depict how the nature, timing, and uncertainty
of revenue and cash flows are affected by economic factors. Quantitative disclosures on the disaggregation of revenue are as follows:
|
|
2018
|
|
|
2017
|
|
Outdoor Advertising Shelter Revenues
|
|
|
276,591
|
|
|
|
85,157
|
|
Contracting Service Revenues
|
|
|
308,059
|
|
|
|
1,167,518
|
|
|
|
|
584,650
|
|
|
|
1,252,675
|
|
Earnings
Per Share
Under
ASC 260, “Earnings Per Share” (“EPS”), the Company provides for the calculation of basic and diluted earnings
per share. Basic EPS includes no dilution and is computed by dividing income or loss available to common shareholders by the weighted
average number of common shares outstanding for the period. Diluted EPS reflects the potential dilution of securities that could
share in the earnings or losses of the entity. For the years ended December 31, 2018 and 2017, basic and diluted loss per share
are the same as the calculation of diluted per share amounts would result in an anti-dilutive calculation. For the years ended
December 31, 2018 and 2017, the following potential shares have been excluded from the calculation of diluted loss
per share because their impact was anti-dilutive:
|
|
2018
|
|
|
2017
|
|
Convertible Debt
|
|
|
201,542,064
|
|
|
|
18,596,912
|
|
Warrants
|
|
|
8,324,757
|
|
|
|
1,020,000
|
|
|
|
|
209,866,791
|
|
|
|
19,616,912
|
|
Recent
Accounting Pronouncements
ASU
No. 2014-09, Revenue from Contracts with Customers (Topic 606) -
This standard provides a single set of guidelines for revenue
recognition to be used across all industries and requires additional disclosures, which we are currently evaluating. It is effective
for annual and interim reporting periods beginning after December 15, 2017. The Company adopted this standard effective January
1, 2018, with no impact on its results of operations and financial condition.
ASU
No. 2016-02, Leases (Topic 842)
- This standard requires all leases that have a term of over 12 months to be recognized on
the balance sheet with the liability for lease payments and the corresponding right-of-use asset initially measured at the present
value of amounts expected to be paid over the term. Recognition of the costs of these leases on the income statement will be dependent
upon their classification as either an operating or a financing lease. Costs of an operating lease will continue to be recognized
as a single operating expense on a straight-line basis over the lease term. Costs for a financing lease will be disaggregated
and recognized as both an operating expense (for the amortization of the right-of-use asset) and interest expense (for interest
on the lease liability). This standard will be effective for our interim and annual periods beginning January 1, 2019 and must
be applied on a modified retrospective basis to leases existing at, or entered into after, the beginning of the earliest comparative
period presented in the financial statements. The Company is currently evaluating the potential impact of this standard on its
financial position, but we do not expect a material impact on its results of operations and financial condition.
There
were other new accounting pronouncements issued by the FASB. Each of these pronouncements, as applicable, has been or will be
adopted by the Company. Management does not believe the adoption of any of these accounting pronouncements has had or will have
a material impact on the Company’s financial statements.
There
were other new accounting pronouncements issued by the FASB. Each of these pronouncements, as applicable, has been or will be
adopted by the Company. Management does not believe the adoption of any of these accounting pronouncements has had or will have
a material impact on the Company’s financial statements.
Results
of Operations for the Year Ended December 31, 2018 as Compared to the Year Ended December 31, 2017
Revenues
During
the year ended December 31, 2018, revenues decreased by $668,025, from $1,252,675 for the year ended December 31, 2017 to $584,650
in 2018, due to the migration away from General Contracting services towards the development of Green Energy Projects including
the sale of Solar powered shelters and other energy related projects. The Company has entered into revenue sharing agreements
with the City of Tallahassee and the State of Rhode Island Transportation Authority and the State of New Jersey and others to
provide and manage approximately up to 1,700 Solar powered shelters and other related products for a period of up to Ten (10)
years that may include providing WiFi Signal Boosters and Advertising in conjunction with the shelters and other related other
outdoor related products. Depending upon the timing of installation and advertising revenue generated per shelter and or other
advertising-based product, the Company’s Revenue may increase materially from this green energy offering.
In
the first quarter of 2019, the Company, through its subsidiary, MedRecycler, Inc., has secured bridge financing of $6,025,000
to begin building out its waste to energy facility in West Warwick, Rhode Island. Depending upon the successful completion of
raising the necessary capital and completing the facility timely, revenues may also increase materially from this additional green
energy offering. However, any profits will be initially dedicated to servicing the debt load, paying principal, and building reserves
under to be determined covenants for the project. These items along with other revenue generating opportunities under review by
the Company may cause dramatic shifts in the Company’s comparative revenue profile of the products and services that the
Company provides in the future.
Cost
of Revenues
During
the year ended December 31, 2018, cost of revenues decreased by $439,310, from $750,802 for the year ended December 31, 2017 to
$311,492 in 2018, due to lesser revenues generated from General Contracting services in the Company’s migration to Green
Energy Projects. Upon the successful launch and completion of the Company’s Waste to Energy facility and the increase in
the Company’s Solar shelters the Company’s Cost of Revenues may increase on an absolute basis, in particular for the
Waste to Energy facility.
Operating
Expenses
During
the year ended December 31, 2018, operating expenses increased by $127,785, from $1,432,783 for the year ended December 31, 2017
to $1,569,796 in 2018 due to an increase in professional fees and general and administrative costs. However, this was offset
by reductions in wages and compensation, rent and insurance costs.
Other
(Income) Expenses
During
the year ended December 31, 2018, Other Expenses decreased by $815,030 from $1,283,456 for the year ended December 31,
2017 to $478,843 in 2018. Due primarily to a loss on settlement of accrued salaries in 2017, offset by increased interest
expense in 2018, resulting from the amortization of debt discounts in 2018.
Net
Loss
As
a result of the above, Net Loss decreased $458,530 from $2,214,366 for the year ended December 31, 2017 to $1,755,837 in 2018.
Liquidity
and Capital Resources
Net
Working Capital
We
have, since inception, financed operations and capital expenditures through the sale of stock and convertible notes and debt.
Our immediate sources of liquidity include cash and cash equivalents, accounts receivable, and unbilled receivables.
At
December 31, 2018, we had a net working capital deficit of approximately $2,866,303 compared to $1,933,619 at December
31, 2017. We relied on proceeds from the sale of common stock, convertible promissory notes and advances from related parties
throughout fiscal 2018.
We
must successfully execute our business plan to increase profitability in order to achieve positive cash flows to sustain adequate
liquidity without requiring additional funds from external sources to meet minimum operating requirements. We may need to raise
additional capital to fund our operations and there can be no assurance that additional capital will be available on acceptable
terms or at all.
Generally,
the Company has insufficient capital to maintain operations. Cashflows from operations of the Company and all its subsidiary holdings
will not sustain the Company’s operations, let alone its filing requirements, unless there is substantial influx of cash
flow through either debt and/or equity financing.
Cash
Flows from Operating Activities
Cash
provided by operating activities provides an indication of our ability to generate sufficient cash flow from our recurring business
activities. Fixed costs such as labor, direct materials, and office rent represent a significant portion of the Company’s
continuing operating costs.
For
the year ended December 31, 2018, net cash used in operations was approximately $758,069 driven by current year operating
loss, offset primarily by non-cash expenses for the loss on settlement of accrued officer compensation, accrued expenses, an increase
in accounts payable, and loss on the conversion of debt.
For
the year ended December 31, 2017, net cash used in operations was approximately $823,000 driven by current year operating loss,
offset primarily by non-cash expenses for the loss on settlement of accrued officer compensation, and stock issued for services.
Cash
Flows from Investing Activities
For
the year ended December 31, 2018, no cash was provided by investing activities.
For
the year ended December 31, 2017, cash provided by investing activities was approximately $2,500 from the sale of equipment.
Cash
Flows from Financing Activities
Cash
provided by (used in) financing activities provides an indication of our debt financing and proceeds from capital raise transactions.
For
the year ended December 31, 2018, cash provided by financing activities was approximately $707,181 from the sale of common
stock, sale of convertible notes, project financing obligations, and advances from officers, offset by repayments of vehicle loans.
For
the year ended December 31, 2017, cash provided by financing activities was approximately $786,000 from the sale of common stock
and advances from related parties, offset by repayments of vehicle loans.
At
December 31, 2018, there were no material commitments for additional capital expenditures, but that could change with the addition
of material contract awards, along with the potential commitments from the Company’s Medrecycler-RI, Inc. ongoing efforts
to develop a Waste to Energy project in 2019.
In
the short term, we must raise additional capital through debt or equity financing to support our business operations and grow
our business. Over the long term, we must successfully execute our growth plans to increase profitable revenue and income streams
to generate positive cash flows to sustain adequate liquidity without impairing growth initiatives or requiring the infusion of
additional funds from external sources to meet minimum operating requirements. We may need to raise additional capital to fund
our operations and there can be no assurance that additional capital will be available on acceptable terms or at all.
Off-Balance
Sheet Arrangements
We
have no off-balance sheet financing arrangements.
Contractual
Obligations
Not
required of smaller reporting companies.
Item
8. Financial Statements and Supplementary Data
Our
consolidated financial statements and notes thereto and the report of our independent registered public accounting firm, are set
forth on pages F-1 through F-15 of this report.
Item
9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item
9A. Controls and Procedures
As
of the end of the period covered by this Annual Report, our Chief Executive Officer and Chief Financial Officer performed an evaluation
of the effectiveness of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act.
Based on the evaluation and the identification of the material weaknesses in internal control over financial reporting described
below, our Chief Executive Officer and Chief Financial Officer concluded that, as of December 31, 2018, the Company’s disclosure
controls and procedures were not effective.
Management’s
Report on Internal Control over Financial Reporting
Evaluation
of Disclosure Controls and Procedures
Pursuant
to Rules 13a-15(b) and 15-d-15(b) under the Securities Exchange Act of 1934, as amended (“Exchange Act”), the Company
carried out an evaluation, with the participation of the Company’s management, including the Company’s Chief Executive
Officer and Chief Financial Officer of the effectiveness of the Company’s disclosure controls and procedures as of the end
of the period covered by this report. The term “disclosure controls and procedures”, as defined under Rules 13a-15(e)
and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information
required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized
and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include,
without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports
that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its
principal executive and principal financial officer, as appropriate to allow timely decisions regarding required disclosure. Based
upon the evaluation of the disclosure controls and procedures at the end of the period covered by this report, the Company’s
Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were
not effective as a result of continuing weaknesses in its internal control over financial reporting principally due to the following:
|
-
|
The
Company has not established adequate financial reporting monitoring activities to mitigate the risk of management override,
specifically because there are few employees and only one officers with management functions and therefore there is lack of
segregation of duties.
|
|
|
|
|
-
|
An
outside consultant assists in the preparation of the annual and quarterly financial statements and partners with the Company
to ensure compliance with US GAAP and SEC disclosure requirements.
|
|
|
|
|
-
|
Outside
counsel assists the Company in the external attorneys to review and editing of the annual and quarterly filings and to ensure
compliance with SEC disclosure requirements.
|
At
such time as the Company raises additional working capital it plans to add staff, initiate training, add additional subject matter
expertise in its finance area so that it may improve it processes, policies, procedures, and documentation of its internal control
processes.
Changes
in Internal Control over Financial Reporting
There
have been no changes in our internal control over financial reporting that occurred during our last fiscal quarter that have materially
affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Item
9B. Other Information
None.
PART
III
Item
10. Directors, Executive Officers, and Corporate Governance;
The
current Directors and Officers of the Company are as follows:
Executive
|
|
Age
|
|
Position
|
Nicholas
Campanella
|
|
54
|
|
Chairman
of the Board, Chief Executive Officer and Director
|
William
Singer *
|
|
47
|
|
(Former)
President and Director
|
Vincent
Randanzzo
|
|
57
|
|
Director
|
Sumair
Mitroo**
|
|
52
|
|
(Former)
Director
|
*William
Singer resigned from the Board on May 30, 2018, as evidenced by Form 8-K filed on June 6, 2018
**
Sumair Mitroo was removed from the Board on January 31, 2019 pursuant to the Bylaws of the Company as evidenced by Form 8-K filed
on February 6, 2019.
Nicholas
Campanella, Director, CEO, and President
is the founder of Sun Pacific Power Corp. and has been its President and a director
since its inception in 2009. Mr. Campanella has been a serial entrepreneur. He has managed, owned, and led a number of companies
in the development, contracting, insurance and manufacturing industries. From 1996 until 2015 he was the President of CGA Associates,
an insurance brokerage company. From 2005 until 2009 he was the President of Northwoods Manufacturing and from 2004 to the present
he is the President of Triplet Square, a real estate development company. Prior to 2004 he held positions of Vice President and
Account Executive in the insurance industry. He has also served in many roles in community service including as an environmental
commissioner and as the chairman of the economic development committee, along with serving as the Grand Knight for the Knights
of Columbus. Mr. Campanella attended New York Institute of Technology in 1984, where he majored in Business Management.
Vincent
Randazzo, Director
was recently appointed to the Board of Directors of Sun Pacific Holding Corp. because of his management
experience with manufacturing operations and financial reporting. Mr. Randazzo received his Bachelor of Science in Business Administration
from Saint Francis College. Mr. Randazzo started his career as an accounting clerk for Agip, USA. Thereafter, he quickly became
a Manager of General Accounting for Time Warner Corporation rising to Plant Manager within 10 years with the company. In 1998,
Mr. Randazzo joined I.L Walker, Inc., a folding carton manufacturing operation, as Vice President/General Manager. I.L. Walker,
Inc. at the time had annual sales of $23,000,000. Mr. Randazzo was responsible for 155 employees, initiated new manufacturing
and quality standards. Based on his experience with I.L. Walker, Inc., in 2001, Mr. Randazzo started his own firm, Zapp Packaging,
Inc. driving sales from $1,500,000 the first year of operations to $15,000,000 in 2005 when he sold the company. In 2006, Mr.
Randazzo joined MyPrint a division of e-Tools Corporation as V.P. of Operations until he was appointed C.E.O. in 2007, where he
remains today. Mr. Randazzo’s experience brings expertise in building and growing businesses.
William
Singer, (Former) President and Director
was appointed to the Board of Directors in April 2017. In 1991, Mr. Singer started
Bill’s Bus, LLC, a bus transportation service providing routes between Isla Vista, California and Santa Barbara, California.
Mr. Singer sold the business in 2007. After selling Bill’s Bus, LLC, Mr. Singer joined Navellier Select, LLC a Fund of Funds
operation. Navellier was sold in 2009 to Genesis. In 2010, Mr. Singer joined TruConnect, LLC, a prepaid mobile broadband business
as President, which was sold to a private equity firm. Since 2013, Mr. Singer has created Pride Wireless, Inc., a phone service
for the LGBTQ community in conjunction with T-Mobile. He currently sits as President for Montecito Investments, LLC, a private
investment and sales consulting firm and Summerland Advisors, LLC a wealth management firm. Mr. Singer also sits as Vice President
of Life Clips, Inc. (LCLP:OTCQB), a publicly traded company selling Mobeego, a onetime use emergency battery for cell phones.
Sumair
Mitroo, (Former) Director
was appointed to the Board of Directors in April 2017. Mr. Mitroo brings an impressive range
of education, research, and proven business experience to the Company. He graduated with a degree in Chemistry from Case Western
Reserve University (CWRU). From 1993 to 1995, Mr. Mitroo started in sales in the medical supplies industry with International
Medical Supply, Inc. and rose to the rank of V.P. Between 1993 and 1997, Mr. Mitroo spearheaded several joint venture and international
license technology collaborations between companies in USA and India as V.P. of Macro International, Inc. From 1998 to 2002, he
worked for Geac Computer Corporation (NASDAQ: GEAC; TSE: GAC), and WorldCom/MCI. In 2003, Mr. Mitroo started Mitroo Networks and
Communications, Inc., a telecom sales agency involved in providing voice and data solutions for companies worldwide, and in 2004,
he started Ashoretree Services, Inc., to help organizations with outsourcing, subcontracting, or in-sourcing their marketing and
BPO (Business Process Outsourcing). After starting as in investor in Larasan Pharmaceutical Corp. in 2003, Mr. Mitroo became CEO
of Larasan in 2012. He is still currently involved in this role. Mr. Mitroo has been a consultant for business development for
several firms.
The
term of the sitting Board of Directors was effective August 24, 2017 and expires on August 23, 2018. The shareholders shall be
duly notified in accordance with the Bylaws of the Company and the laws of the state of Nevada for the appropriate shareholder
meeting and request for shareholder voting per a formal proxy statement.
Committees
As
of the date of this Annual Report, the Company’s board of directors does not have any committees.
The
Board of Directors does not currently have a formal nominating committee as we are deemed a “controlled company” in
that our CEO and Chairman, Nicholas Campanella holds greater than 50% voting control. As such, nominations of additional board
members or nominees for shareholder election are set forth by Mr. Campanella. Mr. Campanella will consider shareholder nomination.
However, there are currently no formal standards for accepting or rejecting such nominations.
The
Board of Directors does not currently have a formal auditing committee nor a member of the board that is a “audit committee
financial expert” as defined by Item 507(d)(5).
Legal
Proceedings
There
are currently no legal proceedings, and during the past 10 years there have been no legal proceedings, that are material to the
evaluation of the ability or integrity of any of our directors.
Family
Relationships
Nicholas
Campanella and Vincent Randazzo are brothers in law. There are no other family relationships among the directors and executive
officers of the Company. There is no arrangement or understanding between or among the directors or executive officers of the
Company to which a director or executive officer of the Company was or is to be selected as a director.
Involvement
in Certain Legal Proceedings
To
our knowledge, during the last ten years, none of our directors and executive officers has:
|
●
|
Had
a bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either
at the time of the bankruptcy or within two years prior to that time.
|
|
●
|
Been
convicted in a criminal proceeding or been subject to a pending criminal proceeding, excluding traffic violations and other
minor offenses.
|
|
●
|
Been
subject to any order, judgment or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction,
permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities
or banking activities.
|
|
●
|
Been
found by a court of competent jurisdiction (in a civil action), the SEC, or the Commodities Futures Trading Commission to
have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended or vacated.
|
|
●
|
Been
the subject to, or a party to, any sanction or order, not subsequently reverse, suspended or vacated, of any self-regulatory
organization, any registered entity, or any equivalent exchange, association, entity or organization that has disciplinary
authority over its members or persons associated with a member.
|
Code
of Ethics
We
do not currently have a code of ethic that applies to any member of the Board of Directors or our executive officers.
Section
16(a) Beneficial Ownership Reporting Compliance
Section
16(a) of the Securities Exchange Act of 1934, as amended, requires our directors and executive officers and persons who own more
than 10% of the issued and outstanding shares of our common stock to file reports of initial ownership of common stock and other
equity securities and subsequent changes in that ownership with the SEC. Officers, directors and greater than ten percent stockholders
are required by SEC regulation to furnish us with copies of all Section 16(a) forms they file. To our knowledge, based solely
on a review of the copies of such reports furnished to us and written representations that no other reports were required, during
the fiscal year ended December 31, 2018 all Section 16(a) filing requirements applicable to our officers, directors and greater
than 10% beneficial owners were complied with.
Item
11. Executive Compensation
None
of our officers have received compensation in the last two fiscal years.
Compensation
of Directors
Executive
Employment Agreement
On
December 20, 2014, the Company entered into a five-year employment agreement with Nicholas Campanella, Chief Executive Officer.
Under the terms of the agreement, the Company is required to pay a base compensation of $180,000 annually, subject to increases
in cost of living and performance bonuses as awarded by the Board of Directors. After 5 years, the agreement is automatically
renewed for an additional two years unless terminated by either party. As part of the agreement Mr. Campanella opted to defer,
with no interest, the receipt of compensation under the agreement until the Company has the funds to pay its obligation.
Item
12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The
following table sets forth, as of April 4, 2019, each person known by the Company to be the officer or director of the
Company or a beneficial owner of five percent or more of the Company’s common stock. Except as noted, the holder thereof
has sole voting and investment power with respect to the shares shown. Except as otherwise indicated, the address of each beneficial
owner is c/o Sun Pacific Power Corporation, 215 Gordons Corner Road, Manalapan, New Jersey 07726.
Name
|
|
Position
|
|
Number
of Shares of Common Stock
|
|
|
Percentage
of Common Stock (1)
|
|
|
|
|
|
|
|
|
|
|
Officers
& Directors
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nicholas
Campanella
|
|
Chairman of the Board. CEO,
& Director
|
|
|
33,897,166
|
(2)
|
|
|
28.29
|
%
|
Vincent Randanzzo
|
|
Director
|
|
|
44,150
|
|
|
|
*
|
|
|
|
Total Owned by
all Officers and Directors
|
|
|
33,941,316
|
|
|
|
28.33
|
%
|
(1)
Applicable percentage ownership is based on 119,816,697 shares of common stock outstanding as of April 3, 2019.
Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission and generally
includes voting or investment power with respect to securities. Shares of common stock that are currently exercisable or
exercisable within 60 days of are deemed to be beneficially owned by the person holding such securities for computing the
percentage of ownership of such person but are not treated as outstanding for computing the percentage ownership of any other
person. Nicholas Campanella, our Chairman and Chief Executive Officer holds 12,000,000 shares of Series A Preferred Stock as
of April 3, 2019. The Series A Preferred Stock has voting rights equal to 125 votes on all matters submitted to a vote to the
stockholders of the Company, does not have conversion, dividend or distribution upon liquidation rights. As a result, Mr.
Campanella has the equivalent to 1,500,000,000 votes. Therefore, although the officers, directors and beneficial holders of
shares greater than 5% of the common stock have voting rights equal to 36.75% of the voting rights of the common stock, this
amounts to only 3.67% of the total voting rights available. Mr. Campanella thus has a total of 96.33% of the total voting
rights.
Item
13. Certain Relationships and Related Transactions and Director Independence
On
August 24, 2017, the Company closed a share exchange agreement with the shareholder of Sun Pacific Power Corporation, a New Jersey
corporation whereby the shareholders of Sun Pacific Power Corporation received 284,248,605 shares of common stock (pre-reverse
stock split of 50:1) on a pro rata basis. Pursuant to the share exchange agreement, Nicholas Campanella was issued 976,351 shares
of Series B Preferred Shares, which automatically converted into 30,126,775 shares of post reverse stock split common shares.
Vincent
Randazzo, our Director, is the brother-in-law of Nicholas Campanella, our Chairman and Chief Executive Office.
On
February 7, 2019, MedRecycler-RI, Inc., of which the wholly owned subsidiary of the Company, MedRecycler, LLC, holds fifty one
percent (51%), entered into an Indenture of Trust for a Promissory Note in the amount of $6,025,000. Pursuant to the Indenture
of Trust, Nicholas Campanella, our CEO and Chairman, provided pledged of personal assets to the note holder, including, real property
and all equity ownership in the Company. Mr. Campanella received thirty nine percent (39%) or thirty-nine thousand shares of MedRecycler-RI,
Inc. as consideration for his efforts and services in 2019 as well as his agreement to pledge substantial personal assets.
Please
refer to Note 7 of the financial statements for details related to related party transactions.
Item
14. Principal Accounting Fees and Services.
The
aggregate fees incurred for each of the last two years for professional services rendered by Turner, Stone & Company, LLC,
the independent registered public accounting firm for the audit of the Company’s annual financial statements included in
the Company’s Form 10-K and review of financial statements for its quarterly report (Form 10-QT) are reported below.
The
total fees charged by Turner, Stone & Company, LLC in 2018 and 2017 aggregated $29,230 and $4,912, respectively, which includes
fees for the 2018 and 2017 audited financial statements and review of the quarterly financial statements for 2018.
|
|
Audit
|
|
|
Taxes
|
|
|
Filings
|
|
|
Oher
|
|
|
Total
|
|
2018
|
|
$
|
29,230
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
29,230
|
|
2017
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
4,500
|
|
|
$
|
412
|
|
|
$
|
4,912
|
|
PART
IV
Item
15. Exhibits, Financial Statement Schedules
Exhibit
Number
|
|
Description
of Exhibit
|
|
Filed
|
|
|
|
|
|
3.1
|
|
Amended and Restated Articles of Incorporation filed May 29, 2015
|
|
Form
10 October 13, 2015
|
|
|
|
|
|
3.2
|
|
Bylaws dated April 5, 2005
|
|
Form
10 October 13, 2015
|
|
|
|
|
|
3.3
|
|
Designation of Series B and Series C Preferred Stock filed with the state of Nevada on August 11, 2017
|
|
Form
8-K August 18, 2017
|
|
|
|
|
|
3.4
|
|
Certificate of Amendment filed with the state of Nevada on October 3, 2017
|
|
Form
8-K October 13, 2017
|
|
|
|
|
|
3.5
|
|
Certificate of Change (Reverse Stock Split) filed with the state of Nevada on October 3, 2017
|
|
Form
8-K October 13, 2017
|
|
|
|
|
|
10.1
|
|
The Acquisition Agreement between the Company and Sun Pacific Power Corp., dated August 16, 2017
|
|
Form
8-K August 29, 2017
|
|
|
|
|
|
10.2
|
|
The Spinoff Agreement with the Company, Randy Romano, and Vaughan Dugan, dated August 24, 2017
|
|
Form
8-K August 18, 2017
|
|
|
|
|
|
10.3
|
|
The Forbearance Agreement between the Company and Nicholas Campanella, dated January 11, 2019.
|
|
Form
8-K January 14, 2019
|
|
|
|
|
|
10.4
|
|
Guarantee of Payment and Performance between the Company and UMB Bank, N.A., date February 7, 2019
|
|
Form
8-K February 11, 2019
|
|
|
|
|
|
10.5
|
|
Extension of Forbearance Agreement between the Company and Nicholas Campanella, dated April 3, 2019
|
|
Herein
|
|
|
|
|
|
31.1
|
|
Certification
of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
Herein
|
|
|
|
|
|
31.2
|
|
Certification
of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
Herein
|
|
|
|
|
|
32.1
|
|
Certification
of the Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
Herein
|
|
|
|
|
|
32.2
|
|
Certification
of the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
Herein
|
|
|
|
|
|
101.INS
|
|
XBRL
Instance
|
|
|
|
|
|
|
|
101.SCH
|
|
XBRL
Taxonomy Extension Schema
|
|
|
|
|
|
|
|
101.CAL
|
|
XBRL
Taxonomy Extension Calculation
|
|
|
|
|
|
|
|
101.DEF
|
|
XBRL
Taxonomy Extension Definition
|
|
|
|
|
|
|
|
101.LAB
|
|
XBRL
Taxonomy Extension Labels
|
|
|
|
|
|
|
|
101.PRE
|
|
XBRL
Taxonomy Extension Presentation
|
|
|
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
|
Sun
Pacific Power Corp.
|
|
|
|
Date:
April 4, 2019
|
By:
|
/s/
Nicholas Campanella
|
|
Name:
|
Nicholas
Campanella
|
|
Title:
|
Chairman
of the Board of Directors, & Chief Executive Officer
(Principal
Executive Officer)
|
|
|
|
Date:
April 4, 2019
|
By:
|
/s/
Nicholas Campanella
|
|
Name:
|
Nicholas
Campanella
|
|
Title:
|
Chief
Financial Officer
(Principal
Financial and Accounting Officer)
|
In
accordance with the Exchange Act, this report has been signed below by the following persons on April 1, 2019 on behalf of the
registrant and in the capacities indicated.
Signature
|
|
Title
|
|
|
|
/s/
Nicholas Campanella
|
|
Chairman
of the Board of Directors, Chief
|
Nicholas
Campanella
|
|
Executive
Officer, & Chief Financial Officer
(Principal
Executive Officer) (Principal Financial and Accounting Officer)
|
|
|
|
/s/
Vincent Randanzzo
|
|
Director
|
Vincent
Randanzzo
|
|
|
FINANCIAL
STATEMENTS
R
eport
of Independent Registered Public Accounting Firm
To
the Board of Directors and Stockholders Sun Pacific Power Corporation and Subsidiaries
Opinion
on the Financial Statements
We
have audited the accompanying consolidated balance sheets of Sun Pacific Power Corporation and its subsidiaries (the “Company”)
as of December 31, 2018 and 2017, and the related consolidated statements of operations, stockholders’ deficit and cash
flows for the years then ended, and the related notes (collectively referred to as the “consolidated financial statements”).
In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position
of the Company as of December 31, 2018 and 2017, and the results of its consolidated operations and its cash flows for the years
then ended in conformity with accounting principles generally accepted in the United States of America.
Explanatory
Paragraph – Going Concern
The
accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern.
As discussed in Note 3 to the consolidated financial statements, the Company has suffered recurring losses from operations since
inception and has a significant working capital deficiency, both of which raise substantial doubt about its ability to continue
as a going concern. Management’s plans in regard to these matters are also described in Note 3. The consolidated financial
statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis
for Opinion
These
consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an
opinion on the Company’s consolidated financial statements based on our audits. 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 audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits
to obtain reasonable assurance about whether the consolidated 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 audits, 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
audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether
due to error or fraud, and performing procedures that respond to those risks. Such procedures include examining, on a test basis,
evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the
accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the
consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/
Turner, Stone & Company, L.L.P.
Dallas,
Texas
April
4, 2019
We
have served as the Company’s auditor since 2017.
SUN PACIFIC HOLDING CORP.
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2018 AND 2017
|
|
December 31, 2018
|
|
|
December 31, 2017
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
Current Assets:
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
4,851
|
|
|
$
|
55,740
|
|
Accounts receivable, net of allowance for uncollectable accounts of $145,155
and $118,221, respectively
|
|
|
77,137
|
|
|
|
76,729
|
|
Other current assets
|
|
|
7,234
|
|
|
|
7,112
|
|
Total current assets
|
|
|
89,222
|
|
|
|
139,581
|
|
|
|
|
|
|
|
|
|
|
Property and Equipment, Net
|
|
|
204,951
|
|
|
|
293,730
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
294,173
|
|
|
$
|
433,311
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ DEFICIT
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Liabilities:
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
245,125
|
|
|
$
|
188,467
|
|
Accounts payable, related party
|
|
|
91,512
|
|
|
|
85,012
|
|
Accrued compensation to officer
|
|
|
631,166
|
|
|
|
451,166
|
|
Accrued expenses
|
|
|
203,670
|
|
|
|
100,612
|
|
Accrued expenses, related party
|
|
|
31,745
|
|
|
|
27,162
|
|
Dividends payable, related party
|
|
|
18,913
|
|
|
|
12,663
|
|
Advances from related parties
|
|
|
612,023
|
|
|
|
588,517
|
|
Project financing obligation
|
|
|
260,000
|
|
|
|
-
|
|
Vehicle installment notes payable, current portion
|
|
|
28,943
|
|
|
|
28,943
|
|
Convertible notes payable, net of discounts
|
|
|
423,454
|
|
|
|
187,184
|
|
Convertible notes payable, related party, net of discounts
|
|
|
408,974
|
|
|
|
403,474
|
|
Total current liabilities
|
|
|
2,955,525
|
|
|
|
2,073,200
|
|
Long Term Liabilities:
|
|
|
|
|
|
|
|
|
Vehicle installment notes payable, net of current portion
|
|
|
31,724
|
|
|
|
57,709
|
|
Total liabilities
|
|
|
2,987,249
|
|
|
|
2,130,909
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies (see Note 7)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders’ Deficit:
|
|
|
|
|
|
|
|
|
Preferred stock $0.0001 par value, 20,000,000 million shares authorized:
|
|
|
|
|
|
|
|
|
Series A preferred stock: 12,000,000 shares designated; 12,000,000 shares issued and outstanding
|
|
|
1,200
|
|
|
|
1,200
|
|
Series B preferred stock: 1,000,000 shares designated; -0- shares issued and outstanding, respectively
|
|
|
-
|
|
|
|
-
|
|
Series C preferred stock: 500,000 shares designated; -0- and 275,000 shares issued and outstanding, respectively
|
|
|
-
|
|
|
|
28
|
|
Common stock $0.0001 par value, 500,000,000 shares authorized; 66,901,354 and
60,833,030 shares issued and outstanding, respectively
|
|
|
6,690
|
|
|
|
6,083
|
|
Additional paid in capital
|
|
|
3,948,051
|
|
|
|
3,168,626
|
|
Accumulated deficit
|
|
|
(6,649,017
|
)
|
|
|
(4,873,535
|
)
|
Total stockholders’ deficit
|
|
|
(2,693,076
|
)
|
|
|
(1,697,598
|
)
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders’ deficit
|
|
$
|
294,173
|
|
|
$
|
433,311
|
|
The accompanying footnotes are an integral part of these consolidated financial statements.
SUN PACIFIC HOLDING CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 2018 AND 2017
|
|
2018
|
|
|
2017
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
584,650
|
|
|
$
|
1,252,675
|
|
Cost of Revenues
|
|
|
311,492
|
|
|
|
750,802
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
273,158
|
|
|
|
501,873
|
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
Wages and compensation
|
|
|
517,627
|
|
|
|
569,609
|
|
Professional fees
|
|
|
530,634
|
|
|
|
332,142
|
|
Insurance
|
|
|
2,658
|
|
|
|
69,090
|
|
Rent
|
|
|
39,297
|
|
|
|
88,865
|
|
General and administrative
|
|
|
479,580
|
|
|
|
373,077
|
|
Total operating expenses
|
|
|
1,569,796
|
|
|
|
1,432,784
|
|
|
|
|
|
|
|
|
|
|
Loss from operations
|
|
|
(1,296,638
|
)
|
|
|
(930,911
|
)
|
|
|
|
|
|
|
|
|
|
Other Income (Expenses):
|
|
|
|
|
|
|
|
|
Loss on settlement of accrued officer salaries
|
|
|
-
|
|
|
|
(1,155,767
|
)
|
Loss on settlement of debt
|
|
|
-
|
|
|
|
(12,650
|
)
|
Dividend expense - preferred stock
|
|
|
(22,917
|
)
|
|
|
(34,375
|
)
|
Gain on sale of property and equipment
|
|
|
-
|
|
|
|
4,401
|
|
Interest expense
|
|
|
(455,926
|
)
|
|
|
(85,065
|
)
|
Total other expense, net
|
|
|
(478,843
|
)
|
|
|
(1,283,456
|
)
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(1,775,481
|
)
|
|
$
|
(2,214,367
|
)
|
|
|
|
|
|
|
|
|
|
Net Loss Per Common Share - Basic and Diluted
|
|
$
|
(0.03
|
)
|
|
$
|
(0.13
|
)
|
|
|
|
|
|
|
|
|
|
Weighted Average Shares Outstanding - Basic and Diluted
|
|
|
62,471,599
|
|
|
|
17,269,048
|
|
The accompanying footnotes are an integral part of these consolidated financial statements.
SUN PACIFIC HOLDING CORP
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’
DEFICIT
YEARS ENDED DECEMBER 31, 2018 AND 2017
|
|
Series
A Preferred Stock
|
|
|
Series
B Preferred Stock
|
|
|
Series
C Preferred Stock
|
|
|
Common
Stock
|
|
|
Additional
Paid
In
|
|
|
Accumulated
|
|
|
Total
Stockholders’
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Deficit
|
|
|
Deficit
|
|
Balances
at December 31, 2016
|
|
|
2,000,000
|
|
|
$
|
200
|
|
|
|
-
|
|
|
$
|
-
|
|
|
|
-
|
|
|
$
|
-
|
|
|
$
|
97,415,411
|
|
|
$
|
9,742
|
|
|
$
|
782,930
|
|
|
$
|
(2,659,169
|
)
|
|
$
|
(1,866,297
|
)
|
Pre
Merger Share Issuances:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of common stock in settlement of convertible debt and promissory notes
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
65,049,488
|
|
|
|
6,505
|
|
|
|
(6,505
|
)
|
|
|
-
|
|
|
|
-
|
|
Issuance
of common stock for services
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
450,000
|
|
|
|
45
|
|
|
|
(45
|
)
|
|
|
-
|
|
|
|
-
|
|
Issuance
of predecessor common stock in settlement of debt
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
450,000
|
|
|
|
-
|
|
|
|
450,000
|
|
Effect
on reverse merger on August 24, 2017
|
|
|
(2,000,000
|
)
|
|
|
(200
|
)
|
|
|
1,000,000
|
|
|
|
100
|
|
|
|
275,000
|
|
|
|
28
|
|
|
|
289,835,550
|
|
|
|
28,984
|
|
|
|
(862,734
|
)
|
|
|
-
|
|
|
|
(833,823
|
)
|
Effect of 1-for-50 revers
split on October 3, 2017
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(443,695,440
|
)
|
|
|
(44,370
|
)
|
|
|
44,370
|
|
|
|
-
|
|
|
|
-
|
|
Conversion
of preferred stock issued for reverse merger
|
|
|
-
|
|
|
|
-
|
|
|
|
(1,000,000
|
)
|
|
|
(100
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
30,856,500
|
|
|
|
3,086
|
|
|
|
(2,986
|
)
|
|
|
-
|
|
|
|
-
|
|
Settlement
of debt assumed in reverse merger
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
17,052,925
|
|
|
|
1,705
|
|
|
|
832,082
|
|
|
|
-
|
|
|
|
833,787
|
|
Settlement
of accrued officer’s salaries
|
|
|
12,000,000
|
|
|
|
1,200
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,250,000
|
|
|
|
125
|
|
|
|
1,261,749
|
|
|
|
-
|
|
|
|
1,263,074
|
|
Issuance
of common stock for cash
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,433,665
|
|
|
|
243
|
|
|
|
500,990
|
|
|
|
-
|
|
|
|
501,233
|
|
Issuance
of common stock for services
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
121,683
|
|
|
|
12
|
|
|
|
24,324
|
|
|
|
-
|
|
|
|
24,337
|
|
Issuance
of common stock in settlement of debt
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
63,248
|
|
|
|
6
|
|
|
|
12,643
|
|
|
|
-
|
|
|
|
12,650
|
|
Issuance
of common stock warrants for services
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
131,808
|
|
|
|
-
|
|
|
|
131,808
|
|
Net
loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(2,214,367
|
)
|
|
|
(2,214,367
|
)
|
Balances at December
31, 2017
|
|
|
12,000,000
|
|
|
|
1,200
|
|
|
|
-
|
|
|
|
-
|
|
|
|
275,000
|
|
|
|
28
|
|
|
|
60,833,030
|
|
|
|
6,083
|
|
|
|
3,168,626
|
|
|
|
(4,873,536
|
)
|
|
|
(1,697,599
|
)
|
Issuance
of common stock for cash
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,230,000
|
|
|
|
123
|
|
|
|
172,877
|
|
|
|
-
|
|
|
|
173,000
|
|
Issuance
of common stock for services
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
668,324
|
|
|
|
67
|
|
|
|
84,142
|
|
|
|
-
|
|
|
|
84,209
|
|
Issuance
of common stock warrants for services
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
130,641
|
|
|
|
-
|
|
|
|
130,641
|
|
Issuance
of common stock warrants with convertible debt
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
350,000
|
|
|
|
-
|
|
|
|
350,000
|
|
Issuance
of common stock warrants for extension of maturity of debt
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
16,401
|
|
|
|
-
|
|
|
|
16,401
|
|
Issuance
of common stock upon conversion of convertible debt
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
4,170,000
|
|
|
|
417
|
|
|
|
25,335
|
|
|
|
-
|
|
|
|
25,752
|
|
Redemption
of preferred stock
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(275,000
|
)
|
|
|
(28
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
28
|
|
|
|
-
|
|
|
|
-
|
|
Net
loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(1,775,481
|
)
|
|
|
(1,775,481
|
)
|
Balances
at December 31, 2018
|
|
|
12,000,000
|
|
|
$
|
1,200
|
|
|
|
-
|
|
|
$
|
-
|
|
|
|
-
|
|
|
$
|
-
|
|
|
|
66,901,354
|
|
|
$
|
6,690
|
|
|
$
|
3,948,051
|
|
|
$
|
(6,649,017
|
)
|
|
$
|
(2,693,077
|
)
|
The accompanying footnotes are an integral part of these consolidated financial statements.
SUN PACIFIC HOLDING CORP
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 2018 AND 2017
|
|
2018
|
|
|
2017
|
|
Cash flows from Operating Activities:
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(1,775,481
|
)
|
|
$
|
(2,214,366
|
)
|
Adjustments to reconcile net loss to net cash used in
operating activities:
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
88,779
|
|
|
|
79,428
|
|
Amortization of debt discount - interest expense
|
|
|
348,446
|
|
|
|
22,000
|
|
Allowance for uncollectable accounts
|
|
|
26,934
|
|
|
|
(160,806
|
)
|
Gain on sale of property and equipment
|
|
|
-
|
|
|
|
1,385
|
|
Loss on settlement of officer compensation
|
|
|
-
|
|
|
|
1,155,767
|
|
Loss on conversion of convertible debt
|
|
|
-
|
|
|
|
12,650
|
|
Stock issued for services
|
|
|
84,209
|
|
|
|
|
|
Warrants issued for services
|
|
|
130,641
|
|
|
|
156,145
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
(27,342
|
)
|
|
|
227,500
|
|
Deposits
|
|
|
(122
|
)
|
|
|
(7,112
|
)
|
Accounts payable
|
|
|
56,659
|
|
|
|
(299,213
|
)
|
Accounts payable, related party
|
|
|
6,500
|
|
|
|
(75,000
|
)
|
Accrued compensation to officer
|
|
|
180,000
|
|
|
|
179,998
|
|
Accrued expenses
|
|
|
111,875
|
|
|
|
62,086
|
|
Accrued expenses, related party
|
|
|
4,583
|
|
|
|
27,162
|
|
Dividends payable, related party
|
|
|
6,250
|
|
|
|
9,375
|
|
Net cash used in operating activities
|
|
|
(758,069
|
)
|
|
|
(823,002
|
)
|
|
|
|
|
|
|
|
|
|
Cash flows from Investing Activities:
|
|
|
|
|
|
|
|
|
Advance to related party
|
|
|
-
|
|
|
|
-
|
|
Proceeds from sale of property and equipment
|
|
|
-
|
|
|
|
2,500
|
|
Net cash provided by (used in) investing activities
|
|
|
-
|
|
|
|
2,500
|
|
|
|
|
|
|
|
|
|
|
Cash flows from Financing Activities:
|
|
|
|
|
|
|
|
|
Proceeds from advances from related parties
|
|
|
23,506
|
|
|
|
321,127
|
|
Repayments of advances from related parties
|
|
|
-
|
|
|
|
-
|
|
Proceeds from issuance of common stock
|
|
|
173,000
|
|
|
|
501,233
|
|
Proceeds from the issuance of convertible debt
|
|
|
281,660
|
|
|
|
-
|
|
Repayment of convertible debt
|
|
|
(5,000
|
)
|
|
|
|
|
Proceeds from project financing obligation
|
|
|
260,000
|
|
|
|
-
|
|
Repayment of vehicle installment notes payable
|
|
|
(25,985
|
)
|
|
|
(36,195
|
)
|
Net cash provided by financing activities
|
|
|
707,181
|
|
|
|
786,165
|
|
|
|
|
|
|
|
|
|
|
Net decrease in cash
|
|
|
(50,888
|
)
|
|
|
(34,337
|
)
|
Cash at beginning of year
|
|
|
55,740
|
|
|
|
90,077
|
|
Cash at end of year
|
|
$
|
4,852
|
|
|
$
|
55,740
|
|
|
|
|
|
|
|
|
|
|
Supplemental Disclosure of Cash Flow Information:
|
|
|
|
|
|
|
|
|
Interest paid
|
|
$
|
24,928
|
|
|
$
|
-
|
|
Taxes paid
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
Supplemental Disclosure of Non-Cash Investing and Financing Activities:
|
|
|
|
|
|
|
|
|
Original issue discount on convertible notes
|
|
$
|
68,340
|
|
|
$
|
-
|
|
Increase in convertible notes and discounts from extension
|
|
$
|
50,000
|
|
|
$
|
-
|
|
Issuance of common stock upon conversion of convertible debt
|
|
$
|
25,752
|
|
|
$
|
-
|
|
Debt discounts on convertible notes payable
|
|
$
|
366,401
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
Automatic redemption of preferred shares
|
|
$
|
28
|
|
|
$
|
-
|
|
Settlement of amounts due to related party with
issuance of common stock
|
|
$
|
-
|
|
|
$
|
450,000
|
|
Assumption of convertible debt from reverse merger
|
|
$
|
-
|
|
|
$
|
833,787
|
|
The accompanying footnotes are an integral part of these consolidated financial statements.
SUN
PACIFIC HOLDING CORP
NOTES
TO CONSOLIDATED FINACNIAL STATEMENTS
YEARS
ENDED DECEMBER 31, 2018 AND 2017
NOTE
1 - DESCRIPTION OF THE BUSINESS
Organization
The
Company was incorporated under the laws of the State of New Jersey on July 28, 2009, as Sun Pacific Power Corporation and together
with its subsidiaries, are referred to as the “Company”. On August 24, 2017, the Company entered into an Acquisition
Agreement with EXOlifestyle, Inc. whereby the Company became a wholly owned subsidiary of EXOlifestyle, Inc. The acquisition was
accounted for as a reverse merger, resulting in the Company being considered the accounting acquirer. Accordingly, the accompanying
condensed consolidated financial statements included the accounts of EXOlifestyle, Inc. since August 24, 2017.
On
October 3, 2017, pursuant to the written consent of the majority of the shareholders in lieu of a meeting, Sun Pacific Holding
Corp., f/k/a EXOlifestyle, Inc. (the “Company”) filed a Certificate of Amendment with the state of Nevada to change
the name of the Company from EXOlifestyle, Inc. to Sun Pacific Holding Corp.
On
October 3, 2017, the Company’s board of directors declared a 1 for 50 reverse stock split. All share amounts for all periods
presented have been restated to reflect the reverse stock split.
Currently,
the Company has six (6) subsidiary holdings. Sun Pacific Power Corp which was the initial company that specialized in solar, electrical
and general construction, Bella Electric, LLC that in conjunction with the Company operates our electrical contracting work. Bella
Electric, LLC is a Pennsylvania limited liability company. The Company also formed Sun Pacific Security Corp., a New Jersey corporation.
Currently the Company has not begun operations in the security sector but is reviewing plans to provide residential and commercial
security solutions, including installation and monitoring. The Company also formed National Mechanical Group Corp, a New Jersey
corporation focused on plumbing operations in the New Jersey and Pennsylvania areas. The Company also formed Street Smart Outdoor
Corp, a Wyoming corporation that acts as a holding company for the Company’s state specific operations in unique advertising
through solar bus stops, solar trashcans and “street kiosks.” MedRecycler, LLC, is a wholly owned subsidiary duly
formed in the state of Nevada. MedRecycler, LLC was created in 2018 to act as a holding company for potential waste to energy
projects. MedRecycler, LLC, currently owns 51% of MedRecycler RI, Inc. a Rhode Island Corporation. MedRecycler RI, Inc. was created
for the Medical Waste to Energy facility that the Company is attempting to finance and operate in West Warrick, Rhode Island.
Description
of business
Utilizing
managements history and contacts in general contracting, coupled with our subject matter expertise and intellectual property (“IP”)
knowledge of solar panels and other environmentally friendly technologies, Sun Pacific Holding (“the Company”) is
focused on building a “Next Generation” green energy company. The Company offers competitively priced “Next
Generation” solar panel and lighting products by working closely with design, engineering, integration and installation
firms in order to deliver turnkey solar and other energy efficient solutions. The Company provides
solar
bus stops, solar trashcans and “street kiosks” that utilize our unique advertising offerings that provide State and
local municipalities with costs efficient solutions.
The Company
provides general,
electrical, and plumbing contracting services to a range of both public and commercials customers in support of our goals of expanding
our green energy market reach. In conjunction with these general contracting services and as part of our effort to expand our
green energy marketplace, we have recently started the process to develop and build out a Waste to Energy plant in the state of
Rhode Island.
Since
August 24, 2017, Nicholas Campanella has put forth all his efforts in trying to revitalize the Company and getting it solvent.
Unfortunately, Mr. Campanella has had limited success in raising capital sufficient to kick start expansion of its businesses.
Any financing that has been received has been very limited and merely sufficient to cover basic costs of being a public company.
As of the date of this filing, revenues are heavily concentrated in operations of the subsidiary Street Smart Outdoor Corp., which
operates in the outdoor advertising space. These cashflows, however, have not been sufficient to provide working capital for the
parent or to expand operations. Although there are prospective contracting and construction contracts for Sun Pacific Power Corp.,
a wholly owned subsidiary, in 2018, revenues generated by Sun Pacific Power Corp. have been limited. Despite its best efforts,
Sun Pacific Power Corp. and the Company have been unable to secure financing to complete UL testing for the glassless solar panel.
As a result, contracts have lapsed, and we are unable to assess the marketability of the glassless solar panel product at this
time.
The
Company has been unable to produce positive cashflows since inception resulting in the Company relying heavily upon toxic convertible
promissory notes and equity financing. As a result, the Company’s shareholders have suffered from highly dilutive financing.
Currently,
management is focused on 2 main areas of operations. 1) Expanding the outdoor advertising operated under Street Smart Outdoor
Corp. through the engagement of a third-party management service. 2) erecting a waste to energy facility in the state of Rhode
Island. Regarding the outdoor advertising, the Company has yet to secure a relationship with a third-party operator that could
alleviate some of the cashflow constraints of Street Smart Outdoor. As for the Rhode Island waste to energy project, we currently
require additional financing to complete the installation and build out of the facility. Currently, MedRecycler-RI, Inc. is indebted
$6,025,000 through a promissory note held by UMB Bank, N.A. as trustee (See Note 10). In order to secure the financing, all interest
in MedRecycler-RI, Inc., including minority interests have been pledged. All repayment under the promissory note has been guaranteed
by the Company and Street Smart Outdoor Corp. Additionally, in order to secure the financing, Nicholas Campanella, our CEO, has
pledged substantial personal assets, including all controlling interest in the Company. Although Mr. Campanella was issued thirty
nine percent (39%) interest in MedRecycler-RI, Inc. for his personal contribution, all said interest has been pledged to the Trustee
(See Note 10). The success of the waste to energy project we estimate will require no less than $8,500,000 in additional financing
and may still not be successful. Even with timely and fully functioning operations, profits derived from the facility will be
dedicated to servicing the debt for the foreseeable future.
NOTE
2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Use
of estimates in the preparation of financial statements
Preparation
of financial statements in conformity with accounting principles generally accepted in the United States requires management to
make estimates and assumptions that affect reported amounts in the financial statements and accompanying notes. Actual results
could differ from those estimates. Significant estimates include the allowance for doubtful accounts and impairment assessments
related to long-lived assets.
Consolidation
The
consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany
balances and transactions have been eliminated.
Cash
and cash equivalents
For
purposes of the consolidated statements of cash flows, cash includes demand deposits and short-term liquid investments with original
maturities of three months or less when purchased. As of December 31, 2018, the Federal Deposit Insurance Corporation (FDIC) provided
insurance coverage of up to $250,000, per depositor, per institution. At December 31, 2018, none of the Company’s cash balances
were in excess of federally insured limits.
Accounts
Receivable
In
the normal course of business, we decide to extend credit to certain customers without requiring collateral or other security
interests. Management reviews its accounts receivable at each reporting period to provide for an allowance against accounts receivable
for an amount that could become uncollectible. This review process may involve the identification of payment problems with specific
customers. Periodically we estimate this allowance based on the aging of the accounts receivable, historical collection experience,
and other relevant factors, such as changes in the economy and the imposition of regulatory requirements that can have an impact
on the industry. These factors continuously change and can have an impact on collections and our estimation process. The Company’s
allowance for doubtful accounts totaled $145,155and $118,221 as of December 31, 2018 and 2017, respectively.
Contingencies
Certain
conditions may exist as of the date financial statements are issued, which may result in a loss, but which will only be resolved
when one or more future events occur or do not occur. We assess such contingent liabilities, and such assessment inherently involves
an exercise of judgment. In assessing loss contingencies related to pending legal proceedings that are pending against us or unasserted
claims that may result in such proceedings, we evaluate the perceived merits of any legal proceedings or unasserted claims as
well as the perceived merits of the amount of relief sought or expected to be sought therein. If the assessment of a contingency
indicates that it is probable that a liability has been incurred and the amount of the liability can be estimated, then the estimated
liability would be accrued in our consolidated financial statements. If the assessment indicates that a potentially material loss
contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent
liability, together with an estimate of the range of possible loss if determinable would be disclosed.
Fair
value of financial instruments
The
carrying amounts of the Company’s accounts payable, accrued expenses, and shareholder advances approximate fair value due
to their short-term nature. The Company’s long-term debt approximates fair value based on prevailing market rates.
Property
and equipment
Property
and equipment are stated at cost. Additions and improvements that significantly add to the productive capacity or extend the life
of an asset are capitalized. Maintenance and repairs are expensed as incurred. Depreciation is computed using the straight-line
method over three to five years for vehicles and five to ten years for equipment. Leasehold improvements are amortized over the
lesser of the estimated remaining useful life of the asset or the remaining lease term.
Impairment
of long-lived assets
The
Company periodically reviews for the impairment of long-lived assets whenever events or changes in circumstances indicate that
the carrying amount of an asset may not be realizable. An impairment loss would be recognized when estimated future cash flows
expected to result from the use of the asset and its eventual disposition is less than its carrying amount. At December 31, 2018
and 2017, the Company has not identified any such impairment losses.
Income
taxes
Under
ASC Topic 740, “Income Taxes”, the Company is required to account for its income taxes through the establishment of
a deferred tax asset or liability for the recognition of future deductible or taxable amounts and operating loss and tax credit
carry forwards. Deferred tax expense or benefit is recognized as a result of timing differences between the recognition of assets
and liabilities for book and tax purposes during the year.
Deferred
tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled. Deferred tax assets are recognized for deductible temporary differences
and operating losses, and tax credit carry forwards. A valuation allowance is established to reduce that deferred tax asset if
it is “more likely than not” that the related tax benefits will not be realized.
Revenue
recognition
100% of the Company’s revenue for the
years ended December 31, 2018 and 2017, is recognized based on the Company’s satisfaction of distinct performance obligations
identified in each agreement, generally at a point in time as defined by Topic 606, as amended.
In May 2014, the Financial Accounting Standards
Board (FASB) issued Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers. This standard replaced
most existing revenue recognition guidance and is codified in FASB ASC Topic 606. Effective January 1, 2018, the Company adopted
ASU No. 2014-09 using the modified retrospective method. Under the new guidance, the Company recognizes revenue from contracts
based on the Company’s satisfaction of distinct performance obligations identified in each agreement. The adoption of the
guidance under ASU No. 2014-09 did not result in a material impact on the Company’s consolidated revenues, results of operations,
or financial position. As part of the implementation of ASC 606 the Company must present disaggregation of revenues from contracts
with customers into categories that depict how the nature, timing, and uncertainty of revenue and cash flows are affected by economic
factors. Quantitative disclosures on the disaggregation of revenue are as follows:
|
|
2018
|
|
|
2017
|
|
Outdoor Advertising Shelter
Revenues
|
|
|
276,591
|
|
|
|
85,157
|
|
Contracting
Service Revenues
|
|
|
308,059
|
|
|
|
1,167,518
|
|
|
|
|
584,650
|
|
|
|
1,252,675
|
|
Earnings
Per Share
Under
ASC 260, “Earnings Per Share” (“EPS”), the Company provides for the calculation of basic and diluted earnings
per share. Basic EPS includes no dilution and is computed by dividing income or loss available to common shareholders by the weighted
average number of common shares outstanding for the period. Diluted EPS reflects the potential dilution of securities that could
share in the earnings or losses of the entity. For the years ended December 31, 2018 and 2017, basic and diluted loss per share
are the same as the calculation of diluted per share amounts would result in an anti-dilutive calculation. For the years ended
December 31, 2018 and 2017, the following potential shares have been excluded from the calculation of diluted loss per share because
their impact was anti-dilutive:
|
|
2018
|
|
|
2017
|
|
Convertible Debt
|
|
|
201,542,064
|
|
|
|
18,596,912
|
|
Warrants
|
|
|
8,324,757
|
|
|
|
1,020,000
|
|
|
|
|
209,866,791
|
|
|
|
19,616,912
|
|
Recent
Accounting Pronouncements
ASU
No. 2014-09, Revenue from Contracts with Customers (Topic 606) -
This standard provides a single set of guidelines for revenue
recognition to be used across all industries and requires additional disclosures. The Company adopted this standard effective
January 1, 2018, with no impact on its results of operations and financial condition.
ASU
No. 2016-02, Leases (Topic 842)
- This standard requires all leases that have a term of over 12 months to be recognized on
the balance sheet with the liability for lease payments and the corresponding right-of-use asset initially measured at the present
value of amounts expected to be paid over the term. Recognition of the costs of these leases on the income statement will be dependent
upon their classification as either an operating or a financing lease. Costs of an operating lease will continue to be recognized
as a single operating expense on a straight-line basis over the lease term. Costs for a financing lease will be disaggregated
and recognized as both an operating expense (for the amortization of the right-of-use asset) and interest expense (for interest
on the lease liability). This standard will be effective for our interim and annual periods beginning January 1, 2019 and must
be applied on a modified retrospective basis to leases existing at, or entered into after, the beginning of the earliest comparative
period presented in the financial statements. The Company is currently evaluating the potential impact of this standard on its
financial position, but we do not expect a material impact on its results of operations and financial condition.
There
were other new accounting pronouncements issued by the FASB. Each of these pronouncements, as applicable, has been or will be
adopted by the Company. Management does not believe the adoption of any of these accounting pronouncements has had or will have
a material impact on the Company’s financial statements.
NOTE
3 - GOING CONCERN
The
accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United
States of America, assuming the Company will continue as a going concern, which contemplates the realization of assets and satisfaction
of liabilities in the normal course of business. For the years ended December 31, 2018 and 2017, the Company incurred losses from
operations of $1,296,638 and $930,911, respectively. The Company had a working capital deficit of $2,866,303 as
of December 31, 2018. These circumstances raise substantial doubt about the Company’s ability to continue as a going concern.
The Company’s ability to continue as a going concern is dependent on its ability to raise the additional capital to meet
short and long-term operating requirements. Management is continuing to pursue external financing alternatives to improve the
Company’s working capital position however additional financing may not be available upon acceptable terms, or at all. If
the Company is unable to obtain the necessary capital, the Company may have to cease operations.
NOTE
4 – PROPERTY AND EQUIPMENT, NET
Property
and equipment consisted of the following as of December 31, 2018 and 2017:
|
|
2018
|
|
|
2017
|
|
Furniture and equipment
|
|
$
|
271,817
|
|
|
$
|
271,817
|
|
Vehicles
|
|
|
189,012
|
|
|
|
189,012
|
|
Leasehold Improvements
|
|
|
66,077
|
|
|
|
66,077
|
|
Less: Accumulated
Depreciation
|
|
|
(321,955
|
)
|
|
|
(233,176
|
)
|
Property
and equipment, net
|
|
$
|
204,951
|
|
|
$
|
293,730
|
|
Depreciation
expenses totaled $88,779 and $79,428 for the years ended December 31, 2018 and 2017, respectively.
NOTE
5 - BORROWINGS
Vehicle
installment notes payable
The
Company’s vehicle installment notes payable consist of several installment notes for various vehicles used in the Company’s
operations. At December 31, 2018 and 2017, the notes have annual interest rates between 3.49% and 4.07% and require monthly minimum
payments of principal and interest ranging from $370 to $434. The Company’s installment notes are collateralized by the
vehicles purchased with the respective installment notes. The notes mature from November 2020 to August 2021. During the year
ended December 31, 2017, the Company sold one of the vehicles securing a note with a principal balance of $16,904, which was settled
as a result of the sale. As of December 31, 2018 and 2017, the balance of the notes totaled $60,667 and $86,652, respectively.
Convertible
notes payable
On
August 24, 2016, the Company issued two two-year unsecured convertible notes payable totaling $200,000 pursuant to a private placement
memorandum. The notes matured on August 24, 2018 and have an annual interest rate of 12.5%. At the election of the holder, upon
the occurrence of certain events, the notes can be converted into common stock of the Company at a conversion price per share
equal to 50% of the average bid price for the 30 consecutive business days prior to conversion. The conversion feature is contingent
upon i) the successful filing of a registration statement to become publicly traded, and ii) the company stock has become publicly
quoted on the OTC Markets and iii) the conversion price is above $0.10. In August 2018, the holders of the notes agreed to extend
the maturity date of the notes to December 31, 2018, in exchange for warrants to acquire 600,000 shares of common stock for an
exercise price of $0.31 per share, exercisable over three years. The Company estimated the fair value of the warrants, totaling
$16,401, using the Black Scholes Method and recorded an additional discount against the note to be amortized over the extended
term of the notes. The notes are carried at $182,184, net of unamortized discounts of $10,666 as of December 31, 2017. The notes
are carried at $196,850, with no remaining unamortized discount as of December 31, 2018. The notes are currently past due and
have not been converted.
On
August 24, 2017, in connection with the reverse merger, the Company assumed convertible notes with an aggregate principal balance
of $833,787. The notes automatically converted into 17,052,925 shares of common stock on October 3, 2017 upon the effective date
of the Company’s reverse split in accordance with the convertible note agreements. The notes had a maturity date of October
23, 2017.
In
April 2018, the Company issued convertible notes with an aggregate principal balance of $350,000, for net proceeds after issuance
costs which were recorded as a discount against the debt to be amortized into interest expense through the maturity of the notes,
of $281,660. The notes mature in April 2019, accrue interest at an annual rate of 10% and are convertible into common stock at
a conversion rate equal to the lesser of $0.05 and 60% times the lowest trading price of the Company’s common stock during
the 18 trading days prior to conversion. Because the conversion feature is indexed to the Company’s stock, and there is
an explicit cap to the total number of shares issuable upon conversion, the Company determine that the embedded conversion option
did not require bifurcation and liability presentation. The investors in the notes also received warrants to acquire an aggregate
of 6,349,457 shares of common stock for an exercise price of $0.11 per share, exercisable for 2 years. The Company estimated the
fair value of the warrants using the Black Scholes model and the following assumptions: volatility – 261.8% to 268.7%; expected
term – 2.0 years; dividend rate – 0.0%; risk free rate – 2.49%, and allocated $173,355 of the proceeds to the
warrants, which was recorded as a discount against the debt to be amortized into interest expense through the maturity of the
notes. Based on the allocation of proceeds to the debt, the Company determined there was a beneficial conversion feature totaling
$176,645, which was recorded as a discount against the debt to be amortized into interest expense through the maturity of the
notes. On November 13, 2018, the Company entered into agreements with the holders of the notes to extend the “Prepayment
Termination Date” to December 23, 2018, as defined in the respective Promissory Notes in exchange for the addition of $25,000
to the principal of the principal of each note, which was recorded as an additional discount against the note and amortized into
interest expense through the extended “Prepayment Termination Date”. During the year ended December 31, 2018, the
Company amortized $311,879 of the discounts. As of December 31, 2018, the notes are carried at $226,604, net of unamortized discounts
of $156,461.
Convertible
notes payable, related party
On
October 23, 2015, a total of $332,474 in advances from a related party was converted into two one-year unsecured convertible notes
payable to Nicholas Campanella, Chief Executive Officer of the Company. The notes have an annual interest rate of 6% and are currently
past due. At the election of the holder, the notes can be converted into common stock of the Company at a conversion price per
share equal to 20% of the average bid price for the three consecutive business days prior to conversion. As of December 31, 2018
and 2017, the balances of the notes totaled $332,474.
On
August 24, 2016, a total of $75,000 in advances from a related party was converted into a two-year unsecured convertible note
payable to Nicholas Campanella, Chief Executive Officer of the Company, pursuant to a private placement memorandum. The note matured
on August 24, 2018, has an annual interest rate of 12.5% and is due at maturity. At the election of the holder, upon the occurrence
of certain events, the note can be converted into common stock of the Company at a conversion price per share equal to 50% of
the average bid price for the 30 consecutive business days prior to conversion. The conversion feature is contingent upon i) the
successful filing of a registration statement to become publicly traded, and ii) the company stock has become publicly quoted
on the OTC Markets and iii) the conversion price is above $0.10. In connection with this note, the Company issued 75,000 shares
of Series B preferred stock, as further described in Note 6. As of December 31, 2018 and 2017, the balance of the notes was $75,000.
The notes are carried at $76,500 and $71,000, net of unamortized discounts of $0 and $4,000 as of December 31, 2018 and 2017,
respectively.
Project
Financing Obligation
In
June 2018, the Company received proceeds of $260,000 pursuant to a partnership agreement and related partnership contribution
agreements with third party investors, pursuant which investors have agreed to provide financing for no less than (10) ten new
bus shelters being installed annually. Each investment in the partnership grants the investor the right to preferential distributions
of profits related to the Company’s contract with Rhode Island. The investors receive 100% of the profits from the Rhode
Island contract to install 20 bus shelters until 100% of the initial investments are returned. Thereafter, the investors receive
20% of the remaining profits from Rhode Island contract. As of December 31, 2018, no profits have been earned on the Rhode Island
contract, no repayments have ocurred and the total amount of investments received totaling $260,00 is reflected on the accompanying
consolidated balance sheet as a Project Financing Obligation.
Line
of credit, related party
On
October 23, 2015, the Company entered into a line of credit agreement with Nicholas Campanella, Chief Executive Office of the
Company, for a total value of $250,000. The line of credit does not bear an interest rate and is payable on demand. As of December
31, 2018 and 2017, the balance of the debt to related party was $161,630 and $138,124, respectively.
The
Company’s estimated future maturities of the Company’s debt, as of December 31, 2018, are as follows:
Year
ending December 31,
|
|
Amount
|
|
2019
|
|
$
|
1,148,991
|
|
2020
|
|
|
23,894
|
|
2021
|
|
|
13,300
|
|
Thereafter
|
|
|
-
|
|
|
|
$
|
1,186,185
|
|
NOTE
6 - PREFERRED STOCK AND COMMON STOCK
Preferred
stock
The
Company is authorized to issue 20,000,000 shares of $0.0001 par value preferred stock. As of December 31, 2018 and 2017, the Company
has designated 12,000,000 shares of Series A Preferred Stock, 1,000,000 shares of Series B Convertible Preferred Stock, and 500,000
shares of Series C Convertible Stock.
Series
A Preferred Stock
- Each share of Series A Preferred Stock is entitled to 125 votes on all matters submitted to a vote
to the stockholders of the Company, and does not have conversion, dividend or distribution upon liquidation rights. In connection
with the reverse merger, all of the outstanding shares of Series A Preferred Stock, totaling 2,000,000 shares were cancelled.
In
October 2017, the Company issued 12,000,000 shares of Series A preferred stock and 1,250,000 shares of common stock to its chief
executive officer in settlement of $107,307 of accrued salary. The Company estimated the fair value of the Series A Preferred
stock based on control premiums reported in empirical studies for transactions involving similar entities and estimated the fair
value of the common stock based on the publicly quoted trading price on the date of settlement. The fair value of the preferred
stock was estimated to be approximately $963,000 and the fair value of the common stock was estimated to be approximately $300,000,
resulting in a loss on settlement of accrued salary of $1,155,767.
Series
B Preferred Stock
- In connection with the reverse merger, the Company issued 2,000,000 shares of Series B Preferred Stock.
Each share of Series B Preferred Stock automatically converted into 30.8565 shares of common stock after giving effect to the
reverse stock split that occurred on October 3, 2017. Holders of Series B Preferred Stock is entitled to vote and receive distributions
upon liquidation with common stockholders on an as-if converted basis.
Series
C Preferred Stock
- In connection with the reverse merger, the Company issued 275,000 shares of Series C Preferred Stock.
Holders of Series C Preferred Stock are not entitled to voting rights or preferential rights upon liquidation. Each share of Series
C Preferred Stock shall pay an annual dividend in the amount of $0.125 per year, for a total of $0.25, over an eighteen (18) month
term, from the date of issuance (the “Commencement Date”). Dividend payments shall be payable as follows: (i) dividend
in the amount of $0.0625 per share of Series C Preferred Stock at the end of each of the third quarter and fourth quarter of the
first twelve (12) months of the twenty-four (24) month period after the Commencement Date; and (ii) dividend in the amount of
$0.03125 per share of Series C Preferred Stock at the end of each of the four quarters of the second twelve (12) months of the
twenty-four (24) month period after the Commencement Date. The source of payment of the dividends will be derived from up to thirty-five
percent (35%) of net revenues (“Net Revenues”) from the Street Furniture Division of the Corporation following the
seventh (7th) month after the Commencement Date. To the extent the amount derived from the Net Revenues of the Street Furniture
Division is insufficient to pay dividends of Series C Preferred Stock, if a sufficient amount is available, the next quarterly
payment date the funds will first pay dividends of Series C Preferred Stock past due. At the conclusion of twenty-four months
after the Commencement Date, and upon the payment of all dividends due and owing on said Series C Preferred Stock, the Series
C Preferred Stock shall automatically be redeemed by the Corporation and returned to the Corporation for cancellation, as unissued,
non-designated, preferred shares. During the years ended December 31, 2018 and 2017, the Company recorded dividend expense of
$22,917 and $34,375, respectively, of which $18,913 is reflected as dividends payable, related party on the accompanying
consolidated balance sheet as of December 31, 2018. The series C preferred stock were redeemed during the year ended December
31, 2018.
Common
stock
In
January 2017, the Company issued 4,500,000 shares of common stock in settlement of $450,000 due to an affiliate, which was reclassified
into additional paid in capital.
In
January 2017, the Company issued 160,000 shares of the Company’s common stock as compensation for services rendered related
to a private placement memorandum dated August 26, 2016.
On
August 24, 2017, in connection with the reverse merger, the Company issued 289,835,550 shares of common stock to the previous
stockholders of the Company.
During
the year ended December 31, 2017, the Company sold 2,433,665 shares of common stock for net proceeds of $501,233.
On
August 24, 2017, in connection with the reverse merger, the Company assumed convertible notes with an aggregate principal balance
of $833,787. The notes automatically converted into 17,052,925 shares of common stock on October 3, 2017 upon the effective date
of the Company’s reverse split in accordance with the convertible note agreements.
In
connection with the reverse merger, the Company issued 2,000,000 shares of Series B Preferred Stock. The Series B Preferred Stock
automatically converted into 30,856,553 shares of common stock after giving effect to the reverse stock split that occurred on
October 3, 2017.
In
October 2017, the Company issued 12,000,000 shares of Series A preferred stock and 1,250,000 shares of common stock to its chief
executive officer in settlement of $107,307 of accrued salary. The Company estimated the fair value of the Series A Preferred
stock based on control premium reported in empirical studies for transactions involving similar entities and estimated the fair
value of the common stock based on the publicly quoted trading price on the date of settlement. The fair value of the preferred
stock was estimated to be approximately $963,000 and the fair value of the common stock was estimated to be approximately $300,000,
resulting in a loss on settlement of accrued salary of $1,155,767.
During
the year end December 31, 2017, the Company issued 121,683 shares of common stock for services. The shares had a grant date fair
value of $24,337 based on prices obtained in recent sales in private placements.
During
the year end December 31, 2017, the Company issued 63,248 shares of common stock in settlement of debt in the amount of $3,092
and recognized a loss on settlement of debt of $12,650.
During
the year end December 31, 2018, the Company sold 1,230,00 shares of common stock for cash of $173,000.
During
the year end December 31, 2018, the Company issued 668,324 shares of common stock for services rendered with a fair value of $84,209,
based on the trading price of the common stock on the date of grant.
During
the year end December 31, 2018, the Company issued 4,170,000 shares of common stock, upon the conversion of principal and interest
on convertible notes totaling $16,935, pursuant to the terms of the convertible note.
Warrants
In
September 2017, the Company agreed to issue a warrant to purchase 20,000 shares of common stock for an aggregate exercise price
of $10.00 as consideration for consulting services to be provided from October 2017 through March 2018. The Company estimated
the fair value of the warrants, $7,000 and recognized $1,167 of expense during the year ended December 31, 2017 based on the portion
of the contract period that had expired and the remaining $5,833 during the year end December 31, 2018.
In
October 2017, the Company issued warrants to acquire 100,000 shares of common stock at an exercise price of $0.10 per share and
900,000 shares of common stock at an exercise price of $45.00 per share, exercisable over 10 years, for services to be rendered
over a six-month period. The Company re-measured the warrants as of December 31, 2017, and estimated the fair value of $261,282,
of which $130,641 was expensed during each of the years ended December 31, 2018 and 2017.
The
fair value of the warrants was estimated using the Black Scholes Method and the following assumptions: volatility – 150%
- 245%; risk free rate 1.00% to 1.98%; expected term – 2.8 years to 10 years.
NOTE
7 - COMMITMENTS AND CONTINGENCIES
Employment
agreement
On
December 20, 2014, the Company entered into a five-year employment agreement with Nicholas Campanella, Chief Executive Officer.
Under the terms of the agreement, the Company is required to pay a base compensation of $180,000 annually, subject to increases
in cost of living and performance bonuses as awarded by the Board of Directors. After 5 years, the agreement is automatically
renewed for an additional two years unless terminated by either party. As part of the agreement Mr. Campanella opted to defer,
with no interest, the receipt of compensation under the agreement until the Company has the funds to pay its obligation. In October
2017, the Company issued 12,000,000 shares of series A preferred stock and 1,250,000 shares of common stock to its chief executive
officer in settlement of $107,307 of accrued salary. At December 31, 2018 and December 31, 2017, the Company had accrued compensation
of $631,166 and $451,166, respectively, and recorded the related expenses in ‘general and administrative’ on the accompanying
condensed consolidated statements of operations.
Lease
agreement
During
March 2017, the Company entered into a five-year lease agreement. Under the terms of the agreement, the Company is obligated to
pay monthly rent payments starting at $3,556 and escalating over the life of the lease. Rent expense for the years ended December
31, 2018 and 2017 was $39,297 and $88,865, respectively. Future minimum rental payments under this agreement are as follows:
Year
ending December 31,
|
|
Amount
|
|
2019
|
|
$
|
44,648
|
|
2020
|
|
|
45,764
|
|
2021
|
|
|
46,908
|
|
2022
|
|
|
7,850
|
|
|
|
$
|
145,170
|
|
Significant
customers
For
the years ended December 31, 2018 and 2017, the Company had the following customer concentrations:
|
|
Percentage
of Revenues
|
|
|
Accounts Receivable as
of
|
|
|
|
2018
|
|
|
2017
|
|
|
December
31, 2018
|
|
Customer A
|
|
|
*
|
|
|
|
32
|
%
|
|
|
-
|
|
Customer B
|
|
|
42
|
%
|
|
|
29
|
%
|
|
$
|
12,698
|
|
Customer C
|
|
|
*
|
|
|
|
13
|
%
|
|
|
-
|
|
Customer D
|
|
|
*
|
|
|
|
*
|
|
|
$
|
49,000
|
|
Legal
Matters
From
time to time, claims are made against the Company in the ordinary course of business, which could result in litigation. Claims
and associated litigation are subject to inherent uncertainties and unfavorable outcomes could occur, such as monetary damages,
fines, penalties or injunctions prohibiting the Company from selling one or more products or engaging in other activities. The
occurrence of an unfavorable outcome in any specific period could have a material adverse effect on the Company’s results
of operations for that period or future periods. The Company is not presently a party to any pending or threatened legal proceedings.
NOTE
8 - RELATED PARTY TRANSACTIONS
Shareholder
advances
For
purposes of these consolidated financial statements, Summit Trading Limited, Zimmerman LLC, the Campanella family, Jody Samuels,
Frank Capria, and Triplet Square LLC are considered related parties due to their beneficial ownership (shareholdings or voting
rights) in excess of 5%, or their affiliate status, during the years ended December 31, 2018 and 2017. During the years ended
December 31, 2018 and 2017, the affiliates made non-interest bearing advances of $23,506 and $321,127, respectively. The balance
of these advances, which are due on demand and include the Line of Credit (See Note 5), totaled $612,023 and $588,517 as of December
31, 2018 and 2017, respectively. Included in accounts payable related parties as of December 31, 2018 and 2017, are expenses incurred
with these affiliates totaling $91,512 and $85,012, respectively.
Management
fees paid with common stock
During
the year ended December 31, 2016, the Company incurred expenses with management and affiliates totaling $450,000 for services
provided to the Company. On January 5, 2017, the Company issued 4,500,000 shares of the Company’s common stock to settle
the liability.
NOTE
9
–
INCOME TAXES
The
Company accounts for income taxes in accordance with ASC 740 which prescribes a recognition threshold and measurement process
for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. ASC 740 also
provides guidance on de-recognition, classification, interest and penalties, accounting in interim period, disclosure and transition.
There were no unrecognized tax benefits as of December 31, 2018 and 2017.
The
following table summarizes the significant differences between the U.S. Federal statutory tax rate and the Company’s effective
tax rate for financial statement purposes for the years ended December 31, 2018 and 2017:
|
|
2018
|
|
|
2017
|
|
U.S. Federal Statutory Tax
Rate
|
|
|
21.00
|
%
|
|
|
34.00
|
%
|
State taxes
|
|
|
5.53
|
%
|
|
|
4.62
|
%
|
Permanent items
|
|
|
-
|
%
|
|
|
(47.22
|
)%
|
Chane in future tax rates
|
|
|
-
|
%
|
|
|
(6.58
|
)%
|
Change in valuation
allowance
|
|
|
(26.53
|
)%
|
|
|
15.17
|
%
|
Totals
|
|
|
0.00
|
%
|
|
|
0.00
|
%
|
The
tax effects of temporary differences that give rise to deferred tax assets and liabilities as of December 31, 2018 and 2017 are
summarized as follows:
|
|
2018
|
|
|
2017
|
|
Deferred Tax Assets:
|
|
|
|
|
|
|
|
|
Net operating loss carry-forwards
|
|
$
|
1,368,000
|
|
|
$
|
695,000
|
|
Accrued expenses
|
|
|
168,000
|
|
|
|
120,000
|
|
Total deferred tax
assets
|
|
|
1,536,000
|
|
|
|
815,000
|
|
Less:
Valuation allowance
|
|
|
(1,536,000
|
)
|
|
|
(815,000
|
)
|
Total
deferred tax assets and liabilities, net
|
|
$
|
—
|
|
|
$
|
—
|
|
As
of December 31, 2018, the Company has available net operating loss carry forwards of approximately $5.2 million which begin
to expire in 2036.
The
Company assesses the recoverability of its net operating loss carry forwards and other deferred tax assets and records a valuation
allowance to the extent recoverability does not satisfy the “more likely than not” recognition criteria. The Company
continues to maintain the valuation allowance until sufficient positive evidence exists to support full or partial reversal. As
of December 31, 2018 the Company had a valuation allowance totaling $1,536,000 against its deferred tax assets due
to insufficient positive evidence, primarily consisting of losses within the taxing jurisdictions that have tax attributes and
deferred tax assets.
On
December 22, 2017, Tax Cuts and Jobs Act (the “Act”) was signed into law. The Act decreases the U.S. corporate federal
income tax rate from a maximum of 35% to a flat 21% effective January 1, 2018. The impact of the re-measurement on the Corporation’s
net deferred tax asset, as of December 31, 2017, was an approximately $31,000 decrease in deferred tax assets, with a corresponding
decrease in the Company’s valuation allowance, and no impact on income tax expense. The Act also includes a number of other
provisions including, among others, the elimination of net operating loss carrybacks and limitations on the use of future losses,
the repeal of the Alternative Minimum Tax regime and the repeal of the domestic production activities deduction. These provisions
are not expected to have a material effect on the Corporation.
Given
the significant complexity of the Act and anticipated additional implementation guidance from the Internal Revenue Service, further
implications of the Act may be identified in future periods.
NOTE
10
–
SUBSEQUENT EVENTS
In
January 11, 2019, the Company entered into that certain Forbearance Agreement between the Company and Nicholas Campanella. Mr.
Campanella is owed approximately $648,400 in principal and interest on loans and lines of credit issued by the Company. Those
debt obligations are currently in default. As consideration for the forbearance of those debts, the Company has agreed to provide
a pledge of 100% membership interest in MedRecycler, LLC, and wholly owned subsidiary of the Company organized in the state of
Nevada which holds 51,000 shares of MedRecycler-RI, Inc. as security against the moneys owed. The amounts owed to Mr. Campanella
date back nearly five years and represent cash payments made by Mr. Campanella to Sun Pacific Power Corp. On April 3, 2019, Mr.
Campanella agreed to extend the forbearance until December 31, 2020.
In
order to secure financing for the MedRecycler-RI, Inc. West Warrick, Rhode Island waste to energy facility, Mr. Campanella agreed
that upon initial financing of the project, he shall pledge substantially all of his holdings in the Company, assign his pledges
in MedRecycler, LLC, and certain properties held by Mr. Campanella, personally, in order to collateralize the debt obligations.
As consideration for his inducement, the Board of Directors has deemed it fair consideration to issue Mr. Campanella 39,000 shares
of MedRecycler-RI, Inc. In addition, MedRecycler-RI, Inc. has engaged the services of Marmac Capital Advisors, LLC and Eilers
Law Group, P.A. to oversee, negotiate and to facility the financing and capital structure MedRecycler-RI, Inc. As neither party
has received compensation for their services for the Company or MedRecycler-RI, Inc. since August of 2018, the Board of Directors
has deemed it fair consideration to issue Marmac Capital Advisors, LLC and Eilers Law Group, P.A. 8,000 and 2,000 shares of MedRecycler-RI,
Inc., respectively. As a result, the Company shall maintain 51% of the ownership of MedRecycler-RI, Inc. through its MedRcycler,
LLC holdings.
On
February 7, 2019, pursuant to an Indenture of Trust entered into by our subsidiary, MedRecycler-RI, Inc., a Rhode Island corporation
and UMB Bank, N.A., a national banking association (“UMB”) (the “Indenture”), Sun Pacific Holding Corp.
(the “Company”) entered into that certain Guarantee of Payment and Performance with UMB acting as Trustee, whereby
the Company agreed to guarantee any and all payments and/or other obligations owed by MedRecycler-RI, Inc. pursuant to the Indenture.
In
order to secure the financing described herein, Mr. Campanella, Marmac Capital Advisors, LLC and Eilers Law Group, P.A. have further
agreed to pledge, upon funding, 100% of their ownership in MedRecycler-RI, Inc. as well as Mr. Campanella’s assignment of
his pledge from the Company of 100% of the membership interests of MedRecycler, LLC. As a result, 100% of MedRecycler-RI, Inc.
will be pledged, upon funding, to the lending party as security for the note and/or bond.
Under
the terms of the Indenture, MedRecycler-RI, Inc. issued a promissory note in the amount of $6,025,000.00 as bridge financing for
the initial buildout and payment for the purchase of certain equipment and other costs related to a waste to energy facility in
the state of Rhode Island (the “Note”). The Note is generally secured by all assets of MedRecycler-RI, Inc. as well
as certain pledges, guarantees, and other collateral made by MedRecycler-RI, Inc. and affiliates of the Company, including the
Guarantee of Payment and Performance disclosed herein. The Note matures on January 29, 2020. Interest payments are generally prepaid
in a segregated account coming due July 29, 2019 and January 29, 2020. The intent is to have the Note paid down with larger long-term
financing through a separate indenture of trust for approximately $14,500,000. We assume that any replacement long-term financing
shall also require, at a minimum, the same pledges, guarantees, and other collateral.
In
the event that additional financing is not secured, the Trustee will likely foreclose upon the pledges and other interests and
assume control of the Company.
As
of today, the transaction described above only exacerbates the insolvency of the Company. We cannot ensure that we will avoid
bankruptcy even with the success of the Rhode Island Project as we do not foresee any cashflows that can be allocated for maintain
operations of the Company.
53,140,000
shares issued for principal & interest on conv. notes totaling $94,696
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