Notes to Condensed
Consolidated Financial Statements (unaudited)
March
31, 2019 and 2018
1.
Basis of Presentation
The
accompanying unaudited financial statements of Water Now, Inc. and subsidiary (collectively, the “Company”) have been
prepared in accordance with the rules and regulations of the Securities and Exchange Commission, or the SEC, including the instructions
to Regulation S-X. Certain information and note disclosures normally included in financial statements prepared in accordance with
generally accepted accounting principles in the United States of America have been or omitted from these statements pursuant to
such rules and regulations and, accordingly, they do not include all the information and notes necessary for comprehensive financial
statements and should be read in conjunction with our audited financial statements for the year ended December 31, 2018.
In the
opinion of the management of the Company, all adjustments, which are of a normal recurring nature, necessary for a fair statement
of the results for the three-month period have been made. Results for the interim period presented are not necessarily indicative
of the results that might be expected for the entire fiscal year. When used in these notes, the terms “Company”, “we”,
“us” or “our” mean Water Now, Inc. and subsidiary.
Certain
amounts in our Condensed Consolidated Statement of Operations for the period ended March 31, 2018 have been reclassified to conform
with the current period presentation.
Recently
Adopted Accounting Pronouncements
Effective
January 1, 2019, we adopted the Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”)
2016-02,
Leases
, which requires the recognition of lease assets and lease liabilities by lessees for those leases
classified as operating leases under previous guidance. The original guidance required application on a modified retrospective
basis with the earliest period presented. In August 2018, the FASB issued ASU 2018-11,
Targeted Improvements to ASC 842
,
which included an option to not restate comparative periods in transition and elect to use the effective date of ASC 842,
Leases
,
as the date of initial application of transition, which we elected. As a result of the adoption of ASC 842 on January 1, 2019,
we recorded both operating lease right-of-use (“ROU”) assets of $159,433 and lease liabilities of $154,518.
The adoption of ASC 842 had an immaterial impact on our Condensed Consolidated Statement of Operations and Condensed Consolidated
Statement of Cash Flows for the three-month period ended March 31, 2019. In addition, we elected the package of practical expedients
permitted under the transition guidance within the new standard which allowed us to carry forward the historical lease classification.
Additional
information and disclosures required by this new standard are contained in Note 9.
2.
Going Concern
At March 31,
2019, the Company had approximately $66,000 in cash and had net working capital deficit of approximately $593,000. The Company,
which generated a net loss of approximately $1,596,000 and $818,000 for the three months ended March 31, 2019 and 2018, respectively,
may not have sufficient cash to fund its current and future operations. There is no assurance that future operations will result
in profitability. No assurance can be given that management will be successful in its efforts to raise additional capital. The
failure to raise additional capital needed to achieve its business plans will have a material adverse effect on the Company’s
financial position, results of operations, and ability to continue as a going concern.
3. Distributorship
Agreement
On October 31,
2018, the Company entered into an Exclusive Sales Distribution Agreement (the “Agreement”) with African Horizon Technologies
(Pty) Ltd (“AHT”) whereby the Company serves as AHT’s exclusive distributor of the Hydraspin Hydro Cyclone technology
in the United States of America. The Company is obligated
to pay AHT $500,000
and issue AHT 500,000 shares valued at $250,000 based on the closing price of the Company’s shares of $0.50 on the date
of the Agreement. In addition, the Company will issue AHT 500,000 shares at the earlier of 24 months from the commencement date
of the Agreement or the sale of 50 units to the Company. The Company will also pay AHT a royalty of 2% of total net profits generated
by the Company from the sale of oil generated using the Hydraspin units. The term of the Agreement is for five years with an automatic
renewal term of five years unless terminated prior to the expiration of the current term. The Company recorded the value of the
Agreement of $1,000,000 as an other asset and is amortizing the asset to expense over the life of the Agreement of five years.
As of March 31, 2019, $500,000 was paid and the remaining 500,000 shares to be issued is included as an accrued expense.
4.
Notes Payable – Stockholders
The Company
borrowed $200,000 and $100,000 from two stockholders on March 25, 2019. The notes bear interest at 18% and are payable beginning
on April 25, 2019, at which time the entire amount of principal and any accrued interest is due and payable. The notes are unsecured,
and the $200,000 note is guaranteed by the Company’s Chief Executive Officer. Subsequent to March 31, 2019, the Company
paid $100,000 on these notes and $200,000 remains outstanding.
5.
Convertible Notes Payable
The Company
borrowed $68,000 from a lender on September 4, 2018. The note bears interest at 8% and matures on September 4, 2019, at which
time the entire amount of principal and accrued interest is due and payable. The note is unsecured. The outstanding principal
and interest amount is convertible by the holder into shares of the Company’s common stock beginning 170 days after the
issuance date and prior to the maturity date at a price per share equal to sixty-five percent of the average of the lowest two
trading prices of the Company’s common stock for the twenty trading days prior to the conversion date. The value of the
embedded beneficial conversion feature on the note payable was estimated to be $39,748. In addition, the Company paid $2,500 for
debt issuance costs. This note was paid in full on January 3, 2019 and the Company recorded a gain on extinguishment of this debt
of $14,351.
The Company
borrowed $200,000 from a lender on September 17, 2018. The note does not bear interest and matures September 17, 2021, at which
time the entire amount of principal is due and payable. The note is unsecured. The outstanding principal amount is convertible
by the holder into shares of the Company’s common stock at any time prior to the maturity date at a price per share equal
to $0.75 per share if before 180 days after the issuance date, or if 180 days after the issuance date, the lesser of $0.75 per
share or seventy percent of the second lowest trading price of the Company’s common stock for the twenty trading days prior
to the conversion date. The value of the embedded beneficial conversion feature on the note payable was estimated to be $37,333.
In addition, the Company granted 60,000 shares of the Company’s common stock valued at $53,400 based on the Company’s
share price on the date of the note agreement, paid $34,400 as a discount for interest on the note, and paid $5,000 for debt issuance
costs. For the period ended March 31, 2019, the Company recorded $86,370 of interest expense related to the value of the embedded
beneficial conversion feature and debt issuance costs. This note was paid in full on March 25, 2019 and the Company recorded a
loss on extinguishment of this debt of $31,111.
The Company
borrowed $100,000 from a shareholder on August 30, 2018. The note bears interest at 10% and is payable in one lump sum on March
4, 2019, at which time the entire amount of principal and accrued interest is due and payable. The note is unsecured. The outstanding
principal and interest amount is convertible by the holder into shares of the Company’s common stock at any time prior to
the maturity date at the conversion price of $0.50 per share. The value of the embedded beneficial conversion feature
on the note payable was estimated to be $72,000. For the period ended March 31, 2019, the Company recorded $26,557
of interest expense related to the value of the embedded beneficial conversion feature. This note was converted into 200,000 shares
of the Company’s common stock on March 28, 2019.
The Company
borrowed $42,500 from a lender on October 15, 2018. The note bears interest at 8% and is payable in one lump sum on October 15,
2019, at which time the entire amount of principal and accrued interest is due and payable. The note is unsecured. The outstanding
principal and interest amount is convertible by the holder into
shares of the
Company’s common stock beginning 170 days after the issuance date and prior to the maturity date at a price per share equal
to sixty-five percent of the average of the lowest two trading prices of the Company’s common stock for the twenty trading
days prior to the conversion date. The value of the embedded beneficial conversion feature on the note payable was estimated to
be $24,160. In addition, the Company paid $2,500 for debt issuance costs. For the period ended March 31, 2019, the Company recorded
$21,745 of interest expense related to the value of the embedded beneficial conversion feature and debt issuance costs. This note
was paid in full on March 26, 2019 and the Company recorded a loss on extinguishment of this debt of $4,803.
The Company
borrowed $86,500 from a lender on January 2, 2019. The note bears interest at 8% and is payable in one lump sum on January 2,
2020, at which time the entire amount of principal and accrued interest is due and payable. The note is unsecured. The outstanding
principal and interest amount is convertible by the holder into shares of the Company’s common stock beginning 180 days
after the issuance date and prior to the maturity date at a price per share equal to sixty-five percent of the average of the
lowest two trading prices of the Company’s common stock for the twenty trading days prior to the conversion date. The principal
balance at March 31, 2019 is $86,500. The interest expense incurred on the note payable was approximately $1,730 for the period
ended March 31, 2019. The value of the embedded beneficial conversion feature on the note payable was estimated to be $72,334.
In addition, the Company paid $2,500 for debt issuance costs. For the period ended March 31, 2019, the Company recorded $18,709
of interest expense related to the value of the embedded beneficial conversion feature and debt issuance costs.
The Company
borrowed $102,500 from a lender on February 14, 2019. The note bears interest at 8% and is payable in one lump sum on February
14, 2020, at which time the entire amount of principal and accrued interest is due and payable. The note is unsecured. The outstanding
principal and interest amount is convertible by the holder into shares of the Company’s common stock beginning 180 days
after the issuance date and prior to the maturity date at a price per share equal to sixty-five percent of the average of the
lowest two trading prices of the Company’s common stock for the twenty trading days prior to the conversion date. The principal
balance at March 31, 2019 is $102,500. The interest expense incurred on the note payable was approximately $1,025 for the period
ended March 31, 2019. The value of the embedded beneficial conversion feature on the note payable was estimated to be $102,500.
In addition, the Company paid $2,500 for debt issuance costs. For the period ended March 31, 2019, the Company recorded $13,125
of interest expense related to the value of the embedded beneficial conversion feature and debt issuance costs.
The Company
borrowed $100,000 from a lender on February 20, 2019. The note bears interest at 10%, and is payable in one lump sum on February
20, 2020, at which time the entire amount of principal and accrued interest is due and payable. The note is unsecured. The outstanding
principal amount is convertible by the holder into shares of the Company’s common stock beginning six months after the issuance
date and prior to the maturity date at a price per share equal to sixty percent of the lowest trading price of the Company’s
common stock for the fifteen trading days prior to the conversion date. The principal balance at March 31, 2019 is $100,000. The
interest expense incurred on the note payable was approximately $1,250 for the period ended March 31, 2019. The value of the embedded
beneficial conversion feature on the note payable was estimated to be $100,000. In addition, the Company paid $5,000 for debt
issuance costs. For the period ended March 31, 2019, the Company recorded $13,071 of interest expense related to the value of
the embedded beneficial conversion feature and debt issuance costs.
The Company
borrowed $560,000 from a lender on February 21, 2019. The note bears interest at 12% and is payable in one lump sum on August
21, 2019, at which time the entire amount of principal and accrued interest is due and payable. The note is unsecured. The outstanding
principal and interest amount is convertible by the holder into shares of the Company’s common stock beginning 180 days
after the issuance date and prior to the maturity date at a price per share equal to sixty-five percent of the second lowest trade
price of the Company’s common stock for the twenty trading days prior to the conversion date. The principal balance at March
31, 2019 is $560,000. The interest expense incurred on the note payable was approximately $8,400 for the period ended March 31,
2019. The value of the embedded beneficial conversion feature on the note payable was estimated to be $560,000. In addition, the
Company granted the lender 450,000 shares of the Company’s common stock, paid $56,000 as a discount on the note, and paid
$4,000 for debt issuance costs. The shares granted must be returned if the note is fully repaid and satisfied prior to 180 days
after the issuance date. The Company recorded the value of the shares
at $400,455,
based on the Company’s share price on the date of the note agreement, as prepaid interest. For the period ended March 31,
2019, the Company recorded $155,000 of interest expense related to the value of the embedded beneficial conversion feature and
debt issuance costs.
The Company
borrowed $42,500 from a lender on March 11, 2019. The note bears interest at 8% and is payable in one lump sum on March 11, 2020,
at which time the entire amount of principal and accrued interest is due and payable. The note is unsecured. The outstanding principal
and interest amount is convertible by the holder into shares of the Company’s common stock beginning 180 days after the
issuance date and prior to the maturity date at a price per share equal to sixty-five percent of the average of the lowest two
trading prices of the Company’s common stock for the twenty trading days prior to the conversion date. The principal balance
at March 31, 2019 is $42,500. The interest expense incurred on the note payable was approximately $142 for the period ended March
31, 2019. The value of the embedded beneficial conversion feature on the note payable was estimated to be $31,556. In addition,
the Company paid $2,500 for debt issuance costs. For the period ended March 31, 2019, the Company recorded $1,419 of interest
expense related to the value of the embedded beneficial conversion feature and debt issuance costs.
The Company
borrowed $150,000 from a lender on March 18, 2019. The note bears interest at 12% and is payable in one lump sum on September
18, 2019, at which time the entire amount of principal and accrued interest is due and payable. The note is unsecured. The outstanding
principal and interest amount is convertible by the holder into shares of the Company’s common stock beginning 180 days
after the issuance date and prior to the maturity date at a price per share equal to sixty-five percent of the second lowest trade
price of the Company’s common stock for the twenty trading days prior to the conversion date. The principal balance at March
31, 2019 is $150,000. The interest expense incurred on the note payable was approximately $750 for the period ended March 31,
2019. The value of the embedded beneficial conversion feature on the note payable was estimated to be $93,077. In addition, the
Company granted 115,384 shares of the Company’s common stock and paid $15,000 as a discount on the note. The shares granted
must be returned if the note is fully repaid and satisfied prior to 180 days after the issuance date. The Company recorded the
value of the shares at $91,153, based on the Company’s share price on the date of the note agreement, as prepaid interest.
For the period ended March 31, 2019, the Company recorded $9,256 of interest expense related to the value of the embedded beneficial
conversion feature and debt issuance costs.
6.
Advances From Related Parties
The
Company has received non-interest bearing advances without a specified maturity date from certain stockholders of the Company.
The Company owed approximately $42,000 and $302,000, respectively, at March 31, 2019 and December 31, 2018 to the stockholders.
7. Revenue
Sharing Agreements
The Company
borrowed $50,000 from a lender on November 29, 2018, whereby the proceeds are to be used to purchase a certain HydraSpin unit
in exchange for the lender to receive five percent of the revenues net of costs generated from the HydraSpin unit. On March 3,
2019, the Company cancelled this original agreement and entered into a new agreement whereby the lender is to receive fifty percent
of the revenues net of costs and has guaranteed that the lender would receive $150,000 in net revenues by March 3, 2021, or the
Company would pay the lender the difference between the $150,000 and the purchase price of $50,000 on or before March 31, 2021.
For the period ended March 31, 2019, the Company recorded $12,500 of interest expense related to the value of the revenue sharing
liability. The agreement remains in full force and effect until the earlier of (a) the Company is unable to satisfy its obligations
under the terms of the agreement and action is brought by the lender to enforce same, (b) the expiration of the operating life
of the unit, as confirmed by the manufacturer (five years), or (c) the mutual written agreement of the parties.
The Company
borrowed $264,000 from a lender on December 13, 2018, whereby the proceeds are to be used to purchase certain HydraSpin units.
On February 27, 2019, the Company cancelled this original agreement and entered into a new agreement to borrow an additional $66,000,
whereby the proceeds were used to purchase a certain HydraSpin unit in exchange for the lender to receive fifty percent of the
revenues net of costs generated from the HydraSpin unit. The Company has guaranteed that the lender would receive $495,000 in
net revenues by
March 3, 2021,
or the Company would pay the lender the difference between the $495,000 and the purchase price of $330,000 on or before March
31, 2021. For the period ended March 31, 2019, the Company recorded $1,375 of interest expense related to the value of the revenue
sharing liability. The agreement remains in full force and effect until the earlier of (a) the Company is unable to satisfy its
obligations under the terms of the agreement and action is brought by the lender to enforce same, (b) the expiration of the operating
life of the unit, as confirmed by the manufacturer (five years), or (c) the mutual written agreement of the parties.
The Company
borrowed $660,000 from a lender on January 2, 2019, whereby the proceeds were used to purchase certain HydraSpin units in exchange
for the lender to receive fifty percent of the revenues net of costs generated from the HydraSpin units. The Company has guaranteed
that the lender would receive $990,000 in net revenues by January 2, 2021, or the Company would pay the lender the difference
between the $990,000 and the purchase price of $660,000 on or before January 15, 2021. For the period ended March 31, 2019, the
Company recorded $41,250 of interest expense related to the value of the revenue sharing liability. The agreement remains in full
force and effect until the earlier of (a) the Company is unable to satisfy its obligations under the terms of the agreement and
action is brought by the lender to enforce same, (b) the expiration of the operating life of the units, as confirmed by the manufacturer
(five years), or (c) the mutual written agreement of the parties.
The Company
borrowed $660,000 from a lender on January 16, 2019, whereby the proceeds were used to purchase certain HydraSpin units in exchange
for the lender to receive fifty percent of the revenues net of costs generated from the HydraSpin units. The Company has guaranteed
that the lender would receive $990,000 in net revenues by January 15, 2021, or the Company would pay the lender the difference
between the $990,000 and the purchase price of $660,000 on or before January 17, 2021. For the period ended March 31, 2019, the
Company recorded $34,375 of interest expense related to the value of the revenue sharing liability. The agreement remains in full
force and effect until the earlier of (a) the Company is unable to satisfy its obligations under the terms of the agreement and
action is brought by the lender to enforce same, (b) the expiration of the operating life of the units, as confirmed by the manufacturer
(five years), or (c) the mutual written agreement of the parties.
The Company
borrowed $330,000 from a lender on January 30, 2019, whereby the proceeds were used to purchase a certain HydraSpin unit in exchange
for the lender to receive sixty percent of the revenues net of forty percent of costs generated from the HydraSpin unit until
the lender receives revenue equal to 120% of the $330,000 investment, then the lender shall receive fifty percent of the revenues
net of costs generated from the HydraSpin unit. The Company has guaranteed that the lender would receive $495,000 in net revenues
by January 30, 2021, or the Company would pay the lender the difference between the $495,000 and the purchase price of $330,000
on or before February 6, 2021. For the period ended March 31, 2019, the Company recorded $13,750 of interest expense related to
the value of the revenue sharing liability. The agreement remains in full force and effect until the earlier of (a) the Company
is unable to satisfy its obligations under the terms of the agreement and action is brought by the lender to enforce same, (b)
the expiration of the operating life of the unit, as confirmed by the manufacturer (five years), or (c) the mutual written agreement
of the parties.
The Company
borrowed $330,000 from a lender on January 30, 2019, whereby the proceeds were used to purchase a certain HydraSpin unit in exchange
for the lender to receive sixty percent of the revenues net of forty percent of costs generated from the HydraSpin unit until
the lender receives revenue equal to 120% of the $330,000 investment, then the lender shall receive fifty percent of the revenues
net of costs generated from the HydraSpin unit. The Company has guaranteed that the lender would receive $495,000 in net revenues
by January 30, 2021, or the Company would pay the lender the difference between the $495,000 and the purchase price of $330,000
on or before February 6, 2021. For the period ended March 31, 2019, the Company recorded $13,750 of interest expense related to
the value of the revenue sharing liability. The agreement remains in full force and effect until the earlier of (a) the Company
is unable to satisfy its obligations under the terms of the agreement and action is brought by the lender to enforce same, (b)
the expiration of the operating life of the unit, as confirmed by the manufacturer (five years), or (c) the mutual written agreement
of the parties.
8.
Equity Transactions
From January
1, 2018 to March 31, 2018, the Company issued 1,656,000 shares to investors at $0.50 per share for cash, with total proceeds of
$828,000, including subscription receivable of $50,000. In addition, the Company
issued 610,000
shares to executives, employees working in research and development at the Company, and consultants. The value of these shares
at $0.50 per share was $305,000.
From
January 1, 2019 to March 31, 2019, the Company issued 200,000 shares to a lender upon receipt of a conversion notice. The Company
also issued 565,384 shares to lenders for debt issuance costs. See Note 5.
9.
Operating Leases – Right of Use Assets
The Company
has an operating lease for office and warehouse space that expires in 2020. Below is a summary of the Company’s right of
use assets and liabilities as of March 31, 2019:
Right-of-use assets
|
|
$
|
140,340
|
|
Lease liability obligations, current
|
|
$
|
82,438
|
|
Lease liability obligations, less current
portion
|
|
|
52,994
|
|
Total lease liability obligations
|
|
$
|
135,432
|
|
Weighted-average remaining lease term
|
|
|
1.6
years
|
|
Weighted-average discount rate
|
|
|
10%
|
|
During the three
months ended March 31, 2019, the Company recognized approximately $22,798 in operating lease costs and are included
in selling, general and administrative expenses in our consolidated statement of operations. During the three months ended March
31, 2019, operating cash flows from operating leases was $22,791.
Approximate
future minimum lease payments for the Company’s right of use assets over the remaining lease periods as of March 31,
2019, are as follows:
Year ending December 31,
|
|
|
|
|
2019
|
|
$
|
69,000
|
|
2020
|
|
|
78,000
|
|
Total minimum payments
|
|
$
|
147,000
|
|
As of March
31, 2019, the Company has an additional operating lease for office and warehouse space that has not yet commenced of approximately $956,000.
This lease term began in April 2019, with a term of 4 years.
10.
Income Taxes
The
Company accounts for income taxes under the liability method. Deferred tax assets and liabilities are recorded based on the differences
between the tax bases of assets and liabilities and their carrying amounts for financial reporting purpose, referred to as temporary
differences. Deferred tax assets and liabilities at the end of each period are determined using the currently enacted tax rates
applied to taxable income in the periods in which the deferred tax assets and liabilities are expected to be settled or realized.
The
Company’s tax provision is determined using an estimate of an annual effective tax rate adjusted for discrete items, if
any, that are taken into account in the relevant period. The 2019 and 2018 annual effective tax rate was 0% for the U.S. federal
and state statutory tax rates. The Company reviews tax uncertainties in light of changing facts and circumstances and adjusts
them accordingly. As of March 31, 2019 and December 31, 2018, there were no tax contingencies recorded.
Deferred
income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities recognized
for financial reporting, and the amounts recognized for income tax purposes.
We had
a net operating loss carry-forward for federal and state tax purposes of approximately $9,500,000 at March 31, 2019, that is potentially
available to offset future taxable income. The TCJA (Tax Cut and Jobs Act) changes the rules on NOL carryforwards. The 20-year
limitation was eliminated, giving the taxpayer the ability to carry forward losses indefinitely. However, NOL carry forward arising
after January 1, 2018, will now be limited to 80 percent of taxable income.
For
financial reporting purposes, no deferred tax asset was recognized at March 31, 2019 and December 31, 2018 because management
estimates that it is more likely than not that substantially all of the net operating losses will expire unused. As a result,
the amount of the deferred tax assets considered realizable was reduced 100% by a valuation allowance. The change in the valuation
allowances were approximately $334,000 and $172,000 for the three months ended March 31, 2019 and 2018, respectively.
11.
Segment Information
The Company
sells water purification products and operates oil recovery machines. The Company has identified such reportable segments based
on management responsibility and the nature of the Company’s products, services, and costs. To date, the Company primarily
sells its water purification products internationally and operates its oil recovery machines in the United States. The Company
measures segment profit (loss) as income (loss) from operations. Segment assets are those assets controlled by each reportable
segment.
Below is the financial information
related to the Company’s segments:
|
|
For the Three Months
|
|
|
|
Ended March
31,
|
|
|
|
2019
|
|
|
2018
|
|
Revenues
|
|
|
|
|
|
|
|
|
Water purification products
|
|
$
|
78,552
|
|
|
$
|
128,130
|
|
Oil recovery machines
|
|
|
—
|
|
|
|
—
|
|
|
|
$
|
78,552
|
|
|
$
|
128,130
|
|
|
|
|
|
|
|
|
|
|
Loss from operations
|
|
|
|
|
|
|
|
|
Water purification products
|
|
$
|
722,554
|
|
|
$
|
718,285
|
|
Oil recovery machines
|
|
|
96,581
|
|
|
|
—
|
|
General corporate
|
|
|
149,276
|
|
|
|
96,067
|
|
|
|
$
|
968,411
|
|
|
$
|
814,352
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures
|
|
|
|
|
|
|
|
|
Water purification products
|
|
$
|
92,158
|
|
|
$
|
—
|
|
Oil recovery machines
|
|
|
628,625
|
|
|
|
—
|
|
General corporate
|
|
|
—
|
|
|
|
—
|
|
|
|
$
|
720,783
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2019
|
|
|
December 31,
2018
|
|
Total assets
|
|
|
|
|
|
|
|
|
Water purification products
|
|
$
|
733,504
|
|
|
$
|
612,498
|
|
Oil recovery machines
|
|
|
1,829,517
|
|
|
|
1,244,814
|
|
General corporate
|
|
|
791,702
|
|
|
|
63,956
|
|
|
|
$
|
3,354,723
|
|
|
$
|
1,921,268
|
|
|
|
|
|
|
|
|
|
|
General corporate
expenses include corporate salaries, health insurance and social security taxes for officers and corporate employees, corporate
insurance, legal and accounting fees, and other corporate costs such as transfer agent and travel costs. Management considers
these to be non-allocable costs for segment purposes.
12.
Subsequent Events
The Company
has evaluated all material events or transactions that occurred after March 31, 2019 up to May 15, 2019, the date these financial
statements were available to be issued and noted no material subsequent events which would require disclosure.
Financing
The Company
borrowed $175,000 from a lender on April 9, 2019. The note bears interest at 12% and is payable in one lump sum on January 9,
2020, at which time the entire amount of principal and accrued interest is due and payable. The note is unsecured. The outstanding
principal and interest amount is convertible by the holder into shares of the Company’s common stock beginning 180 days
after the issuance date and prior to the maturity date at a price per share equal to the lesser of (1) the lowest trading price
during the previous twenty-five trading days prior to the date of the note and (2) fifty-five percent of the lowest trading price
of the Company’s common stock for the twenty-five trading days prior to the conversion date.
The Company
borrowed $102,500 from a lender on April 10, 2019. The note bears interest at 8% and is payable in one lump sum on April 10, 2020,
at which time the entire amount of principal and accrued interest is due and payable. The note is unsecured. The outstanding principal
and interest amount is convertible by the holder into shares of the Company’s common stock beginning 180 days after the
issuance date and prior to the maturity date at a price per share equal to sixty-five percent of the average of the lowest two
trading prices of the Company’s common stock for the twenty trading days prior to the conversion date.
HydraSpin
Contracts
The Company
borrowed $330,000 from a lender on April 1, 2019, whereby the proceeds were used to purchase a certain HydraSpin unit in exchange
for the lender to receive fifty percent of the revenues net of costs generated from the HydraSpin unit. The Company has guaranteed
that the lender would receive $495,000 in net revenues by April 8, 2021, or the Company would pay the lender the difference between
the $495,000 and the net revenues received on or before April 30, 2021.
Lease
The Company
has an additional operating lease for office and warehouse space of approximately $956,000. This lease term began in April
2019, with a term of 4 years.